Electricity Markets

Trump directs DOE to intervene on coal, nuclear generation

President Donald Trump on June 1 directed Secretary of Energy Rick Perry to take steps aimed at keeping “fuel-secure” power facilities -- coal-fired generation and nuclear power plants -- operational.

The move came after Bloomberg News reported Thursday evening that Trump administration officials were “making plans to order grid operators to buy electricity from struggling coal and nuclear plants in an effort to extend their life, a move that could represent an unprecedented intervention into U.S. energy markets.”

The Bloomberg article went on to say that the DOE had circulated a draft memorandum prior to a meeting of the National Security Council held on June 1 to discuss the plant retirements. According to a copy of the draft memo posted with the Bloomberg story, DOE would exercise emergency authority under a pair of federal laws to direct ’System Operators’ to “purchase or arrange the purchase of electric energy or electric generation capacity from a designated list of Subject Generation Facilities (SGFs) sufficient to forestall any further actions toward retirement, decommissioning or deactivation” during a two-year time period. The laws in question are the Federal Power Act and the Defense Production Act of 1950.

According to the draft memo, DOE would also establish a Strategic Electric Generation Reserve “To promote the national defense and maximize domestic energy supplies.” The memo describes these efforts as a “stop-gap measure” while DOE further addresses grid security challenges. The memo does not define the Subject Generation Facilities or the Strategic Electric Generation Reserve.  As Bloomberg notes, the memo is marked as a “draft” and “not for further distribution.”  Further, the memo is styled as an “addendum,” and it cross-references a number of other documents, including a DOE directive, that have not been made public.

According to multiple news reports, White House Press Secretary Sarah Sanders issued a statement on June 1 in which she said that impending retirements of fuel-secure power facilities “are leading to a rapid depletion of a critical part of our nation’s energy mix and impacting the resilience of our power grid," adding that Trump has charged Perry with preparing “immediate steps to stop the loss of these resources and looks forward to his recommendations."

PJM weighs in

The PJM Interconnection on June 1 said that while it had not not received any official document from the DOE, its analysis of the recently announced planned deactivations of certain nuclear plants has determined that there is no immediate threat to system reliability. “Markets have helped to establish a reliable grid with historically low prices,” it said.

“Any federal intervention in the market to order customers to buy electricity from specific power plants would be damaging to the markets and therefore costly to consumers. There is no need for any such drastic action,” the grid operator said.

It noted that it recently released the results of its capacity auction, which secured supplies through 2021/2022. The auction results saw an increase in the amount of coal resources that cleared the market, along with a diverse mix of natural gas generation, nuclear generation, renewable resources, demand response and energy efficiency.

“We have acknowledged the concerns raised by officials and regulators about the long-term resilience of the grid and we are embarking on a fuel security initiative that we announced just a few weeks ago. Our goal with that initiative is to ensure that the already reliable electric grid will continue to remain both reliable and resilient for years into the future without the need for government intervention in the marketplace,” PJM went on to say.

FERC scrapped DOE proceeding

The Federal Energy Regulatory Commission earlier this year said that it was terminating a proceeding it initiated in order to address a proposed rule on grid reliability and resilience pricing submitted to the commission by Perry last year.

At the same time, FERC in its order said that it was initiating a new proceeding to specifically evaluate the resilience of the bulk power system in the regions operated by regional transmission organizations and independent system operators. 

DOE proposed rule in late September

The rule proposed to FERC by Perry would have required several regional organized wholesale power markets to “develop and implement market rules that accurately price generation resources necessary to maintain the reliability and resiliency” of the country’s bulk power system, and specifically described such rules as establishing electric energy rates that provide for the recovery of costs and a return on equity for certain “eligible reliability and resiliency resources.”

FERC launched a proceeding to consider the proposed rule and it issued a related notice inviting comments.

In initial comments filed on Oct. 23, the American Public Power Association urged FERC to reject the DOE proposed rule. The Association said that while it agreed that the DOE’s proposed rule raised important questions that the industry should study further, the proposed rule did not establish the existence of an imminent threat to the electric grid requiring cost-recovery payments to merchant generators.

The Association also told FERC that the proposal was ambiguous and incomplete in many respects, and unworkable in its current form. The Association also submitted reply comments in the proceeding.

No need for FERC action on resilience at this time: Association

More recently, the Association in May said that filings made by regional transmission organizations and independent system operators at FERC don’t show the need for any specific FERC actions on resilience at this time, on either a generic or region-specific basis.

The Association’s May 9 reply comments were submitted in the proceeding launched by the Commission earlier this year to evaluate the resilience of the bulk power system in the regions operated by regional transmission organizations and independent system operators (Docket No. AD18-7-000).

Association urged DOE to reject FirstEnergy plea for emergency order

In April, the Association urged the DOE to reject a request by FirstEnergy Solutions that the Secretary of Energy issue an emergency order requiring PJM Interconnection and, by extension, electricity consumers in the PJM region, to provide “full cost recovery” for certain merchant generating plants in PJM.

Such a request is unjustified, the Association said in its April 9 submittal to the DOE. FirstEnergy Solutions has neither demonstrated the existence of an emergency that would support action by Secretary of Energy Rick Perry under Federal Power Act section 202(c), nor shown that its requested relief is reasonable, the public power group argued.

At issue is a March 29 request made by FirstEnergy Solutions, on behalf of certain of its subsidiaries (collectively, FirstEnergy), with the DOE.