Legal & Regulatory

Perry Hammered on FERC Order During House Subcommittee Hearing

Criticism for Secretary of Energy Rick Perry’s recent notification of proposed rulemaking (NOPR) directing the Federal Energy Regulatory Commission to show favor to coal and nuclear plants was in no short supply during an October 12 hearing of the House Subcommittee on Energy.

The hearing, which focused on the Department of Energy’s (DOE) missions and management priorities, covered a wide range of topics, from Perry’s use of chartered flights to climate change, but nearly everybody on the panel noted the recent NOPR, and few had much friendly to say.

The NOPR, which was issued in late September, directs FERC—an independent regulatory government agency that is officially organized as part of the DOE—to require regional transmission organizations (RTOs) to “establish just and reasonable rates for wholesale electricity sales” for power plants that show “reliability and resiliency attributes.”

The rule would allow for generators which meet certain requirements, such as a 90-day fuel supply on site, to recover costs.

The NOPR has been widely criticized by Democrats, consumer advocates, and some Republicans. The rule “picks winners and losers,” is an unabashed effort to distort the energy market, has no basis and is misguided, opponents say.

Many opponents on the panel were quick to note that the DOE’s recent reliability study found that “markets have evolved since their introduction, they are currently functioning as designed—to ensure reliability and minimize the short-term costs of wholesale electricity—despite pressures from flat demand growth, federal and state policy interventions, and the massive economic shift in the relative economics of natural gas compared to other fuels.”

Subcommittee Ranking Member Bobby Rush (D-Ill.) asked Perry to explain on what data the NOPR is based. Perry didn’t name any studies or reports, instead suggesting that he was informed by his “life experiences.” Perry also suggested that FERC is designed to operate when “the sun is shining and the wind’s blowing,” but that it’s his job to think “outside of the box.”

Rush responded: “The study that was completed, done by your own agency, came up with some conclusions. Are you saying that your gut feeling presents a strong enough rational against the study that you would take the position that you are taking now? It seems to me like you’re saying ‘well my gut feeling has more priority, my gut feeling is something. Rather than what these experts have said, I’m going to operate on my gut feeling.’”

Perry was asked again by full committee Ranking Member Frank Pallone (D-N.J.) for any specific analysis or model runs that Perry had done by the national labs or the Energy Information Administration to determine the full impacts of the proposal before it was released.

Rep. Kathy Castor (D-Fla.) suggested that the NOPR is misguided, noting again the reliability study as well as statements made by the North American Electric Reliability Council (NERC) that the grid is reliable and strong as is. “NERC, they have said even just recently that the U.S. power system reliability is strong. There’s really, there just is no rational basis for this new FERC rule that you’re trying to move through as quickly as possible.”

Perry stated on several occasions that the rule is meant to prepare for worst-case scenarios in which the sun stops shining and the wind stops blowing. Several times he noted the Polar Vortex of 2014, during which the East Coast narrowly avoided a blackout. The grid study, he said doesn’t “address with specificity” the events that he’s concerned about. “I want to try to push the FERC and this country to take action so that we don’t face that event in the future where people’s lives are put in jeopardy or where this country’s national security is jeopardized because we just refused to buy into the concept that we needed a very diverse energy portfolio. That’s really at the basis of this,” Perry said.

Perry said several times that his real goal with the NOPR was to “jump-start a conversation” about the reliability of the grid. Rep. Mike Doyle (D-Penn.) argued that the NOPR is certainly not worded like an innocent conversation starter. He noted that the NOPR uses phrases like “the Secretary is requiring the commission.”

“Which is it, Mister Secretary? Is this a directive to FERC to do this, or is it a conversation?” Doyle asked. “What your words said in the NOPR and what you’ve said here today seem to be at odds with one other, it can’t be both, so which one is it?”

Perry answered that “It is both. We can have a conversation and I think they must move. I think they must act.”

In one of the more baffling exchanges of the hearing, Rep. Paul Tonko (D-Calif.) asked Perry if he had considered if it would be more cost-effective to invest instead in modernizing the electricity delivery system, as most outages in the U.S. occur due a failure in that sector, as opposed to at the generator.

Perry responded: “I think you take cost into account, but when it comes to, you know, what’s the cost of freedom? What does it cost to build a system to keep America free? I’m not sure I want to just put that straight out on the free market and say okay whoever can build the cheapest delivery system here to keep America free?”

Contrary to the praise of several Republicans on the panel who called Perry the biggest proponent of the free market for energy, Perry himself used the hearing to double down on statements made in recent days that there is no such thing as a free market in the energy sector. “The idea that there is a free market in the energy industry in a fallacy,” he said several times.

It wasn’t just the left side of the aisle that questioned the NOPR. Rep. Pete Olson (R-Texas) was quick to note that during Hurricane Harvey nuclear and natural gas plants continued to operate while coal units couldn’t run because the coal on site got too wet. “We learn something new in every disaster,” Perry said later when coal’s performance during Hurricane Harvey was again mentioned.

While some Republicans were leery of the NOPR, others were pleased by the action. “I don’t see any daylight between you and me on this subject, particularly as it relates to reliability. I am 100% behind what your position is on that,” Rep. David McKinley (R-W.Va.) said. “I want to see us spend more research dollars into finding ways to make gas more reliable and find ways that we can have gas have that 90-day supply on site inside the fence.”

Granting perhaps some hope to those opposed to the NOPR, Perry suggested that his NOPR may not come to fruition. “If the NOPR to FERC is what you say it is, they won’t go forward with it,” he told Castor.


Abby L. Harvey is a POWER reporter.

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