The White House is preparing to bail out struggling coal and nuclear power plants, with a meeting scheduled for Friday.
The Trump administration’s plan includes ordering federally-overseen grid operators to buy electricity from the power plants, allowing them to evade market pressures and keep running, according to a copy of a White House draft memo reviewed by the Washington Examiner.
Representatives of a huge industry coalition opposing federal interference in the electricity market said if the White House moves forward with the plan, it would stoke a “firestorm” in the electricity sector and go straight to court.
“If this effort goes forward, we anticipate mounting a significant legal challenge,” said Dena Wiggins, president and CEO of Natural Gas Supply Association. “This misguided attempt to artificially resuscitate a specific set of aging and uneconomic power plants will do far more harm than good.”
But the White House has not signed off on any plan, except to say that it must give the Energy Department authority to delay power plant closures “temporarily” based on the Federal Power Act and the Cold War-era Defense Production Act. Legal experts say the defense law is somewhat outdated, as it originated during the Korean War.
Bloomberg broke the news late Thursday night, obtaining the draft memo circulated ahead of Friday’s meeting of the White House National Security Council. The White House has not officially confirmed the meeting.
Members of an industry coalition opposing a bailout plan being considered by Energy Secretary Rick Perry said the timing of the release of the memo is odd.
“Ordering that now is a bit odd since we had been told by others that the [National Security Council] was going to be studying resilience, etc., as it relates to the military and so on for like 6-12 months,” said John Shelk, president and CEO of the Electric Power Supply Association, representing merchant power plant owners.
The White House draft memo says “federal action is necessary” while the Energy Department, other agencies, and states evaluate national security needs and current threats to energy infrastructure.
“I suppose the two aren’t mutually exclusive,” Shelk said in an email to the Washington Examiner. “They could order something in PJM and then study the rest of the country, but if the order comes out as summarized … there will be a firestorm in the electricity sector, competing suppliers such as us and consumers. This, in turn, will result in a rush to the courthouse to be sure.”
Shelk has not seen the memo in any official capacity. The grid operator PJM, which he referred to in the email, runs the largest electric grid market in the country, comprising 13 states from the Washington, D.C. to the Midwest. The grid operator said Friday that it has not seen the memo, either.
“PJM has not received any official document from the Department of Energy,” it said. But it doesn’t think there is any immediate threat to grid security from power outages stemming from power plant retirements.
“Our analysis of the recently announced planned deactivations of certain nuclear plants has determined that there is no immediate threat to system reliability,” PJM said, adding that any federal intervention would be damaging to the grid.
“Markets have helped to establish a reliable grid with historically low prices,” it said. “Any federal intervention in the market to order customers to buy electricity from specific power plants would be damaging to the markets and therefore costly to consumers.”
The memo reflects a plan that would give utility First Energy everything it asked for in a petition it sent to Perry in April.
The company wants Perry to use his authority under the Federal Power Act to issue an emergency must-run order. But the scope of the petition is much broader than how the authority has been used in the past. It is used to keep one plant running for a short period, such as several months, because of reliability concerns.
Perry also has said he is looking at using the Defense Production Act, which gives the federal government the authority to keep power plants running in time of war or as a matter of national security.
The memo says the White House is looking at both laws to keep the plants going. It also lays out a plan to create a “Strategic Electric Generation Reserve” with the goal of promoting a national defense and maximizing domestic energy supplies, almost like a Strategic Petroleum Reserve for electricity.
The coalition opposing the First Energy request includes the oil and natural gas industry, merchant utilities, manufacturers, and the solar and wind industries. The coalition says any such plan is outside the scope of the law and would undermine the function of the restructured markets overseen by the Federal Energy Regulatory Commission.
“The administration’s draft plan to provide government assistance to those coal and nuclear power plants that are struggling to be profitable under the guise of national security would be unprecedented and misguided,” said Todd Snitchler, head of the American Petroleum Institute’s market development group.
FERC is evaluating the state of the grid’s resilience, and whether any new payments to generators are required. But that process is expected to take years. FERC had rejected a similar idea floated by Perry in the fall.
The Natural Resources Defense Council was one of the first out of the gate Friday morning to oppose the White House’s proposed plan.
“This would be the most outrageous scheme yet,” said John Moore, director of the Sustainable FERC Project housed within the big environmental group.
“The only risk here is to Trump’s campaign promise to bail out very expensive polluting coal and aging nuclear plants, which will cause our electric bills to skyrocket,” Moore said. “And the only security that will be protected is that of the companies who want a massive bailout.”
