FirstEnergy’s request for emergency bailout from Rick Perry generates widespread backlash

The troubled electric utility company is accused of using a "manufactured crisis."

FirstEnergy Corp.'s 2,460-megawatt Bruce Mansfield coal-fired plant in western Pennsylvania. CREDIT: Robert Nickelsberg/Getty Images
FirstEnergy Corp.'s 2,460-megawatt Bruce Mansfield coal-fired plant in western Pennsylvania. CREDIT: Robert Nickelsberg/Getty Images

A major electric utility company wants Energy Secretary Rick Perry to rescue its coal and nuclear plants, along with other companies’ plants located in the eastern United States, by declaring an “emergency” in the power industry. The request was widely panned by industry officials and experts, with one company describing the scenario as a “manufactured crisis.”

On Thursday, First Energy Corp. asked the Department of Energy (DOE) to issue an emergency order, claiming in its letter to Perry that “the nation’s security is jeopardized if DOE does not act now” to keep the plants open. The diversity of supply that nuclear and coal-fired units provide to the grid is being lost as more of these plants retire each year, the company said, arguing this will make the electric system less reliable.

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However, despite FirstEnergy’s sense of urgency, coal and nuclear plants have been shutting down on a regular basis across the United States over the past half-dozen years without any reliability issues.

Furthermore, DOE’s emergency powers are intended to be used in only the most extreme circumstances, such as an act of war or severe grid impairment from a hurricane or cyberattack, not to help rebuild shareholder value at a troubled investor-owned utility company.

In its letter to Perry, FirstEnergy, based in Akron, Ohio, requested that DOE exercise its authority to ensure “just and reasonable cost-based rates” for generators that have 25 days of onsite fuel supply and are not recovering their costs today. FirstEnergy also requested that DOE’s order direct PJM Interconnection Inc., the grid operator for a large portion of the mid-Atlantic and Midwest regions, to “begin negotiating immediately with such generators on the terms of such supply.”

FirstEnergy wants the emergency order to remain in place for four years, or “until the Secretary determines that the emergency has ceased to exist because the PJM markets have been fixed to properly compensate these units for the resiliency and reliability benefits that they provide, whichever is later.”

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PJM appeared bewildered by FirstEnergy’s request. “There is no immediate emergency,” the grid operator said. “Nothing we have seen to date indicates that an emergency would result from the generator retirements.”

On Wednesday, FirstEnergy announced the planned retirement of three of its nuclear plants. The company’s Davis-Besse nuclear power station in Ohio, with a capacity of 908 megawatts, would retire in 2020. Its 1,268-megawatt Perry nuclear plant, also located in Ohio, would retire in 2021. And its 1,872-megawatt Beaver Valley nuclear station, located in Pennsylvania, would retire in 2021.

FirstEnergy blamed “market challenges” beyond its control for the planned closure of the three plants.

PJM, in its response to FirstEnergy’s emergency order request, said the potential retirement of these power plants and others has been under discussion “for some time.” The grid operator has taken a look at the effect of the retirements on its system and “found that the system would remain reliable,” it said. “We have adequate amounts of generation available.”

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FirstEnergy’s rhetoric resembles the pro-coal language used by DOE since Trump took office. And, like DOE’s failed plan to subsidize coal and nuclear plants last year, the company’s application is full of inaccuracies and misstatements about the state of the nation’s electric grid.

“FirstEnergy is trying every trick in the book to get Rick Perry and the Trump administration to stop the rapid growth of the clean energy economy, boost their own profits and drag us backward into the past yet again, but they will not succeed,” Mary Anne Hitt, director of the Sierra Club’s Beyond Coal campaign, said in response to the request. “If the Trump Administration bows to FirstEnergy and moves forward with this bailout attempt, Sierra Club fully intends to challenge and defeat the administration in court.”

The company, in its letter, stated “DOE is undoubtedly aware” that “threats to the nation’s power supply and grid are real and can no longer be ignored.”

But the lack of panic by the nation’s grid operators belie FirstEnergy’s dire warning.

In January, Perry lost his battle with the Federal Energy Regulatory Commission (FERC) when the agency rejected his proposal to approve subsidies to coal and nuclear power plants. But unlike Perry’s proposal, FirstEnergy’s request circumvents the necessity of FERC’s approval since DOE’s emergency authority doesn’t require it.

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“This Bailout 2.0 amounts to nothing but another attempt to swindle utility customers out of their hard-earned cash to buoy the coffers of failing plants,” Earthjustice, an nonprofit environmental law firm, said Thursday in a statement.

“This request by FirstEnergy is a desperate attempt to get special treatment from Secretary Perry” and do an “end run” around the proposal that FERC already rejected, Earthjustice Staff Attorney Kim Smaczniak said.

NRG Energy, one of FirstEnergy’s competitors in the region, described the emergency request as a “manufactured crisis.”

“There is absolutely no reliability problem in PJM, and in any event, PJM would study the reliability impact of announced retirements and could facilitate a reliability-must-run agreement if it was needed,” NRG spokesperson David Gaier said in a statement emailed to ThinkProgress.

Reliability-must-run agreements are typically reached when an electric grid operator believes a power plant scheduled for closure is still needed to ensure the reliable flow of electricity. The owners of the plants are typically guaranteed a revenue stream that covers the cost of operating the plants, plus an additional payment.

The top trade group for the oil and gas industry was also highly critical of FirstEnergy’s request. The American Petroleum Institute (API) called on FirstEnergy “to stop misleading the public on the future of its power plants in Ohio and Pennsylvania.”

“FirstEnergy’s latest attempt to spread a false narrative surrounding the reliability of the electric grid is nothing more than a ruse that will force Main Street consumers to pay higher prices,” API Market Development Group Director Todd Snitchler said Thrusday in a statement.

FirstEnergy’s claim that the electric grid would be in immediate danger with its power plant retirements is “simply untrue,” API said. “For FirstEnergy to cry wolf on the issue of grid reliability is irresponsible and is the company’s latest attempt to force consumers to pay for a bailout.”

In the application, FirstEnergy subsidiary FirstEnergy Solutions cited a DOE report released earlier this week as a justification for the bailout. The authors of the report, prepared by DOE’s National Energy Technology Laboratory (NETL), stated that so much coal was used during the so-called bomb cyclone in the eastern United States in late December and early January that the nation must find a way to prevent coal plants from shutting down.

Experts have described the NETL report as a “political” document rather than an honest assessment of the state of the nation’s power grid. Mark Kresowik, eastern region deputy director of the Sierra Club’s Beyond Coal campaign, said“You’ve got this supposedly independent lab putting out really shoddy, politicized analysis, and it’s deeply disturbing from a grid reliability and consumer cost perspective.”