A top Energy Department official said Thursday that his agency will not consider the economic struggles of a Ohio utility when deciding whether to grant the company’s request to invoke a little-used emergency power to save coal and nuclear plants across the Midwest.
The Energy Department is expected soon to decide whether to grant FirstEnergy’s petition for an emergency order under section 202(c) of the Federal Power Act to keep alive its ailing coal and nuclear plants.
The measure is not meant to be used for economic reasons, but rather for emergency circumstances that include war, energy shortages, or sudden surges in demand.
FirstEnergy’s coal and nuclear divisions recently filed for Chapter 11 bankruptcy protection, and critics have said granting the emergency request would amount to a bailout that would undermine competitive wholesale power markets that have reduced prices for consumers.
“I don’t know much about their bankruptcy filing,” Dan Brouillette, the Energy Department’s deputy administrator, said at Columbia University’s Global Energy Summit. “We are going to approach this as a public policy matter, not as an economic emergency matter for one or two companies. We are going to look at this from the point of view of the grid, its reliability, its resiliency. The decisions we make are going to be on that basis.”
FirstEnergy wants the Energy Department to force PJM Interconnection, the nation’s largest federally overseen grid operator, to enter into contracts with coal and nuclear plants across its 13-state region to provide electricity “as needed to maintain the stability of the electric grid.”
The Energy Department has rejected similar emergency requests in the past. And the Federal Energy Regulatory Commission in January rejected Energy Secretary Rick Perry’s proposal to give special payments to struggling coal and nuclear plants that can hold fuel on-site for at least 90 days.
FERC, in blocking Perry’s plan, directed regional transmission operators to submit information on resilience challenges in their markets, as energy generation transitions away from around-the-clock coal and nuclear to natural gas and renewable sources such as wind and solar.
Brouillette on Thursday urged FERC to act to more fairly compensate coal and nuclear plants. He argued that coal and nuclear are being undercut on price by renewables in wholesale electricity markets because many states offer wind and solar subsidies.
“If FERC does not act very soon there will be a grid reliability problem coming up,” Brouillette said. “We are very concerned about some of the results of the so-called markets FERC has set up.”
The push from Brouillette comes after Bloomberg reported Thursday that the Trump administration is considering using a 68-year-old Cold War-era law to save coal and nuclear plants as an alternative to granting FirstEnergy’s emergency request.
The Defense Production Act effectively allows the president to nationalize private industry to ensure the U.S. has resources needed during a war or after a disaster.
Sen. Joe Manchin, a Democrat from the coal state of West Virginia, urged Trump to use the statute in a letter Wednesday.
Energy experts say invoking that law would stretch the law beyond what it’s meant for, just like the FirstEnergy emergency request, because there is no imminent national security threat from coal and nuclear plants closing.
“It would be a gross abuse of the law to use the Defense Production Act to bail out failing power plants,” Josiah Neeley, the energy policy director of the R Street Institute, a free-market think tank, told the Washington Examiner. “Each of these proposals to save failing coal and nuclear plants seems more far-fetched than the last.”
