Energy Industry Associations Tell FERC that DOE Proposal to Subsidize Coal, Nuclear Power Plants is Unsupported by Record, Would Throw a Costly Wrench into Electricity Markets 

Joint filing from broad array of groups takes aim at financial “Beneficiaries” as the only entities to support the DOE proposal – and whose filings fail to establish that the proposed subsidies are needed or legally valid

In separate comments, AEE urged FERC to make any future examination of resilience fuel and technology neutral, allowing advanced energy to compete based on capabilities

WASHINGTON, D.C., Nov. 7, 2017 — A diverse group of a dozen energy industry associations representing oil, natural gas, wind, solar, efficiency, and other energy technologies today submitted reply comments to the Federal Energy Regulatory Commission (FERC) continuing their opposition to the Department of Energy’s (DOE) proposed rulemaking on grid resiliency pricing, in the next step in this FERC proceeding. Action by FERC is expected by December 11.

In these comments, this broad group of energy industry associations notes that most of the comments submitted initially by an unprecedented volume of filers, including grid operators whose markets would be impacted by the proposed rule, urged FERC not to adopt DOE’s proposed rule to provide out-of-market financial support to uneconomic coal and nuclear power plants in the wholesale electricity markets overseen by FERC.

Just a small set of interests – those that would benefit financially from discriminatory pricing that favors coal and nuclear plants – argued in favor of the rule put forward by DOE in its Notice of Proposed Rulemaking, or NOPR. But even those interests – termed “NOPR Beneficiaries” by the energy associations – failed to provide adequate justification for FERC to approve the rule, and their specific alternative proposals for implementing the bailout of these plants were just as flawed as the DOE plan, according to the energy industry associations.  

“Even in the wake of hundreds of comments filed – most of them in opposition – there is no evidence that reliability and resilience of the electric power system are at risk, much less that there is an emergency that would justify giving preferential treatment for uneconomic power plants, at great cost to customers, particularly those in the Midwest and Atlantic states who would bear the brunt of that cost,” said Malcolm Woolf, senior vice president of policy for Advanced Energy Economy (AEE), one of the signatories of the joint comments. “The only interests speaking up for this proposed rule are those that would gain from it what they cannot in open competition. I hope that FERC sees this proposal for what it is – a politically motivated bailout with no benefit for the public – and puts an end to it.” 

In the new reply comments – submitted in response to the initial comments filed by hundreds of stakeholders on or before October 23 – the energy industry associations made the follow points:

Despite hundreds of comments filed, no new information was brought forth to validate the assertion – by DOE or the NOPR Beneficiaries – that an emergency exists that requires accelerated action to prop up certain power plants that are failing in competitive electricity markets:  

• “The record in this proceeding, including the initial comments, does not support the discriminatory payments proposed” by DOE, state the industry groups.

Nearly all of the initial comments filed in the matter take issue with the DOE NOPR and its claim of imminent threats to the reliability and resilience of the electric power system:

• “Of the hundreds of comments filed in response to the DOE NOPR, only a handful purported to provide substantive evidence in support of the proposal. In contrast, an overwhelming majority of initial comments agree that the DOE NOPR fails to substantiate its assertions of an immediate reliability or resiliency need related to the retirement of merchant coal-fired and nuclear generation.”

Grid operators filed comments refuting claims that the potential retirement of coal and nuclear plants which could not compete economically present immediate or near term challenges to grid management:

• “Even the RTOs and ISOs themselves filed comments opposing the DOE NOPR, noting that the proposed cost-of-service payments to preferred generation would disrupt the competitive markets and are neither warranted nor justified…. Most notably, this includes PJM Interconnection, … the RTO in which most of the units potentially eligible for payments under the DOE NOPR are located. PJM states that its region ‘unquestionably is reliable, and its competitive markets have for years secured commitments from capacity resources that well exceed the target reserve margin established to meet [North American Electric Reliability Corp.] requirements.’ And PJM analysis has confirmed that the region’s generation portfolio is not only reliable, but also resilient.”

The need for NOPR Beneficiaries to offer alternative proposals reflects the weakness of DOE’s rule as drafted, but their options for propping up uneconomic power plants are no better, practically or legally:

• Plans put forward by supporters of the power plant bailout “acknowledge, at least implicitly, that the preferential payment structure proposed in the DOE NOPR is unclear, unworkable, or both. However, the alternatives offered by the NOPR Beneficiaries, are equally flawed both substantively and procedurally, extending well beyond the scope of the DOE NOPR.”

Citing one example, the energy groups note that the detailed plan put forward by utility FirstEnergy Service Co. would provide preferential payments far more costly than those now provided to individual power plants needed for immediate reasons (and given a “reliability must run” contract, or RMR):

• “Compensation provided under [FirstEnergy’s proposal] would be significantly expanded beyond RMR precedent, going so far as to include bailing [a qualifying] unit out of debt based on an unsupported assertion that revenues are needed to ensure long-term operation.”

Calling the action FERC would be required to take in adopting the DOE proposal “unprecedented,” the energy industry associations reiterate their opposition:

• “While the undersigned support the goals of a reliable and resilient grid, adoption of ill-considered discriminatory payments contemplated in the DOE NOPR is not supportable – or even appropriate – from a legal or policy perspective."

The follow energy industry associations are among those signing the joint comments:

• Advanced Energy Economy
• American Biogas Council
• American Council on Renewable Energy
• American Petroleum Institute
• American Wind Energy Association
• Electric Power Supply Association
• Electricity Consumers Resource Council
• Energy Storage Association
• Independent Petroleum Association of America
• Interstate Natural Gas Association of America
• Natural Gas Supply Association
• Solar Energy Industries Association

Several other groups and individual energy companies signed the comments as well.

AEE also submitted an additional set of reply comments on its own. In that filing, AEE advised that any future examination of resilience by FERC should be fuel and technology neutral. In proposing discriminatory treatment in favor of specific resources (namely coal and nuclear power), DOE’s NOPR ignored the many ways that advanced energy technologies can and do support resilience, as in the case of the Polar Vortex, where it is documented that natural gas and wind generation, along with demand response, met electric power needs when coal piles froze and power plants experienced mechanical failure due to low temperatures.

“Rather than asserting that coal and nuclear power are needed for resilience, giving undue credit to onsite fuel supplies, FERC should examine what is truly needed to make the electric power system more resilient, and allow all energy resources to show how they could contribute,” said Woolf. “On a technology-neutral basis, advanced energy wins.”

About Advanced Energy Economy
Advanced Energy Economy is a national association of businesses that are making the energy we use secure, clean, and affordable. Advanced energy encompasses a broad range of products and services that constitute the best available technologies for meeting energy needs today and tomorrow. AEE’s mission is to transform public policy to enable rapid growth of advanced energy businesses. AEE and its State and Regional Partner organizations are active in 27 states across the country, representing more than 1,000 companies and organizations in the advanced energy industry. Visit AEE online at www.aee.net.

Background Materials:

• AEE Backgrounder on FERC DOE Proposed Rule is here.
• Refer to FERC Docket RM18-1-000 (access via AEE’s PowerSuite tool)
• AEE filed initial comments Oct. 23 with a broad range of energy groups representing oil, natural gas, renewables, energy storage and other technologies.
• AEE filed additional comments Oct. 23 with advanced energy trades groups.

Media Contact:
Monique Hanis, mhanis@aee.net, 202-391-0884