Energy Secretary Rick Perry’s ukase to the Federal Energy Regulatory Commission (FERC) last week—undo over 20 years of federal policy on national electric markets to aid coal and nuclear generation—is a joke. It is an entirely political screed devoid of intellectual content. That pretty much describes Perry.
In an administration that bills itself as committed to federal deregulation, Perry’s proposal is a massive case of reregulation, telling FERC that it should substitute cost-of-service regulations (in states where that is no longer the case) for the competitive wholesale bidding that has lowered customer costs, increased investment, and improved reliability for over half of the United States.
The tipoff to the lack of seriousness is that Perry wants FERC to act in 60 days to upset competitive markets to favor coal and nuclear generation. The Department of Energy (DOE) called on FERC to not only take action in 60 days, but also consider issuing an immediate interim “final rule,” with “later modifications” after public comment. That’s the typical Trump administration approach to governing: shoot first, ask questions later. Not going to happen. No serious federal regulatory agency would attempt to kowtow to the pressure from DOE.
Surely DOE officials below Perry know about the Administrative Procedures Act, even if the Trumpeters don’t. Nor does FERC owe any deference to the administration. It operates under law, which establishes FERC as an independent agency. Unless the new Republican majority on the commission decides to abandon 40 years of independent, non-political history, Perry’s push is likely to stall.
The hook for Perry’s reregulation endeavor is “fuel security,” the notion that plants that typically serve base loads have fuel supplies in hand that natural gas and renewables don’t (despite the fact that plentiful natural gas storage is common in most regions of the U.S., save New England). The DOE proposal says FERC should put the federal government’s thumb on the wholesale market price scale in favor of resources that have a 90-day fuel supply at the generating site.
That 90-day period works for nukes. It’s unclear how well it works for coal-fired plants. And, particularly for coal, it’s an economically expensive proposition. On-site fuel inventory is costly, driving up costs that DOE would have FERC order recovered in rates, along with a return.
The rationale behind Perry’s preposterous proposal is undercut by the study of reliability he ordered when he marched into the Forrestal Building earlier this year. As Graham Richard of Advanced Energy Economy, a business group, said, “This proposed rule ignores the primary finding from Secretary Perry’s own grid study from just a month ago, which was that the grid is being managed reliably with today’s diverse energy resources.”
Take a look at Puerto Rico, where Hurricane Maria has left the island power grid destroyed. Would base load nuclear or coal generation (the local public power utility generates mostly with oil) have done anything to prevent the loss of the grid? No. It was transmission and distribution that went down, not generation.
Indeed, most major blackouts in U.S. history have had nothing to do with loss of base load generation. They have been transmission grid collapses, most often due to failures of grid operators to understand cascading failures of high-voltage lines, sometimes due to weather, sometimes due to human error.
The Perry proposal is mainly aimed at coal, which Trump promised to revive (despite no idea of how to accomplish that) during his campaign. The nukes get a free ride. The real problem for nuclear is that carbon-free emissions are not valued in wholesale markets. But the Trump administration is afraid to address that issue, as it means they would have to change their position on global warming.
The DOE proposal reflects the sloppiness of the Trump policy-making operation. Utility Dive quoted Ari Peskoe at Harvard Law School’s Environmental Policy Initiative, “Usually proposed rules have far more detail that would provide a basis for comments on specific aspects of the proposal and that’s not really here.” He suggested that FERC would have to “start over” if it is serious about addressing the Perry proposal.
Jon Wellinghoff, former FERC chairman, told the online news service that he would set the Perry proposal “over to the side someplace under a pile of papers because it would be something that I wouldn’t even consider or entertain.”
—Kennedy Maize is a long-time energy journalist and frequent contributor to POWER.