The head of a pro-coal group is rolling up his sleeves to work with federal regulators to find a way to support coal-fired power plants, even as a major utility is pleading with Energy Secretary Rick Perry to forget the regulators and use his authority to overstep them altogether.
Paul Bailey, the president and CEO of the American Coalition for Clean Coal Electricity, told the Washington Examiner that he supports the electricity markets overseen by the Federal Energy Regulatory Commission, or FERC, and is willing to work with them, even though the process may take a while.
“We are not anti-market at all,” said Bailey, who added that his group is in it for the long haul to see if it can get FERC to agree on a definition for resilience, which would lead to new ways for coal plants to be compensated by the giant public utilities FERC oversees, such as PJM Interconnection.
Resilience is the ability of the grid to bounce back after a major weather event, or even a physical or cyber attack.
Bailey admits that it is an endeavor that will take at least three years to accomplish. But he believes he has a good shot of making it work.
Meanwhile, the Ohio-based utility First Energy doesn’t think the FERC process is worth the effort.
The company wants Energy Secretary Rick Perry to step in quickly and issue an emergency order that directs regional grid operator PJM Interconnection to take immediate steps to keep the company’s coal and nuclear plants afloat amid hard economic times.
First Energy said in a March 29 letter to Perry that FERC has “failed to heed” its warnings about an “impending crisis” affecting nuclear and coal power plants.
“Indeed, FERC has had the opportunity to prevent this crisis on numerous occasions, including the opportunity you provided it through your Notice of Proposed Rulemaking,” which the commission rejected in January, the letter read.
Perry had proposed that FERC enact market-based incentives for coal and nuclear power plants, which the five-member commission unanimously said didn’t pass muster under the law.
FERC said it would work with PJM and its other grid operators to understand the state of resilience and reliability on the grid, and seek a more informed policy on whether actions such as incentives are necessary.
Bailey’s group, which represents other large coal utilities such as American Electric Power and Southern, is supporting the direction FERC has chosen, which First Energy is antagonistic toward.
“FERC’s reliance on comments by [grid operators] — the very entities that preside over the flawed markets — is misplaced,” First Energy added in its letter to Perry. “More fundamentally, FERC’s decision to study the issue further is too little, too late.”
Bailey had little to say about First Energy’s approach, which appears diametrically opposed to what he is focused on. He said he hasn’t paid much attention to it.
He is spending more time reading a March report by the Energy Department’s National Energy Technology Laboratory, which “proves the need for a coal fleet,” Bailey said. It is up to the industry, FERC, and the grid operators to come together on a set of definitions and metrics that address the issues affecting the fleet, he said.
The NETL report looked at the January deep freeze and determined that without coal the threat of major regional blackouts would have been real.
Bailey’s team is also pouring through the comments that PJM, the Midcontinent Independent System Operator, the New England operator, and others submitted to FERC in March.
The coal group is preparing to use those comments to reinforce its arguments for market rules that help compensate coal plants for the grid stability they provide.
“Everyone is sort of in the same ballpark, but the nuances are a little different,” Bailey said. “FERC is saying, ‘Let’s come up with a definition we can all agree on,’ meaning we don’t have a definition that we all agree on.
“And then therefore we don’t have any criteria for resilience, and we don’t have any metrics for determining whether the grid is resilient or not,” Bailey said.
One of the grid operators that demonstrates the lack of grid resilience the most is the New England Independent System Operator. The operator’s comments will likely be used throughout Bailey’s group’s comments to FERC.
“We looked at the grid operator comments, New England ISO clearly has a problem. They aren’t trying to hide it,” said Bailey. “They are heavily reliant on natural gas and fuel oil, and they have problems getting gas.”
Comments to FERC on the grid operators’ statements on the state of resilience are due May 9.
Bailey also said he would like to see a short-term tax credit created while FERC is working out a way to account for resilience. He said he believes the best route for that is legislation, not an administrative action.
He is backing a bill introduced by Rep. Larry Bucshon, R-Ind., in March to provide a temporary tax credit for coal-fired power plants. The tax credit would help offset the operational and maintenance cost of the plants over a five-year period.
Bailey said that matches the timeline he envisions for FERC to finalize any action it takes.
