FirstEnergy has asked the U.S. Department of Energy to declare an emergency that would secure higher prices for its money-losing coal and nuclear power plants, claiming that their closure would destabilize the power grids they serve.
But the request faces an uphill battle. A similar request from Murray Energy, the coal company that serves FirstEnergy’s fleet of power plants, was denied by the Trump administration last year.
Despite reports that DOE might be planning a bailout for FirstEnergy, the head of DOE’s Office of Electricity Delivery and Energy Reliability told reporters in February that neither he nor Energy Secretary Rick Perry would consider using the agency’s powers to support uneconomic power plants.
FirstEnergy’s long-expected request comes as it faces the imminent threat of bankruptcy for its power plant subsidiary, which operates six coal and three nuclear power plants in Ohio, Pennsylvania and West Virginia, as well as gas and oil, hydro and wind resources.
After losing $6.2 billion in 2016, FirstEnergy warned of possible bankruptcy in its nuclear business in early 2017. It received a $2.5 billion boost in equity from investors in January, but CEO Chuck Jones warned in February that the power plant subsidiary faced insolvency as early as this month.
The utility’s request asks DOE to use its authority under Section 202 of the Federal Power Act to issue must-run orders to its price-challenged power plants, under the claim that shutting them down would cause severe disruption to the transmission system served by mid-Atlantic grid operator PJM.
"PJM has demonstrated little urgency to remedy this problem any time soon, so immediate action by the Secretary is needed to alleviate the present emergency," said Donald Schneider, president of FirstEnergy Solutions.
But the idea that closing coal and nuclear power plants equate to a grid emergency has been repeatedly shot down in recent policymaking. The most glaring example has been Secretary Perry’s request to create similar price supports for nuclear and coal power plants — or, more specifically, power plants with 90 days of fuel stored on site — which was denied by the Federal Energy Regulatory Commission in January.
Perry did use DOE’s Section 202 powers in April 2017 to support a coal-fired power plant in Oklahoma. But in August, it rejected a similar request from coal company Murray Energy, which was reportedly based on the same premise that underlies FirstEnergy’s request.
Amidst reports that DOE was considering an emergency intervention for FirstEnergy’s power plants, Assistant DOE Secretary Bruce Walker told reporters at a February event that “we would never use a 202 to stave off an economic issue.”
On the issue of grid resilience, Walker said that DOE is working with FERC and the North American Electric Reliability Corporation to create better models of grid reliability and resilience. But he said the agency had not received, nor was considering, any plan for issuing emergency support for FirstEnergy’s plants.
News of FirstEnergy’s request drew a swift and negative response from the clean energy industry and environmental groups that have been fighting efforts to prop up uneconomic coal and nuclear power plants.
Mary Anne Hitt, director of Sierra Club’s Beyond Coal campaign, threatened a lawsuit if DOE took up FirstEnergy’s request.
Malcolm Woolf, senior vice president of policy for Advanced Energy Economy, called the request an “outrageous” and “unprecedented” attempt to get DOE to “exercise authority that is reserved for an emergency threatening national security just to salvage power plants that are losing money for their owners and costing money for consumers.” PJM currently has generating capacity well in excess of its projected needs, he noted.
The issue of baseload generators’ role in providing reliable and resilient grid energy is far from closed, however. FERC’s order rejecting Secretary Perry’s request for coal and nuclear power plant support also opened a new docket on grid resilience, starting with clearing up what the ill-defined term actually means, and concluding with a long list of questions for the independent system operators (ISOs) and regional transmission organizations (RTOs) that manage transmission systems that serve about two-thirds of the country.
The grid operators filed their first responses to FERC’s resilience order early this month, providing a glimpse into how each ISO and RTO is approaching the issue of defining and valuing resources that can help prevent or recover from storms, cyberattacks and other major disruptions.
PJM’s filing stood out from the rest by specifically asking FERC to link its resilience efforts to a separate energy market price formation proposal that would increase total energy and capacity market costs from 2 to 5 percent, largely in ways that would aid power plants that don’t provide the marginal energy that sets prices in traditional market constructs. Clean energy and environmental groups have opposed this plan, calling it a backdoor bailout for coal and nuclear power plants.
But FERC did issue an unusual 3-to-2 split vote this month approving another proposal from New England grid operator ISO-NE to create a two-stage capacity market auction, designed with the same intent of balancing zero-marginal-cost wind and solar power with fossil fuel and nuclear-powered generators.
This order also opened the possibility of using a market construct known as the "minimum offer price rule” that clean energy advocates warn could deny market access to zero-marginal-cost resources like wind and solar energy.
