Steel Products

Trump's Coal Revival Faces Setback

January 9, 2018

President Trump’s plan to revive the coal industry received a blow on Monday when the Federal Energy Regulatory Commission rejected a proposal by Energy Secretary Rick Perry to subsidize certain power plants. Perry’s proposal on grid reliance and reliance pricing recommended regional transmission organizations and independent system operators compensate plants that maintain 90-day fuel supplies against weather and emergency disruptions.

FERC agreed with critics that there is no evidence of a threat to the power grid that would justify Perry’s request and that RTO/ISO tariffs would increase the cost of electricity for consumers. The proposed subsidies would protect coal-fired and nuclear power plants that have the capability of on-site energy storage while putting natural gas and renewable energy sources such as wind and solar power at a financial disadvantage. Critics of the proposal said the plan would alter the competitive balance in the electricity markets and help only a handful of coal and nuclear companies.

The Commission wrote in its findings, “The Proposed Rule proposes that RTOs/ISOs pay a cost-of-service rate to a resource that has a 90-day fuel supply on site to enable it to operate during an emergency, extreme weather conditions, or a natural or man-made disaster. However, neither the Proposed Rule nor the record demonstrate why the existence of an on-site 90-day fuel supply is a reasonable basis to find that rate to be just and reasonable and not unduly discriminatory or preferential. In addition, the Proposed Rule does not address the concern that an eligible resource located in a constrained area may not assist with the resilience of the bulk power system to warrant that rate.”

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The FERC noted that economic, environmental, and policy drivers are changing the way electricity is procured and used and may impact the resilience of the bulk power system. As a result, it is initiating a new proceeding to develop a common understanding about what resilience of the bulk power system means and how RTOs and ISOs address challenges.

“Today’s action directs operators of the regional wholesale power markets to provide information as to whether FERC and the markets need to take additional action on resilience of the bulk power system,” said the Commission in a statement.

Following the unanimous decision by the FERC, Perry said, “”What is not debatable is that a diverse fuel supply, especially with onsite fuel capability, plays an essential role in providing Americans with reliable, resilient and affordable electricity, particularly in times of weather-related stress like we are seeing now.”

Perry’s view is not shared by everyone. “Rick Perry’s scheme to prop up aging nuclear and dirty coal plants was never about making sure the lights and heat stayed on,” said John Moore, an energy policy expert for the Natural Resources Defense Council. “It was about protecting the bank accounts of plant owners at the expense of everyday Americans.”