Regulators Reject Rick Perry's Plan to Rescue Struggling Coal and Nuclear Plants
Posted January 8, 2018 11:06 p.m. EST
Updated January 8, 2018 11:09 p.m. EST
WASHINGTON — Federal regulators on Monday rejected a proposal by Energy Secretary Rick Perry to subsidize struggling coal and nuclear plants, in a major blow to the Trump administration’s efforts to revive America’s declining coal industry.
Over the past decade, an influx of cheap natural gas and the rapid rise of renewable energy has transformed the nation’s power sector, driving down electricity prices and pushing many older coal and nuclear plants into retirement.
In September, Perry warned that the loss of these plants could threaten the “reliability and resiliency of our nation’s grid” and asked the Federal Energy Regulatory Commission, which oversees regional electricity markets, to guarantee financial returns for any power plants that can stockpile at least 90 days’ worth of fuel on-site — which, in effect, meant propping up uncompetitive coal and nuclear plants. (Natural gas plants are usually fed by pipeline and would not qualify.)
While a few power companies with significant coal and nuclear capacity supported the idea, Perry’s proposal generated a fierce backlash from a broad coalition of utilities, electricity consumers and former regulators.
Critics argued that Perry’s proposal would upend competition in the nation’s electricity markets, which have been deregulated in much of the country since the 1990s and currently tend to favor the lowest-cost sources of power.
Opponents of Perry’s proposal also pointed out that blackouts usually occurred because of problems with transmission lines — not because power plants had insufficient fuel on site.
In its decision, the commission largely sided with the critics, noting that grid operators have proved adept at keeping the lights on even as natural gas, wind and solar have crowded out baseload coal and nuclear plants, which were once favored by utilities because they can reliably generate power at all hours of the day.
“There is no evidence in the record to suggest that temporarily delaying the retirement of uncompetitive coal and nuclear generators would meaningfully improve the resilience of the grid,” Commissioner Richard Glick wrote, concurring with the agency’s decision to reject the proposal. “Rather, the record demonstrates that, if a threat to grid resilience exists, the threat lies mostly with the transmission and distribution systems, where virtually all significant disruptions occur.”
The agency did add, however, that it would investigate potential threats to the resilience of the grid from natural disasters and other disruptions, giving grid operators 60 days to submit comment. At that time, it could issue a new order to tweak rules in competitive electricity markets.
“I appreciate the commission’s consideration and effort to further assess the marketplace distortions that are putting the long-term resiliency of our electric grid at risk,” Perry said in a statement. “As intended, my proposal initiated a national debate on the resiliency of our electric system.”
President Donald Trump has vowed to revive the ailing coal-mining industry, and his administration has moved to relax a variety of climate and pollution regulations on the nation’s coal plants. However, those rollbacks have failed to halt the market forces that continue to drive coal plants into retirement. Last year, utilities announced plans to shut down more than 22 gigawatts of coal capacity across the country, and more retirements are expected this year.
Perry’s proposal was the most aggressive move yet in support of coal and nuclear power and would have shielded a number of plants in the Midwest and Mid-Atlantic from those competitive forces. An analysis by Resources for the Future estimated that the rule, if enacted, would have prevented the retirement of 25 gigawatts of coal capacity and 20 gigawatts of nuclear capacity. The analysis found that the proposal would have cost electricity users an extra $72 billion through 2045.
While coal is more polluting than natural gas, nuclear plants do not produce any emissions, and some states like New York have moved to rescue their ailing reactors to help combat climate change. The commission’s decision would not affect those state efforts.
The commission’s unanimous decision to reject Perry’s proposal is final. While four of the five members of the commission were nominated by Trump, the agency has historically operated independently of the executive branch and tends to be protective of the competitive market structure built up over the past three decades.
“There is clearly a broad consensus among commissioners of both parties that the carefully constructed competitive power markets that FERC has created over the past 30 years are keeping consumer prices low,” said Paul Bledsoe, a former Clinton White House climate change adviser. "The notion of subsidizing coal and nuclear and thereby raising consumer prices is anathema to Trump appointees and Democrats alike.”