By Rich Heidorn Jr.
BALTIMORE — Department of Energy officials and FERC Chief of Staff Anthony Pugliese traveled 40 miles from the capital Monday to make their case for coal and nuclear price supports at the National Association of Regulatory Utility Commissioners’ 129th Annual Meeting.
In the morning, Pugliese and Bernard McNamee, DOE deputy general counsel for energy policy, spoke at a breakfast meeting sponsored by the Consumer Energy Alliance. After lunch, Sean Cunningham, DOE’s executive director for energy policy — and a former lobbyist for FirstEnergy and American Electric Power — lectured the audience on how he said FERC had failed to protect the grid against disaster. The audience included Commissioner Cheryl LaFleur — who kept her head down, writing notes and betraying no reaction.
The department’s Notice of Proposed Rulemaking (RM18-1) was a big topic of conversation both at the microphones and in the hallways at the Hilton Baltimore beside Oriole Park at Camden Yards. But LaFleur and Commissioner Robert Powelson, who spoke to consumer advocates in the morning, had little to say on how they will vote next month on the controversial proposal.
FERC Chairman Neil Chatterjee said last week he will seek an interim “lifeboat” to ensure the survival of struggling coal and nuclear plants while the commission ponders long-term rule changes. Chatterjee has said the commission will take action by Dec. 11 on Energy Secretary Rick Perry’s call for “full recovery” of coal and nuclear plants’ costs in RTOs with energy and capacity markets, including PJM, ISO-NE and NYISO. More than 700 comments were filed in response to the proposal. (See NOPR Backers, Foes Seek Last Word at Comment Deadline.)
LaFleur, Powelson Respond
LaFleur declined to comment on Chatterjee’s plan.
“I’ve really tried to spend my time thinking through the issues and not debating in the press. So, for now, I’ll just stick there, I think,” she said, adding, “But it’s less than a month so you’ll be hearing from us.”
Powelson also declined to say if he would support the chairman’s proposal.
“We’ll listen and see what everybody’s saying,” he said in an interview after speaking to the National Association of State Utility Consumer Advocates (NASUCA), which is holding its annual meeting alongside NARUC. “I don’t want to prejudge any outcomes.
“I’m open to having a broader conversation around valuing resiliency; looking at reliability metrics beyond just the capacity construct. And making sure … that we stay above and out of the fuel war conversation. That’s not the FERC’s role.
“I don’t think the secretary’s asking us to revert on organized markets,” Powelson added. “I think what he’s saying is, look at some of the things that are working in these markets and some of the things that aren’t working.”
Coal, Nukes ‘Came to the Rescue’
But at the General Session after lunch, DOE’s Cunningham made it clear he already knows the answers.
“The bottom line is this: Coal and nuclear power remain crucial to the continued functioning of the electric grid,” he said.
He used a revisionist view of the 2014 polar vortex to make his point.
“Because a large portion of gas supply is diverted to home heating, the grid operators struggled to meet demand and gas generators became unavailable. It was then that coal and nuclear plants came to the rescue. Because these plants are true baseload generators with onsite fuel storage, they successfully met the emergency demand,” he said.
In its response to Perry’s proposal, PJM said the NOPR “mischaracterized and misconstrued” the polar vortex, noting “PJM’s system remained reliable despite nearly 14,000 MW of coal retirements” and saying the 22% forced outage rate had been “mitigated” by the Capacity Performance rules enacted afterward.
“Contrary to the DOE NOPR, neither the 2014 polar vortex nor the recent hurricanes justify upending existing competitive energy markets,” PJM said, noting that some coal plants were idled because of frozen fuel and conveyor belts. “While fuel delivery was an issue during the polar vortex, it was not the driving factor behind outages that occurred during the extreme weather event, nor was gas-fired generation the villain, nor coal and nuclear the savior, that the DOE NOPR suggests them to be,” PJM said.
DOE: FERC Slow to Respond
Cunningham painted a dire future without coal and nuclear generation.
“Unfortunately, due in part to years of pressure brought to bear by opponents of coal and nuclear power, many of those plants were and are scheduled to close, which makes any number of disasters — or just a hot day in October or a cold one in April — a significant potential threat to our grid today. What if they had closed? How would that closure have affected the functioning of our hospitals? How would it have affected our police and firefighting capabilities? How would it have impacted the operations of our military?”
Cunningham said FERC has been slow to respond to the threat.
