Plant bailout back on tap as Perry, coal interests reportedly derail FERC nomination
A federal coal bailout is back in the spotlight in Washington due to a new White House economic report and headlines about a shakeup in the nomination process for the Federal Energy Regulatory Commission (FERC).
On Tuesday, Politico reported former NRG Energy executive David Hill is out of the running for FERC after Secretary of Energy Rick Perry and coal executives pressured the president not to nominate him. The Energy Daily previously reported Perry is pushing the president to nominate former Texas regulator Barry Smitherman to the agency.
Also on Tuesday, the White House Council of Economic Advisors released a report to the president calling for a strategic electricity reserve that could keep retiring plants in service. Perry told reporters last week that the administration has not ruled out direct financial support for struggling generators.
After months of lying dormant, discussion about a plant bailout in Washington this week may indicate the White House is preparing another effort to save retiring generators.
Last year, FERC rejected the administration’s first attempt to provide cost recovery to at-risk coal and nuclear plants. The National Security Council then crafted a memo that advocated using DOE’s emergency authority or the executive branch's wartime powers to keep plants online, but that strategy reportedly stalled at the White House over legal concerns.
The new CEA report revisits a central idea from that memo — a "strategic generation reserve" that would keep older coal and nuclear plants in service.
"The entire portfolio of generation assets in the United States could be eligible to be part of a reserve, with different strategic weights placed on various types of generation — for example, nuclear or coal-fired generation might provide greater resilience benefits and therefore be preferentially selected into the reserve," the report reads.
The report, however, contains few details about how the program would be structured or funded, and appears to undercut its case for a strategic reserve.
Citing Energy Information Administration data, the report says there is "some evidence" that fuel supply problems can lead to outages, but then acknowledges that the vast majority of power disruptions come from other issues.
"In 2017, the EIA reported 94 major disturbances or unusual occurrences in the electricity supply system affecting a total of 17.1 gigawatts of capacity," it reads. "Fuel supply deficiency accounted for 6 percent of these events and 1.2 percent of the total lost capacity.”
Depending on how the White House structures an eventual plant bailout, FERC may need to be involved to set rates paid to the retained generators.
This week, bailout backers reportedly scored a victory in derailing the FERC nomination process of David Hill, the former executive vice president and general counsel at NRG.
Hill, a former Department of Energy official in the George W. Bush administration, has been vocal in his opposition to the White House's plant bailout plans.
"[I]f you really wanted to do something that values reliability and resilience, you do it with something that is fuel neutral and attribute based," Hill said in 2017, according to the Washington Examiner. "We are not against or for any particular generation source. We are for whatever generation serves the needs of customers at the lowest cost.”
Politico reports that Perry teamed up with coal companies Murray Energy and Alliance Resources to convince the president not to nominate Hill. In his place, Perry is pushing Trump to tap Smitherman to the federal board, according to multiple outlets.
Smitherman was a steadfast supporter of coal and other fossil fuels as chair of the Public Utilities Commission of Texas and the Railroad Commission, which oversees oil and gas production. Since then he has publicly doubted the scientific consensus on climate change when he ran for Texas Attorney General in 2014.
Smitherman has also championed deregulated electricity market and competitive transmission siting in Texas. Last month, he wrote an op-ed for Utility Dive advocating reform of FERC Order 1000, which governs transmission construction.
"[T]he competitive electric transmission provisions of Order 1000 face a number of roadblocks to more widespread implementation nationwide," Smitherman wrote. "Order 1000 should be expanded and implemented consistently so more consumers can enjoy the benefits of innovative solutions and cost containment."
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