Evidence Mounts That Coal, Nuclear Interests Influenced Perry’s Grid Resiliency Rule

Evidence Mounts That Coal, Nuclear Interests Influenced Perry’s Grid Resiliency Rule

Energy Secretary Rick Perry’s effort to change federal energy regulations to favor coal and nuclear power plants in the name of grid resilience has received a barrage of criticism for misstating the facts, ignoring the evidence, and attempting to ram through a major disruption in interstate energy markets on an emergency timeframe. 

While Perry has insisted this initiative is necessary to "rebalance the market" and "keep our families warm," there's mounting evidence the proposal was taken from an industry playbook. 

The accelerated timeline for DOE’s notice of proposed rule making (NOPR) is outside of the norm for such a radical

Energy Secretary Rick Perry’s effort to change federal energy regulations to favor coal and nuclear power plants in the name of grid resilience has received a barrage of criticism for misstating the facts, ignoring the evidence, and attempting to ram through a major disruption in interstate energy markets on an emergency timeframe. 

While Perry has insisted this initiative is necessary to "rebalance the market" and "keep our families warm," there's mounting evidence the proposal was taken from an industry playbook. 

The accelerated timeline for DOE’s notice of proposed rule making (NOPR) is outside of the norm for such a radical market shift, but it does match up with a major political ask from one of President Donald Trump’s key supporters in the coal industry: Robert Murray, CEO of Murray Energy. 

Over the past week, new details have emerged linking efforts by the outspoken private coal company owner to obtain federal financial aid for the industry, and DOE’s highly unusual decision in September to directly ask the Federal Energy Regulatory Commission for an emergency intervention in the country’s interstate energy markets. 

The interests of Murray Energy run through FirstEnergy, the Ohio-based utility that’s facing near-term financial challenges in managing money-losing coal plants in the region served by grid operator PJM -- the same region that would be most heavily hit by DOE’s proposal. As the Houston Chronicle noted in a Sunday article, more than 70 percent of Murray Energy’s coal delivered to U.S. power plants went to PJM. 

And the timeline for FirstEnergy to seek relief is fast approaching. In its third quarter 2017 earnings report late last month, the company noted that it has cash on hand to fund operations through March 2018. But starting in the second quarter, with $515 million of maturing debt that will “likely to be difficult to refinance” coming due, and absent any moves by Ohio state regulators to re-regulate its plants, the company’s power generation division, FirstEnergy Solutions, may be forced to “restructure debt and other financial obligations with its creditors and/or seek protection under U.S. bankruptcy laws” -- a move that could push FirstEnergy to do the same. 

Time pressure from coal industry 

This threat of bankruptcy without market intervention echoes similar ones made by Murray to Trump over the summer. In a letter obtained and released by the Associated Press in August, Murray wrote that his company would be forced to file for bankruptcy protection and lay off 6,500 workers -- more than the total number of employees listed on its web site -- without an emergency intervention in energy markets under Section 202(c) of the Federal Power Act. 

Murray, who donated to both Trump’s successful campaign and Perry’s failed 2012 presidential campaign, also wrote that he was relying on a personal assurance from Trump to get this relief, according to news reports citing the letter. “Please fight for us," the letter reads. "Even if we are wrong and this fails, at least we can tell our people you did everything possible and that you left no stone unturned. We will be forced to file for bankruptcy in October of this year if no action is taken.”

President Trump rejected this emergency request in late August, and October came and passed without a bankruptcy filing. Analysts had been skeptical about the threat, noting that it isn’t the first from Murray. FirstEnergy Solutions, by contrast, saw its bond rating downgraded yet again by Standard & Poor’s in August due to bankruptcy fears. 

FirstEnergy has long sought ways out of its financial straits, including its decision late last year to exit the punishing merchant generation business, with the sale of its natural gas and hydro power assets. CEO Chuck Jones said in last month's earnings call that the company remains committed to its strategy to "become fully regulated." 

