Federal Energy Regulatory Commission Chairman Neil Chatterjee said Wednesday that he has three options for Energy Secretary Rick Perry’s plan to prop up coal and nuclear plants, and two out of three of them require rejecting it.
The commission could “adopt it, reject it, or reject it and commence our own process,” he said Wednesday morning at a forum hosted by CQ Roll Call in Washington.
But no matter the decision, Chatterjee said the commission is “on track” to meet Perry’s deadline of Dec. 11 for issuing a final order on the plan.
The Perry plan is working its way through the commission as a proposed regulation that would provide incentives for coal and nuclear plants for being able to store a 90-day supply of fuel onsite. Perry says that attribute is not being fairly valued by the large electric markets that FERC oversees. A large bloc of industry groups opposes the plan as an unnecessary process that could harm the energy markets that FERC regulates.
Chatterjee also is working on an interim proposal that he said could keep coal plants from shutting down while the commission does the heavy lifting required to analyze whether the plants deserve to be compensated for their resilience.
He wasn’t clear on what an interim market option would look like for coal and nuclear, although it likely would have a cost associated with it. The interim step may have some cost, but its goal would be to keep plants working while the commission does a longer-term analysis on how to weigh resilience in the market for coal and nuclear, Chatterjee said.
“Need to take a long-term view” on the implications of compensating these plants, but “that takes time,” he said.
Chatterjee said FERC will look at subsidies to examine their impact on the market to determine if certain generators should have to bid their actual cost and whether that is distorting the market.
Nuclear utilities have long argued that wind subsidies distort the market, undervaluing nuclear plants and forcing them to close.
“We need to look at that, study the externalities,” Chatterjee said.
But whatever the interim step is, Chatterjee reiterated that his goal is not to harm existing markets.
Democratic Sen. Joe Manchin, D-W.Va., who spoke at the forum before Chatterjee, said he wants the Perry proposal to succeed to help his state, which is a major coal producer.
“Well, you have to have baseload … coal is going to be needed,” Manchin said, using the word “baseload” to mean power plants such as “coal and nuclear” that can generate electricity around the clock.
Manchin acknowledged that low natural gas prices are prompting a shift from coal to more natural gas power plants, but he said “natural gas can be interrupted” from pipelines being constrained or even a cyber attack.
His comments come a day after FERC’s reliability watchdog, the North American Electric Reliability Corporation, issued a report that showed natural gas to be increasingly reliable and resilient, which doesn’t mention incentives for coal and nuclear as necessary to enhance the ability of the grid to bounce back after a major disruption such as a hurricane.
The American Petroleum Institute, a major opponent of the Perry plan, called the NERC repot “a missed opportunity to properly examine ways to improve the reliability and resilience” of the nation’s electric grid.
“While all forms of power generation will continue to be a part of America’s energy mix moving forward, natural gas has earned its place in the competitive energy market and driven the development of the reliable, resilient and diverse electric grid that we have today,” said API market development director Todd Snitchler.
Snitchler, the former chairman of the Public Utility Commission of Ohio, joined the oil group recently. He had adamantly opposed subsidies for coal and nuclear plants in the Buckeye State proposed by American Electric Power and First Energy.
Meanwhile, other groups that are part of the industry coalition opposing the Perry plan came out in support of the NERC report, using it to demonstrate that resilience is being met by natural gas power plants, despite increased coal and nuclear retirements.
