By Michael Brooks and Rich Heidorn Jr.
WASHINGTON — A senior Department of Energy official told Congress on Thursday his agency has no estimates on the cost of the coal and nuclear power bailout President Trump ordered last week, as Democrats blasted the proposal.
Trump directed Energy Secretary Rick Perry last Friday to force grid operators to provide a lifeline to struggling coal and nuclear plants, saying their retirements threaten national security. Trump’s directive came after the leak of a 40-page draft DOE memorandum that cited the Defense Production Act of 1950 and Section 202c of the Federal Power Act, which allows the energy secretary to issue emergency orders during energy shortages.
The memo proposed creation of a “Strategic Electric Generation Reserve (SEGR) to promote the national defense and maximize domestic energy supplies.”
Rep. Don Beyer (D-Va.) confronted DOE Assistant Secretary Bruce J. Walker over the directive at a hearing of the House Committee on Science, Space, and Technology’s Subcommittee on Energy on Thursday. Walker, head of the Office of Electricity Delivery and Energy Reliability, responded tersely.
Beyer asked Walker about his pledge at DOE’s Electricity Advisory Committee meeting on Feb. 20 that “‘We would never use a 202 to stave off an economic issue. That’s not what it’s for.’”
“And now, FirstEnergy Solutions has recently asked that the department use a 202 to stave off an economic issue,” Beyer continued. “Do we understand that you won’t use a 202 for them?
“The 202 application from FirstEnergy is being reviewed by my department as we speak,” Walker responded poker-faced.
Beyer quoted the president of the Electricity Consumers Resource Council (ELCON), who said the DOE memo’s proposed requirement that RTOs purchase capacity and energy from at-risk plants would “devastate” U.S. manufacturing.
“Have you calculated the costs on American business, specifically American manufacturing?” Beyer asked.
Walker: “I have not.”
Beyer then cited ELCON’s estimate that DOE’s earlier Notice of Proposed Rulemaking to provide cost-of-service payments to plants with on-site fuel — made under Section 403 of the Department of Energy Organization Act — would cost $8 billion annually in PJM alone.
“Now the new plan nationalizes the 403 proposal, so I would expect that $8 billion is going to go up very significantly,” Beyer said. “In putting together this draft plan have you estimated what this will cost the U.S. taxpayer?”
Walker: “I have not.”
“I have to give you wonderful credit for being able to answer these things very, very tightly,” Beyer responded. “I would suggest though … this is something that you and Secretary Perry and others look very seriously at and should have numbers available for. I think it’s within my purview as a member of this committee to ask you to go back and do the elementary research and report back to the committee on those two things please.”
Walker said nothing, his expression unchanged.
Once the hearing had ended, Walker hurriedly left the room and did not make himself available for questions from reporters.
Beyer yesterday sent Perry a letter, co-signed by more than 30 Democrats, asking the Trump administration to “cease the false narrative that bailing out uneconomic energy sources in competitive markets is needed for electrical grid resilience.”
Republican leaders of the committee made no reference to the order at the hearing, the topic of which was grid modernization. Ranking member Marc Veasey’s (D-Texas) opening remarks, however, focused on the bailout order.
“The Trump administration is inventing emergencies to bail out coal and nuclear plants, while ignoring the real problems,” Veasey said. “I’m sure the White House views this legal loophole that surfaced … as an easy way to try to fulfill campaign promises, which is very bad and very unsound when it comes to energy policy. … It would wreak havoc on our energy markets and create a number of misaligned incentives.”
Rep. Paul Tonko (D-N.Y.) noted that he had worked with Walker on deregulating New York’s electricity markets. He acknowledged the markets are not perfect, “but in 2018, the toothpaste is out of the tube, and drastic and unnecessary market interventions under the false pretense of an emergency to bail out uncompetitive generators like ones being discussed by the administration I think are unacceptable.”
Also testifying at the hearing was energy consultant Rob Gramlich, former economic adviser to former FERC Chair Pat Wood III.
Gramlich said the directive ignores coal and nuclear plants’ cyber risks, vulnerability to droughts and lesser ability than wind plants to ride through frequency deviations. “Fifty-year-old plants have outage rates that are typically three times as high as new plants,” he added.
“All technologies …. have their strengths and weaknesses and contribute to reliability and resilience in different ways, but none of them are essential,” he said. “Reliability comes from having reserves. In fact, each region already has a Strategic Generation Reserve. It’s called a reserve margin.”
Retirements Discussed at FERC-NRC Meeting
Nuclear and coal plant retirements also were the subject of a joint meeting Thursday morning of FERC and the Nuclear Regulatory Commission at FERC headquarters.
Mark Lauby, NERC’s senior vice president and chief reliability officer, discussed his organization’s concerns about the loss of “conventional” generation and the increase in renewables and natural gas.
“When you look in certain areas and you’ve got 60 to 70% of their fuels [being procured] on spot [markets], it makes me worried that we have a risk there that we have to start thinking about addressing,” he said.
But he said “firming up” fuel supplies is more important than fuel diversity. “Diversity really is only extremely helpful when you deal with things like Aliso Canyon, Fukushima, coal strikes. Diversity is helpful when you have those kind of unusual type events.”
FERC Commissioner Richard Glick noted that nuclear plants can’t provide frequency response, ramping or load following.
FERC Commissioner Rob Powelson asked if there was any validity to complaints that NRC’s regulations are unduly burdensome and could be contributing to plant retirements. “Is that fake news?” he asked.
NRC Chairwoman Kristine L. Svinicki said for the nuclear retirements to date, “I think we could have radically changed our regulations. It would not have been enough to change the business case and the decisions to shut those units down. … I’ve seen a little bit of the profit and loss statements, and I don’t know what on earth the regulators could have done that could have saved those units.”