As part of this plan, FirstEnergy has asked Ohio regulators for permission to raise rates on customers to help bail out its struggling power plants in the state -- one coal-fired and one nuclear. First submitted in 2014, a modified version of the proposal was approved by the Public Utilities Commission of Ohio (PUCO) in August, and is now being challenged by environmental and ratepayer groups in the state supreme court. 

DOE’s move could essentially render this state-level action moot by declaring cost recovery status to power plants with 90 days of fuel supply on hand -- something that applies almost solely to nuclear and coal plants. Perry's team says this is needed to keep the grid safe from extreme weather or terrorist threats. 

But this statement ignores data that shows the vast majority of outages are caused by transmission and distribution system outages, not fuel supply disruptions, and that fuel stocks don’t ensure that plants will stay running during emergencies in any case. It also ignores the conclusions of the DOE's own report on grid reliability and resilience. The report, authored by veteran energy consultant Alison Silverstein, does not explicitly support the case for subsidizing coal and nuclear, and yet Perry has cited it to justify the emergency nature of the NOPR.

In a public appearance last week, Silverstein said DOE administrators did not influence her writing, but that the NOPR, "cooked up long after," is in line with the administration's political aims.

"If you work for an administration that is making a big deal about helping coal, and you have a lot of senior staff people who don’t have a significant amount of expertise, either about the industry or about the administrative and policy issues that you are dealing with, I think what you do is say, 'Heck, we’ll send over something that’s a Hail Mary, does all the right political stuff about coal and nuclear. We’ll be the heroes, and it’s FERC’s job to do the dirty work,'" she said, according to Forbes.

"Perry and his team are doing all the right things for the cause, and if it works, Great! If it doesn’t work, it’s someone else’s fault," Silverstein added. "I think that’s the raw political answer."

Appointees with long connections to Murray, FirstEnergy and coal industry

PUCO recently joined a long list of state regulators, former FERC commissioners, and other energy sector insiders in coming out against the NOPR on the grounds that it will raise costs and prop up inefficient resources to the detriment of cheaper, less polluting alternatives. A collection of 14 different energy industry trade groups -- ranging from wind and solar, to oil and natural gas -- have argued that the NOPR's proposed payments go beyond those provided to so-called “reliability must run” power plants, amounting to a bailout to keep certain units running.

FERC has said it will vote on the NOPR in a December 11 meeting. Most observers, including former FERC members, don’t believe that FERC will be able to turn the vague NOPR document into a final rule by next month. But with coal industry allies playing major roles in the agencies tasked with reviewing and implementing the NOPR, opponents are worried that FERC could take some action to prop up coal plants in the short term, while leaving the NOPRs larger challenges to a future date. 

Longtime FirstEnergy lobbyist Sean Cunningham, now executive director of DOE’s office of energy policy and systems analysis, has been the sole DOE representative outside of Perry himself to speak publicly in support of the NOPR. In a debate last month, Cunningham repeated the assertion that coal and nuclear plants weren’t being valued properly and that failing to act on the NOPR could jeopardize grid reliability in the short term. 

Meanwhile, FERC acting chairman Neil Chatterjee, a Trump appointee and former aide to Senate Majority Leader Mitch McConnell (R-Ken), said last week that he’s working on an interim plan to “rescue” FirstEnergy’s ailing coal plants, based largely on the utility’s proposals in comments before FERC.

Chatterjee said he has met with FirstEnergy Corp CEO Chuck Jones to “really kick the tires on what they proposed and challenge them on some of what they had put forward.” Under FirstEnergy's plan, plants would receive a monthly payment from grid operators that fully offsets operation costs and includes a "fair return on equity.”

Read more

About us...

Qatar Green Leaders is a Green Building Certification Management & Training Company, dedicated to helping its clients achieve the most feasible LEED / GSAS certification.

We are a privately-owned Qatari company established in June 2011 and operating from Doha, Qatar.

Follow QGL...

Newsletter

If you wish to receive our regular news & updates, please subscribe now to our newsletter:
captcha 
© 2017 Qatar Green Leaders. All Rights Reserved.

Search