When is an “emergency” not an emergency? When the U.S. Department of Energy needs a cover story for disrupting markets to subsidize companies who own uneconomic coal and nuclear power plants.
For more than a year, DOE has been looking for ways to prop up decades-old coal-fired power plants now losing money in competitive electricity markets, in fulfillment of President Trump’s campaign promises to the coal industry, and throwing unprofitable nuclear power plants into the bailout bucket for good measure.
The energy department’s first attempt to save these plants from retirement went to the independent Federal Energy Regulatory Commission, which in January rejected DOE’s proposed rule to give these plants guaranteed payments to keep them running. In a unanimous 5-0 decision that included four recent Trump appointees, FERC concluded that “the extensive comments submitted by the [regional grid operators] do not point to any past or planned generator retirements that may be a threat to grid resilience.”
DOE is now considering a petition from FirstEnergy Solutions, a power plant owner currently in bankruptcy proceedings, to invoke its emergency powers under Section 202 of the Federal Power Act to bail out the company’s coal and nuclear plants immediately. Most neutral observers acknowledge that there is little, if any, basis for DOE to grant this request.
Why?
Simply because there is no emergency. In both the previous FERC proceeding and in response to the FirstEnergy request, the grid operator in the region has demonstrated that these plants can retire in an orderly fashion without risk to electric power reliability.
With two strikes in the count, DOE is now considering the use of a Korean War-era emergency statute, the Defense Production Act, as grounds for a bailout. Problem is that law only provides for DOE to order power plants to keep generating in times of war and other emergencies, and it doesn’t allow for the kind of above-market pricing these plants need to stay in operation.
In a further stretch, authority designed for “grid security emergencies,” such as cyberattack, is also under consideration for this politically motivated financial rescue operation. Besides the fact that the power plant plea has nothing to do with cybersecurity, the law only provides for 15 days of emergency action, not the sustained monetary relief that would bail out the power plant owners.
Despite the absence of a true emergency and appropriate legal authority, President Trump and Energy Secretary Rick Perry have both told supporters and members of Congress that such unprecedented action is under consideration, raising the possibility that government fiat could be used to keep an entire fleet of uneconomic plants running at consumer expense.
What all of these measures have in common is the unprecedented intervention by government into competitive electricity markets by forcing consumers to pay a heavy price for electricity from antiquated power plants that are not needed to keep the lights on and more expensive than available alternatives.
Invoking Section 202, the Defense Production Act, or anti-cyberattack authorities would increase costs for families and businesses that have enjoyed a decade of record-low energy prices. It would reduce investment in renewables, energy efficiency, and natural gas production and electricity generation. It would also signal that the era of market competition is over, and an era of bailing out political allies has begun.
Uneconomic power plants are retiring because competitive energy markets are driving innovation and reducing customer costs. This is one of the greatest benefits of capitalism. Many of the plants heading toward retirement are 50 years old and have been struggling to compete on a cost basis since the late 2000s. The energy marketplace is bursting with low-cost domestic natural gas, renewable energy resources that are cheaper than ever, and efficient appliances and devices that require less energy for operation. Meanwhile, overall electricity demand has remained mostly flat.
Simply put, it’s a bad time to be an inefficient electricity producer. While that may not be good news for power plant owners seeking a bailout, or the coal producers that supply them, it’s very good for American businesses and households that save money on their electric bills. It’s also how the free market is supposed to work.
And it’s how the highly competitive electricity market is working, favoring cheaper, plentiful fuel sources and money-saving efficiency investments. Invoking Section 202 or an emergency statute designed for time of war or cyberattack to save a politically favored few would only hurt consumers, innovation, and the economy.
Dena Wiggins is president of the Natural Gas Supply Association. Malcolm Woolf is senior vice president of policy for Advanced Energy Economy, a national association of businesses in renewable energy, energy efficiency, energy storage, and other technologies.
