When Energy Secretary Rick Perry’s proposal to give a massive bailout to the coal and nuclear industries was released last September, most energy regulatory experts dismissed it as a desperate attempt to reward the Trump administration’s political supporters in the energy industry.
Perry’s plan, according to numerous analyses, would lead to confusion and chaos in the nation’s power markets and put customers on the hook for billions of dollars in new costs. But Trump-appointed Republicans comprise the majority of Federal Energy Regulatory Commission (FERC) commissioners, several of whom have deep ties to the industries they’re now tasked with regulating. And the agency, while independent, has a history of favoring fossil fuels.
Most energy regulatory experts were troubled that Perry even submitted his proposal to FERC. As a result, when the commission came out with its decision on Monday rejecting the proposal, observers were relieved but also worried the entire exercise could set a precedent for the executive branch to interfere in future proceedings at the commission. Even though FERC ultimately rejected Perry’s proposal, the outcome may be different the next time an administration urges the commission to approve its energy agenda.
On the campaign trail, President Donald Trump promised coal industry executives that he would take various actions to prop up their ailing industry. Once in office, Trump and his Department of Energy listened to coal industry executives, including coal baron Robert Murray, on how the administration could help boost coal sales and prop up coal-fired power plants.
In late September, Perry sent the proposal to FERC — called a grid reliability and resilience pricing plan — that would subsidize struggling coal and nuclear plants in the name of keeping power grids dependable. Many viewed the proposal as an unprecedented and unnecessary intrusion by an administration into the operations of an independent federal agency.
“It was worrisome for a while,” said Robbie Orvis, an analyst at Energy Innovation, a San Francisco-based energy and environmental research firm.
Neil Chatterjee, who was serving as acting FERC chairman when Perry submitted the proposal, initially said he was “sympathetic” with the plan and later pushed for aid to struggling coal and nuclear plants on an interim basis. Chatterjee suggested FERC should explore whether qualities unique to coal and nuclear plants are due to their ability to store fuel onsite.
Critics of the plan viewed Chatterjee’s comments with suspicion. His statements “were not representative of the evidence and fact-driven way that FERC has made policy in the past,” Orvis told ThinkProgress. Chatterjee, a strong supporter of the coal industry, had served as Senate Majority Leader Mitch McConnell’s (R-KY) energy policy adviser for several years. He handed over the agency’s chairmanship to Kevin McIntyre in December and now is serving as a commissioner.
On Monday, FERC — composed of three Republicans and two Democrats — unanimously rejected Perry’s controversial proposal. They tore into the core of Perry’s argument, namely that somehow cheap renewables and natural gas are forcing essential coal and nuclear plants to be shut down. They noted that “the extensive comments submitted” by the grid operators “do not point to any past or planned generator retirements that may be a threat to grid resilience.”
FERC has traditionally been an apolitical and an evidence- and fact-driven independent agency, said Orvis. Chatterjee’s sympathy for the plan through the proceeding exposed how FERC “can be swayed by politics,” he said.
In the end, Chatterjee voted to reject the proposal. But in a statement attached to the decision, Chatterjee thanked Perry for “jump-starting a national conversation on this urgent challenge.” While he would have preferred an order that addressed the issues raised by Perry, Chatterjee conceded he is “nevertheless encouraged by today’s order, which represents a positive step forward in addressing these critical issues.”
In a separate statement attached to the order, FERC Commissioner Richard Glick emphasized “there is no evidence in the record to suggest that temporarily delaying the retirement of uncompetitive coal and nuclear generators would meaningfully improve the resilience of the grid.”
Glick, one of the two Democrats on the commission, also highlighted the flaws in Perry’s plan to guarantee profits only to power plants that maintain 90 days of fuel on site, such as coal and nuclear plants, as a bulwark against the electricity grid failing. During last week’s bitter cold spell, coal-fired facilities accounted for nearly half of all forced power plant outages reported in a large part of the mid-Atlantic and Midwest, he wrote.
The Pilgrim nuclear plant in Massachusetts, a facility that would have qualified for the guaranteed profits under Perry’s plan, was forced to shut down during last week’s winter storm. The outage was due to the loss of one of two electric transmission lines that connects to the nuclear plant.
The failure of the electric transmission line feeding the Pilgrim nuclear plant was a perfect illustration of why greater attention should be placed on the reliability and resilience of electric transmission and distribution systems, Orvis said. The Pilgrim nuclear plant outage “was so iconic because it put to rest the argument that nuclear is the most reliable source and it highlighted the importance of the transmission system in terms of maintaining plant availability,” he argued.
Despite transmission issues and coal plant outages, the nation’s electric grid operated reliably during one of the coldest periods in recent history. The electric system had passed a major test on the eve of FERC’s scheduled ruling on Perry’s proposal.
Trump’s former campaign manager offered a taste of what to expect from the administration in response to FERC’s rejection of its proposal. On Tuesday morning, Corey Lewandowski criticized the decision, characterizing FERC and “government officials who don’t support the Trump agenda” as “the deep state.”
Trump supporters have seized onto the term “deep state” to refer to government officials who want to undermine the Trump presidency and agenda.
Most FERC observers believe the decision came down to a legal issue, clouded by politics. Michael Panfil, a senior attorney and director of federal energy policy at the Environmental Defense Fund, called Perry’s proposal a “profit guarantee” to Trump’s “politically favored” electric generation resources. From the day Perry released the proposal in September, Panfil said he knew it was “plainly unlawful” and “clearly in contravention” of FERC’s statutory authority.