“FERC has been studying these issues for years, but the problem remains,” he said. “Secretary Perry’s proposal was intended to jump start a long overdue conversation — and more importantly, to spur FERC to action.”
“Washington has been stacking the deck against coal and nuclear power for years despite their benefits to the grid,” Cunningham added. “President Trump’s clear direction is to unleash every energy resource to make America energy dominant. … The president has nominated the people for government service who share that vision and are willing to address the regulatory burdens and government overreach that have limited our growth potential. Secretary Perry is doing, and will continue, to do everything in his power to jeep our diverse energy mix in place.”
Chatterjee Aide Chimes In
During the earlier meeting, DOE’s McNamee also defended the NOPR, echoing Cunningham’s response to critics who fear it would disrupt wholesale markets. Electric markets are not free, they said, but are shaped by policies such as the tax credits for renewables. “The fundamental fact [is] that the markets are distorted,” McNamee said.
FERC’s Pugliese responded to complaints that the commission’s deliberations were being rushed because of Perry’s 60-day deadline.
“I don’t think it is” too little time, Pugliese said. “Within PJM, this has been an issue that has been discussed for three-plus years. But for a lot of places around the country it … wasn’t. And so, all the sudden now we get 60 days, and I will tell you first-hand, every group around the country is coming in, every chance they get, to come give us ideas.”
Chatterjee laid out his “lifeboat” plans in remarks at an industry conference and in an interview Thursday on Bloomberg television.
In a meeting with reporters last month, Chatterjee said FERC’s options include initiating its own rulemaking, convening a technical conference or issuing a final rule based on DOE’s NOPR.
Now, facing legal and political obstacles to winning approval of a final rule, Chatterjee said he is seeking a short-term plan to rescue as many plants as possible while the commission does additional fact-finding.
“What I don’t want to have is plants shut down while we’re doing this longer-term analysis, so we need an interim step to keep them afloat,” Chatterjee told the S&P Global Platts Energy Podium in D.C. “I don’t know that we can get everybody in the lifeboat,” he added.
“My approach is going to be one of no regrets,” he said in the Bloomberg interview. “The worst-case scenario would be we do the long-term analysis, we figure out we actually did need these plants, but they’re gone. They’re offline and we can’t get them back.”
He said his plan will not alter RTO dispatch practices or distort markets.
Chatterjee also disclosed he had met with FirstEnergy CEO Chuck Jones “to really kick the tires on what they proposed [in their comments on the DOE NOPR] and challenge them on some of what they had put forward.” FERC’s ex parte rules, which bar commissioners from private discussions with parties in “case-specific, contested proceedings,” do not apply to rulemakings, according to a 2010 presentation by FERC Associate General Counsel Lawrence R. Greenfield (18 CFR 385.2201(a), (b), (c)(1)(ii)).
FirstEnergy proposed that the commission require RTOs and ISOs adopt a pro forma Resiliency Support Resource (RSR) tariff agreeing to make monthly payments to “fuel-secure, resilient generators.” The payments would be “equal to its full costs of operation and service” and a “fair return on equity,” minus its revenues for capacity, energy and ancillary services.
Chatterjee, a native of coal state Kentucky and a former aide to Senate Majority Leader Mitch McConnell (R-Ky.), has made no secret of his desire to aid coal generators. Powelson, a Republican, and LaFleur, a Democrat, have reacted more warily to the Perry proposal, expressing concern it could damage wholesale markets.
Awaiting McIntyre and Glick
Republican Kevin McIntyre and Democrat Richard Glick, who were confirmed to FERC by the Senate on Nov. 2, are awaiting their swearing-in and have not commented publicly on the proposal. Chatterjee told Bloomberg that he had not discussed the NOPR or his interim proposal with McIntyre, who will replace him as chairman.
“Kevin is somebody with a lot of expertise. He’s a smart, thoughtful guy. … And I hope that he will ultimately be persuaded to follow the course that I’ve laid out,” Chatterjee said.
Perry’s Sept. 28 proposal requested that FERC issue a final rule within 60 days. But even if Chatterjee won the two additional votes he needs to approve a final rule in December, it could be vulnerable to court challenges on the grounds that it was rushed through without sufficient notice to the public and proper evaluation by the commission.
Powelson said he was looking forward to the arrival of McIntyre and Glick — who cannot join FERC until President Trump gives them their signed commissions.
“Having two other colleagues be part of this conversation is important,” he said. “I think we’ve got a lot of work ahead of us over the next 24 days.”
Michael Brooks contributed to this article.