Trump’s Energy Regulators Don’t Buy His Coal, Nuclear Bailout

Critics say the administration’s plan to bolster failing plants ignores market realities and invents a national security emergency.

AP Photo/Ron Schwane
June 12, 2018, 8 p.m.

A group of Trump-appointed energy regulators could stand in the way of the White House’s proposal to bail out financially embattled coal and nuclear plants.

Those regulators, members of the Federal Energy Regulatory Commission, shot down the administration’s national security sales pitch for the bailout at a Senate hearing Tuesday—a blatant show of defiance against an administration that is pulling out all the stops to prop up the troubled plants.

Details of the plan are murky. But a broad range of lawmakers, regulators, and outside advocates say a bailout would boost electricity bills by billions annually.

The Tuesday hearing often veered into the arcane details of energy markets and regulation. A short portion of Sen. Martin Heinrich’s question-and-answer session, however, encapsulated the opposition.

“Do any of you believe that in the wholesale power markets, we’re facing an actual national security emergency at the moment?” Heinrich asked. “Anyone willing to answer that with a ‘yes’?”

Silence followed. “Let’s move on then,” Heinrich said.

Coal and nuclear-power plants are retiring at breakneck speed. The Energy Department’s chief research and data arm, the Energy Information Administration, says roughly 13 gigawatts of coal-production capacity will retire in 2018, following a spike in retirements since 2012. Roughly 2 gigawatts of nuclear-power capacity and 1.5 gigawatts of coal capacity are slated to retire in 2019. Those retirements in total equate to about 8,250 utility-scale wind turbines.

The bailout plan, which surfaced June 1 through a leak, argues for government intervention to stave off those retirements in order to safeguard the electricity grid against disruptions and power outages. The plan invokes two statutes that the Energy Department could potentially use to do so, the Defense Production Act and the Federal Power Act.

But critics of that approach, including virtually all the FERC commissioners, say the market is weeding out plants that are performing poorly, adding that the market transition is not jeopardizing the reliability or resiliency of the electricity grid.

“We’re going to need all these resources, but I don’t think it’s appropriate to put the FERC in the arena of creating moral hazards in these markets,” Commissioner Robert Powelson, a Republican Trump appointee whom the Senate confirmed in mid-2017, said during the Senate Energy and Natural Resources hearing.

“These markets are working hyper-efficiently right now,” he added. “A hard and fast mandate on these markets could really evaporate all the good will that consumers have seen and the environment has seen. To erode that would be a real step back for our U.S. bulk power system.”

So far, it’s unclear the role FERC would play in a potential bailout plan, but the prospect of FERC action—as opposed to unilateral Energy Department measures—bodes poorly for embattled plants. This isn’t the first time the commission has pushed back against the administration. FERC members voted unanimously in January to reject a similar DOE proposal to subsidize coal and nuclear plants.

Experts, however, say the Energy Department would have to walk a fine legal line to sideline FERC.

“Generally, it is FERC and not DOE that oversees and has principal regulatory authority over our interstate, wholesale electric grid,” Michael Panfil, director of federal energy policy and senior attorney at the Environmental Defense Fund, told National Journal. “It strikes me as certainly FERC’s role and responsibility here.”

At least some lawmakers are warning the Trump administration against strong-arming or circumventing FERC.

“I look at this administration, and trying to get around the rule of law and traditional processes happens as often as not,” Sen. Ron Wyden, a member of the energy committee who was chairman in 2013-2014, told National Journal. “Do I think they might circumvent [FERC]? You bet.”

An Energy Department spokeswoman, Shaylyn Hynes, did not respond to requests for comment.

Renewable energy, including hydropower, now provides 17 percent of total U.S. electricity generation, a huge increase over past decades. Nuclear power, however, still edges out renewables at 20 percent of the grid. And fossil fuels continue to provide the lion’s share. Coal makes up 30 percent of total generation, while natural gas makes up 32 percent.

The natural-gas contribution to the grid has skyrocketed over the past decade, based on prices that dropped due to the fracking revolution.

The American Coal Council, a coal advocate, declined to comment on the leaked plan but signaled it would be amenable to such a strategy. The group’s CEO, Betsy Monseu, pointed to the uptick in coal generation in extreme-cold scenarios, such as the “bomb cyclone” that hit the Eastern U.S. at the outset of 2018. Natural-gas pipelines often freeze in extreme cold.

“Many coal plants, including those that ramped up during the bomb cyclone, are likely to close if nothing changes,” Monseu said in a statement. “We support reforms to level the playing field for generation resources and counterbalance the impacts of other policy measures, including renewables subsidies and mandates.”

Renewable energy has long benefited from tax credits, as well as state and municipal purchase mandates.

Electricity bills, however, are a prime kitchen-table issue. And research surrounding the Trump administration’s various iterations of coal and nuclear bailouts suggests the price increase could be staggering.

The Nuclear Information and Resource Service, a nonprofit that opposes nuclear and fossil-fuel power, said the plan could increase electricity bills up to $34 billion annually. The majority of those upticks would largely fall on Americans in the Eastern region of the country and in Texas, where the vast majority of the retirements are expected.

Jay Apt, an energy professor at Carnegie Mellon University, estimated the cost would come in at roughly $32 billion annually—a nearly 9 percent increase over current nationwide costs. The move, however, would also send shockwaves through the energy market, Apt said.

“This is a frontal attack on the concept of competitive electric power markets, and the markets won’t recover anytime soon if this is put in,” he said. “And so your banker, while she’s kicking you out of her office, is going to tell you, ‘OK, well, Trump decided to monkey around with the markets to advantage coal plants. But the next president is going to monkey around with the markets to do something else. We don’t believe in the sanctity of the markets anymore, so I’m not going to lend to you.’”

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