NovaQuant Quantitative Think Tank Center:U.S. Regulators Reject Trump’s ‘Multi-Billion-Dollar Bailout’ for Coal Plants

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The Federal Energy Regulatory Commission on Monday unanimously rejected a Trump administration gambit that would have favored the coal industry by rewarding electric companies for keeping big stockpiles of fuel on hand, supposedly to improve the reliability of power supplies.

The commission, in one of its first significant actions since its membership was fleshed out with President Donald Trump‘s new appointees, said that it would do its own analysis of how the grid is coping and that it had solicited ideas from the nation’s grid operators about how to proceed. The grid operators are the regional authorities who control power supplies, rather than the electric companies or their fuel suppliers.

The idea to bolster the coal and nuclear segments of the complex grid was pushed hard by Energy Secretary Rick Perry last year after extensive lobbying by influential fossil fuel companies, including Murray Coal and First Energy. The plan had been excoriated by diverse interest groups, including many environmental advocates, some public utility companies and natural gas suppliers.

Consumers would have paid billions in higher bills, and most of the benefits would have gone to a few big companies, studies showed.

Neil Chatterjee, a Trump appointee who was the commission’s interim chairman until early December, praised what he called “Secretary Perry’s bold leadership in jump-starting a national conversation on this urgent challenge.”

But another new commissioner, Richard Glick, called the proposal, which also would have affected some nuclear plants, “a multi-billion-dollar bailout” that was not supported by the evidence. He was named to FERC by Trump to a Democratic seat on the politically apportioned commission.

Perry’s Plan Relied on Emergency Powers

The FERC ruling was closely watched even though the action Perry proposed seemed legally frail, relying on emergency powers that are rarely invoked. This time, they were being pushed without any sign of an actual emergency, such as a foreign embargo or a crippling strike, that might have undermined the grid.

As Harvard expert Ari Pesko outlined in this Twitter thread, the proposal didn’t even meet the threshold legal test that FERC had to consider: whether existing rate schedules, known as tariffs, were inherently unjust or unreasonable, and that the new approach would be fairer.

Perry’s theory was that the rates that coal and nuclear utilities were allowed to charge did not reflect all the services they provide to grid stability, and that this was letting renewable energy sources unfairly elbow their way into the marketplace, along with natural gas.

The countervailing view is that a pro-coal thumb on the scales was an anachronism in an energy system that would be better served by market forces.

Unspoken in this debate—and not on Perry’s radar—has been the imperative of making changes to the electric system to reduce emissions of carbon dioxide, the principal greenhouse gas that is warming the planet.

“Energy regulators must follow the law and act on the best available science, and not pick winners and losers based on political alliances,” said Mike Jacobs, senior energy analyst at the Union of Concerned Scientists.

Ask the Grid Operators

In all this, FERC has hardly been a household name, even though its decisions over gas pipelines, electric rates and the like affect consumers all over the country. Its role has been increasingly controversial as advocates of a clean energy revolution have lambasted it for pro-industry leanings, even showing up to protest disruptively at FERC hearings, normally the least theatrical of Washington’s venues.

Environmental groups expressed relief.

“FERC’s decision to ask the regional grid operators how they currently ensure a resilient grid is a reasonable first step,” said John Moore, who runs a “Sustainable FERC” coalition from the Natural Resources Defense Council.

“A well-thought-out inquiry into resilience could help strengthen America’s electric grid. But that will happen only if FERC abandons the Trump administration’s inappropriate focus on aging and unneeded coal and nuclear plants, properly defines resilience and truly investigates how to build a 21st century electricity system,” Moore said.

Uncompetitive Coal vs. Renewables and Gas

Glick was vehement in his criticism of Perry’s plan.

“There is no evidence in the record,” he wrote, “to suggest that temporarily delaying the retirement of uncompetitive coal and nuclear generators would meaningfully improve the resilience of the grid.”

Indeed, he said, the Department of Energy’s own staff study, performed at Perry’s urging, had concluded that the retirement of coal-fired power plants in favor of cheaper, cleaner renewables and natural gas “have not diminished the grid’s reliability or otherwise posed a significant and immediate threat to the resilience of the electric grid.”

“To the contrary, the addition of a diverse array of generation resources, including natural gas, solar, wind, and geothermal, as well as maturing technologies, such as energy storage, distributed generation, and demand response, have in many respects contributed to the resilience of the bulk power system,” he argued.

In a statement, Perry said that “a diverse fuel supply, especially with onsite fuel capability, plays an essential role in providing Americans with reliable, resilient and affordable electricity, particularly in times of weather-related stress like we are seeing now.”

But Glick dismissed that argument, noting that “many coal and nuclear plants with significant on-site fuel supplies have failed to function during extreme weather events because those fuel supplies froze, flooded or were otherwise unavailable. In fact, initial reports indicate that coal-fired facilities accounted for nearly half of all forced outages in PJM during last week’s period of extreme temperatures.”