The Trump administration has shelved a plan to invoke wartime emergency powers to justify multibillion-dollar bailouts for economically struggling coal and nuclear plants — at least for the time being.
That’s according to a Tuesday report from Politico, which cites four unnamed sources who say that presidential advisers including the National Security Council and National Economic Council have put a halt to the plan at the White House, citing problems with its legality and its cost.
But the sources also warned Politico that “Trump frequently changes his mind, and the idea could re-emerge in advance of the president’s re-election campaign.”
The plan has never been officially acknowledged by the Trump administration or DOE Secretary Rick Perry. But as outlined in a Department of Energy memo written in May and leaked in June, it calls for using authority under Section 202 of the Federal Power Act, the Defense Production Act of 1950, and the Fixing America’s Surface Transportation (FAST) Act, to force grid operators, utilities and consumers to buy power from plants with on-site fuel storage — a category that only includes coal and nuclear plants, as well as some hydropower facilities.
DOE’s memo outlined how to declare certain power plants vital to national security and subject to out-of-market payments for all the energy they were capable of producing. While the memo didn’t provide a list of these generators, many observers expected it to include power plants owned by politically connected utility FirstEnergy, which asked DOE to take similar emergency steps days before it filed for bankruptcy protection for its power plant business, and supplied by politically connected coal company Murray Energy, whose CEO Robert Murray has been linked to previous DOE efforts to bail out the coal industry.
But the plan has drawn opposition from just about everyone outside the utilities and coal interests that stand to directly benefit. These opponents include the oil and natural gas industries, renewable energy and energy efficiency providers, corporate and consumer groups, state utility regulators, regional grid operators, and at present, all five members of the Federal Energy Regulatory Commission, as well as many former FERC commissioners.
“If it’s true that the proposals to identify and bail out certain plants are shelved for now, that is a great thing for the wholesale electricity markets,” Robbie Orvis, policy director at Energy Innovation, wrote in a Tuesday email. “The proposals that were being discussed were uneconomic and unwarranted, and would have resulted in ratepayers or taxpayers subsidizing unneeded, politically selected plants.”
According to the limited analysis available for a plan that hasn’t been officially released, forcing the purchase of power from coal and nuclear plants that would otherwise close would cost taxpayers billions, if it ends up looking anything like DOE’s previous attempt to bail out the two industries.
Last September, Perry introduced a plan to provide support for power plants with 90 days of fuel on site — something only nuclear and coal plants can do — citing a critical need for enhanced grid resilience and reliability. But the plan was rejected by the Federal Energy Regulatory Commission, which instead opened a new docket to push the country’s grid operators to examine grid resilience from storms and floods, cyber or physical attacks, and other major disruptions.
The DOE plan outlined in the leaked memo suffered from similar legal shortcomings, according to Ari Peskoe, director of the Electricity Law Initiative at Harvard University. “The leaked May 2018 memo suggested that the administration would cobble together unrelated authorities in the Federal Power Act, FAST Act, and the Defense Production Act in an attempt to justify a bailout,” he wrote in a Tuesday email.
“That plan conceded that no single law provided the administration with legal authority to provide aging plants with a handout. In essence, they were relying on the baseless legal theory that the combined laws provided more authority than the sum of their parts. Unsurprisingly, the leaked memo did not articulate a coherent legal theory.”
Likewise, the claim that coal and nuclear power plants need to be propped up to maintain grid resilience is unsupported by the evidence, and has been contradicted by reports from mid-Atlantic grid operator PJM and other analysis. But as Orvis noted, FERC’s docket on resilience is still open, and “any resilience-related matters will likely be handled there, through a much more robust and less political process.”
While FERC has so far turned down the Trump administration's efforts to use national security as justification for pro-coal and nuclear energy policies, it has also issued some decisions this year that have drawn fire from renewable energy proponents. In a 3-2 vote in June, FERC ordered PJM to reconfigure its capacity markets in ways that could undermine state subsidies for renewable energy and nuclear power, for example.
FERC's resilience docket has become the subject of some controversy over how it could be used by some grid operators to justify market changes that could advantage baseload generators over renewables.
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