Chatterjee: Boosting Coal, Nukes won’t Destroy Markets
By Rich Heidorn Jr. and Michael Brooks
WASHINGTON — FERC Chairman Neil Chatterjee praised Energy Secretary Rick Perry’s “bold leadership” in calling for price supports for coal and nuclear plants but promised the commission’s response will be “fuel-neutral” and will not undermine wholesale markets.
“I think the bold directive [Perry] took has initiated this conversation, and it’s something that we are going to look at very seriously, and I’m confident we’ll find a positive resolution to,” Chatterjee said in a nearly hour-long press conference at FERC headquarters Friday. “I’m sympathetic to some of the things that Secretary Perry has raised. This idea that there are perhaps attributes that certain generating sources have that have value [and] that are not appropriately being captured by our existing market structure, we need to look at that carefully…
“I also believe strongly in markets. We’ve invested nearly two decades and billions upon billions of dollars into our existing market structure, and I don’t want to do anything to disrupt that market structure,” he continued. “Accurately valuing resilience is not a zero-sum game. Compensating baseload generation does not equate to destruction of the markets. On the contrary, I think it’s a step toward accurately pricing contributions of all market participants.”
Chatterjee said the commission must act within 60 days in response to the Department of Energy’s Notice of Proposed Rulemaking, which was published in the Federal Register on Tuesday.
The NOPR would require FERC-jurisdictional RTOs and ISOs with capacity markets and day-ahead and real-time energy markets to ensure full cost recovery for any generation that can provide “essential energy and ancillary services” and has a 90-day fuel supply on site. Units subject to cost-of-service rate regulation would be excluded. Just and reasonable rates for such generators would cover “its fully allocated costs and a fair return on equity,” including operating and fuel expenses and the costs of capital and debt, the NOPR said.
Chatterjee outlined FERC’s options for responding: “We could do an Advance Notice of Proposed Rulemaking; we could do a Notice of Proposed Rulemaking superseding the DOE NOPR; we could issue a final rule; we could do an extension of the comment period and solicitation of further comments; we can convene technical conferences; we can do a notice of inquiry; we could initiate Federal Power Act Section 206 review proceedings.”
Asked whether the commission could take an up-or-down vote on the proposal within 60 days, Chatterjee responded, “It could be. We’re going to carefully look at it.”
Chatterjee said that while he would prefer to delay major actions until the commission is fully staffed with the addition of nominees Kevin McIntyre and Richard Glick, he wouldn’t hold up action pending their arrival. The two are awaiting a Senate floor vote after clearing the Senate Energy and Natural Resources Committee on Sept. 19.
“These challenges are too important to wait,” Chatterjee said, noting that the commission is planning a “big announcement” on hydropower licensing policy at its next open meeting Oct. 19.
He also defended the commission’s refusal to extend the comment period on the NOPR (RM18-1). The commission set an Oct. 23 deadline on comments, with reply comments due Nov. 7. “It’s not a new issue,” he said. “We have ample time to receive comments.”
Kentucky Native on Coal’s Role
Chatterjee defended comments he made in a podcast in August, which some FERC watchers interpreted as signaling a break from the commission’s traditional “fuel-neutral” policies.
After praising “baseload” coal and nuclear generation for their value to “resilience and reliability,” Chatterjee noted that coal provided more than 80% of the electricity in his home state of Kentucky last year. “As a nation, we need to ensure that coal, along with gas and renewables, continue to be part of our diverse fuel mix,” he said then.
“I wasn’t saying that FERC was not fuel-neutral,” he said Friday. “To be clear, whatever solution that we pursue here will be fuel-neutral as well. I agree with Commissioner [Cheryl] LaFleur’s assessment that we don’t start with a resource and work backwards. We come up with policies that will be applied in a fuel-neutral way.”
But he said he agreed with lawmakers who want to preserve “fuel diversity,” suggesting coal could act as a hedge against “unintended consequences” from technological changes on the grid.
He cited the switch of the Big Sandy generator in Kentucky from coal to natural gas. Much of the plant’s load was from the energy-intensive coal mines in the region.
“So, when the power plant shut down, the coal mines that fed that plant shut down with it. … Now the operators of the gas plant find themselves in a situation where they’ve got to come to the state for a massive rate increase to account for … lost load,” he said. “So that’s a perfect example of an unintended consequence that occurs when you have these technological shifts. And I just think we need to be very thoughtful and careful in assessing what the long-term future of our grid looks like when these types of unintended consequences can occur.”
Chatterjee declined to offer an opinion on whether a 90-day fuel supply is a valid way to measure reliability. The NOPR said such supplies enable a plant “to operate during an emergency, extreme weather conditions, or a natural or man-made disaster.”
“I just think we have to go through our process, take in people’s comments. Look at the rationale to see how it would impact them,” Chatterjee said. “I’m not prepared at this stage of our process — not having all that complete information submitted — [to say] how we will address that.”
The commission also will consider data cited by members of the House Energy Subcommittee during a Thursday hearing with Perry indicating that most outages result from problems on the distribution system rather than from insufficient generation, the chairman said. (See Perry Defends Call for Coal, Nuclear Supports.)
“Staff put out an … extensive list of questions to facilitate this kind of dialogue and commenting. I fully expect comments in line with what you’re laying out will come in.”
Mum on White House Input on Staff
Chatterjee declined to answer concerns among some FERC watchers that his appointments of General Counsel James Danly and Chief of Staff Anthony Pugliese were directed by the Trump administration.
The commission has traditionally been independent and rarely decides issues on party lines. But some observers said the appointments suggested that could change because the two key positions were filled before the arrival of McIntyre, who was tapped by President Trump to lead the agency. New chairmen typically select their own general counsel and staff chiefs.
Danly, an Iraq War veteran, joined the commission from Skadden, Arps, Slate, Meagher & Flom.
Pugliese, who formerly lobbied on solar, oil and natural gas issues in Pennsylvania, came to FERC after serving as the White House’s eyes and ears at the Department of Transportation. Politico described Pugliese in May as one of Trump’s “White House-installed chaperones,” saying he clashed with Secretary Elaine Chao.
“Day to day, Pugliese and his counterparts inform Cabinet officials of priorities the White House wants them to keep on their radar,” The Washington Post reported in March. “They oversee the arrival of new political appointees and coordinate with the West Wing on the agency’s direction.”
At his press conference — which Pugliese and Danly attended — Chatterjee praised the two as “very talented people.” The two sat in the rear of the room, behind reporters and facing Chatterjee — Pugliese frequently shaking his head no or yes in response to the questions and answers.
“Mr. Pugliese has extensive experience in infrastructure and public policy, and I’ve been thoroughly impressed in the manner in which he has comported himself in his time here at the agency,” Chatterjee said.
He also praised Danly’s “astonishing resume,” calling him “one of the most talented brightest, capable energy lawyers in the country.”
Were they suggested to Chatterjee by White House officials?
“They were suggested to me by a number of people,” Chatterjee responded. “They have sterling reputations, and people who I respect and trust recommended them to me.”
Including the White House?
“I’m not going to speak [about] who recommended them,” Chatterjee said.