U.S. energy industry associations have told the Federal Energy Regulatory Commission (FERC) the Department of Energy's (DOE) proposal to subsidize coal, nuclear power plants would throw a costly wrench into electricity markets.
The group notes 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 coal and nuclear power plants in the wholesale electricity markets overseen by FERC.
Just a small set of interests argued in favor of the rule put forward by DOE in its Notice of Proposed Rulemaking (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.
“We are encouraged to see overwhelming recognition that the proposal would undermine competitive electricity markets, harming consumers and reliability in the process” said Amy Farrell, Senior Vice President for Government and Public Affairs, for the American Wind Energy Association (AWEA). “It is particularly telling that even many coal and nuclear plant owners who would receive those payments under the proposal filed in opposition, recognizing short term gains would be outweighed by long-term harm to electricity markets.”
Despitehundreds 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;
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;
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;
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).
They stated, “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.”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 reiterated their opposition stating, “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.