Utility CEOs to DOE: Hands off state energy policies, grid planning
Members of EEI's board say they want the DOE's baseload review to embrace the power mix transformation, not inhibit it.
The leaders of some of the nation’s largest investor-owned utilities have a message for President Trump and his Department of Energy: Stay out of our grid planning.
Utility executives convened this week in Boston for the annual conference of the Edison Electric Institute, the trade group for U.S. IOUs. During panel appearances and interviews, they expressed hope that the DOE’s pending review of baseload generation would reaffirm that changes to the U.S. power mix do not threaten reliability.
“We have one of the most reliable generation fleets in the world,” said Pat Vincent-Collawn, CEO of PNM Resources and the incoming chair of EEI. “Hopefully the study takes into account good utility planning and … will show what we've known for a long time, which is that we know how to plan the grid.”
“We have one of the most reliable generation fleets in the world."
CEO of PNM Resources
Secretary of Energy Rick Perry ordered a 60-day review of the U.S. power sector back in April, seeking to ascertain whether increasing renewable energy penetration is forcing baseload plants offline and threatening reliability. If so, Perry said the federal government could seek to preempt state energy policies on the grounds of national security.
While EEI itself has not taken a position on the study, members of its executive board said that route would be a mistake, even as they expressed concern about the retirement of baseload plants, particularly nuclear generators.
“What we hope is that the review emphasizes the need for a diverse, resilient portfolio in the country and part of that is baseload generation that's being squeezed out of the market right now,” said Chris Crane, CEO of Exelon, the nation’s largest nuclear operator. “[Nuclear] provides more benefits than just megawatts. The resiliency, fuel diversity — it's important that is factored into price formation.”
But Crane said recognizing those benefits could largely be left up to the states. Exelon won financial support for its nuclear plants last year in Illinois and New York, where the generators were under pressure from low natural gas prices, stagnant demand and subsidized renewables. The company is currently pushing for similar subsidies in Pennsylvania, while other utilities seek supports in Ohio, Connecticut and New Jersey.
“Allowing the states to recognize the environmental benefits of nuclear are important at the federal level,” Crane said. “All of the incentives for [renewable] generating sources will phase out over time and it will create a more competitive platform. It's just not increasing them at this point.”
"What we hope is that the review emphasizes the need for a diverse, resilient portfolio in the country and part of that is baseload generation that's being squeezed out of the market right now."
Southern Co. CEO Tom Fanning, the outgoing chair of EEI, reinforced that point, calling for cooperation and federalism in power policy. “There has to be a harmonization of what happens at the federal level along with what happens at the state and local level,” he said. “I think that's the importance of things like the Federal Power Act.”
Nuclear subsidies are controversial in the sector, with gas generators arguing they intrude on federal jurisdiction over interstate power markets and could threaten reliability by pushing unsubsidized plants offline. Those arguments mirror qualms many generators have with subsidies for wind and solar, which they say also depress wholesale power prices, stoking fears among some in the sector that DOE will seek to overrule or alter them.
While EEI has not been contacted for consultation on the DOE review, Media Relations Director Jeff Ostermayer said “generation-specific” trade groups have been “doing a lot of outreach” at DOE.
Crane said Exelon has been involved in discussions of the review process ahead of the planned release of the report on June 26. “We've had conversations with staff at the DOE and conversations with the EPA," he said. "It's more of a working-level dialogue right now but as they make the appointments, we'll be able to get in.”
The utility executives' comments come just weeks after a bipartisan group of senators expressed similar concerns about the DOE review and state clean energy policies. In a confirmation hearing for two nominees to the Federal Energy Regulatory Commission, lawmakers sought to ensure the energy regulators would not seek preemption of state policies.
“When we're talking about grid reliability issues or studies that are being embarked upon, I think it's important we look at all the experts, whether they are at the National Renewable Energy Laboratory or utilities,” said Sen. Cory Gardner (R-CO). “Take Xcel Energy that has done a remarkable job of integrating various sources, fuel mixes, into the grid while maintaining superior reliability.”
EEI chair: Reliability not threatened by power mix shifts
Amid the DOE grid review, the White House has put forward other administration officials to make the case for preserving baseload plants — especially coal, a persistent focus of Trump’s energy policy.
After the announced withdrawal from the Paris climate accord, EPA Administrator Scott Pruitt has played the lead role. During an appearance on NBC’s Morning Joe this month, Pruitt said that decreasing coal generation could lead to unspecified reliability risks on the grid.
"When we're at less than 30% or right at 30% today, that creates vulnerabilities to attacks on infrastructure," he said, arguing that utilities need plants with “solid hydrocarbons onsite” to ensure reliability.
Those statements fly in the face of numerous studies conducted by national laboratories and grid operators over the past decade, as well as the lived experience of many utilities.
Vincent-Collawn’s utility PNM, for instance, released a draft integrated resource plan this spring that would see it abandon coal generation entirely by 2031. The PNM CEO said that despite Pruitt’s comments, outside analysis of the IRP anticipates no reliability problems.
“We still have some baseload because we still own a piece of [the Palo Verde nuclear plant],” she said. “We have some gas plants and then need to have some peaking plants. So we will need to have other supplements to the renewables, but getting out of coal will be done in a way that doesn’t affect reliability.”
"We will need to have other supplements to the renewables, but getting out of coal will be done in a way that doesn’t affect reliability."
PNM Resources CEO
Earlier at the conference, DTE Energy CEO Gerry Anderson said his utility’s move away from coal and toward cleaner sources of power was guided largely by economics. When the Michigan utility began preparing for the Clean Power Plan — an Obama-era emissions rule — officials found they “could deeply decarbonize DTE Energy and we could do it in a way that's affordable.”
That perspective is one shared by both the broader industry and PNM, said Vincent-Collawn, the first woman to chair EEI.
“If you look at where we are with gas prices, renewables prices, it's changed dramatically,” she said. “So those market forces lead us to different conclusions because we do want to produce power at the lowest possible cost."
In the face of stagnant or declining power demand from sectors traditionally served by electric utilities, DTE's Anderson said utilities’ growth this century will largely be fueled by electrifying other industries, like transportation. The EEI chair reiterated that point as well.
“You talk about EVs, about smart cities, I think that's really where electric companies are going — not just focusing on the electricity we sell, but focusing on its attributes," she said.
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