With the deadline for public comment on the Department of Energy's controversial proposal to provide cost recovery for coal and nuclear power plants fast approaching, all sides have been weighing in.
The DOE’s notice of public rulemaking (NOPR) is currently in the hands of the Federal Energy Regulatory Commission (FERC), which recently agreed to an expedited review period.
Initial comments are due October 23, and reply comments are due November 7. The DOE has asked FERC to issue a decision 15 days after that -- although many people familiar with the agency's rule making procedures say that's highly unlikely.
On the pro side of the issue are coal-state lawmakers, nuclear industry groups, and labor unions supporting the grid reliability and market failure claims made by the NOPR, and making a plea to support the jobs and economic activity these rapidly retiring power plants provide.
On the con side are a panoply of energy industry groups, former federal energy commissioners, free-market think tanks and environmental law groups, whose complaints range from why the NOPR is terrible policy, to why it isn't even legal for FERC to consider.
These are some of the highlights from the comments being filed with FERC in the NOPR docket. We’ve already covered the genesis of this proposal, the backlash from major sectors of the energy industry and regulatory complex, and how FERC’s current commissioners have been reacting.
All of this is happening within what many observers say is an impossibly short timespan -- with just 45 days to submit public comments. Many key parties, such as state utility commissions and regional electricity coordinating groups, were still filing requests for standing as an intervenor in the docket.
Among the more noteworthy entries was a Thursday filing from eight former FERC commissioners, three of them Republicans and five Democrats, declaring the NOPR a “a significant step backward from the Commission’s long and bipartisan evolution to transparent, open, competitive wholesale markets.”
While a resilient power system is a worthy goal, DOE’s proposal wouldn’t help that, they wrote. Instead, it “would instead disrupt decades of substantial investment made in the modern electric power system, raise costs for customers, and do so in a manner directly counter to the Commission’s long experience."
Subsidizing resources that would otherwise retire as uncompetitive could actually distort markets by driving out unsubsidized competition, raising prices on consumers, and evaporating confidence in markets, which “tend to collapse” under such circumstances, thereby undermining reliability.
The former commissioners -- Pat Wood III (R), Joe Kelliher (R), James Hoecker (D), Betsy Moler (D), Jon Wellinghoff (D), Donald F. Santa, Jr. (D), Linda Key Breathitt (D) and Nora Mead Brownell (R) -- offered a different solution. They urged FERC to work on what they described as the key issue for grid reliability: utility transmission and distribution system recovery after a storm or emergency.
“While there have been some instances of generation-related customer outages, fuel supply emergencies have been an insignificant cause,” they wrote.
The legal argument for killing the NOPR
Meanwhile, at least two legal groups filed comments seeking to short-circuit the need for FERC to review the DOE’s proposal at all.
In a filing this week, Ari Peskoe, a Harvard Law School senior fellow writing for the Harvard Environmental Policy Initiative, laid out a Iegal argument he discussed days after the NOPR first came out during an interview on The Interchange with GTM Research chief Shayle Kann. In simple terms, DOE hasn’t shown, or even proposed, that current wholesale rates in FERC-regulated jurisdictions are “unjust and unreasonable” or “unduly discriminatory” -- and without such a finding, FERC has no justification to act to change what’s already in place.
“This glaring omission dooms DOE’s proposal under Section 206 of the Federal Power Act and allows the Commission to issue a swift rejection without weighing in on the merits,” he wrote.
Even without this consideration, Peskoe wrote, DOE’s failure to provide definitions of key terms like “resiliency,” a word never used by FERC in connection with wholesale rates, means that commissioners and interested parties would have to, essentially, invent a meaning in order to create a rule that values it in energy markets. That violates a legal requirement for rulemaking to present a range of alternatives to what's being proposed.
“[T]he NOPR does not propose even a single definition, let alone a 'range of alternatives,'" according to Peskoe.
Columbia Law School’s Sabin Center for Climate Change Law also argued in its comments that DOE has failed to demonstrate “unjust and unreasonable” market rules, preventing it from moving forward. It also argued that the proposal’s call for compensating particular fuel types means it requires a National Environmental Policy Act review -- something that can’t happen within 45 days. Finally, it declared the NOPR “a politically motivated gambit to allocate resources to the support of coal- and nuclear-fired generating capacity.”
The free-market think tank R Street Institute took a different approach to the legal issues. “RSI sees no defensible case to support the NOPR and as such, only provides comments on staff questions that relate to the 'need to reform' and an additional question on alternative options.”
Instead, the group weighed in on its area of expertise, saying the proposal “lacks empirical support for its claim that an emergency situation justifies massive, abrupt intervention that will likely cost consumers billions without any clear benefit.” R Street urged FERC to “pursue an alternative course to price reliability and resiliency services that enhances the competitive performance of organized wholesale electricity markets.”
Coal country responds
Of the comments supporting of the proposal, the most politically weighty to date have come from U.S. Sen. Shelley Capito (R-WV) and three of the state’s Republican Congressmen, asking FERC to act quickly to “recognize the value” of coal and nuclear resources with 90-day fuel supplies.
The lawmakers also laid out a more specific policy for putting the NOPR’s vague concepts into action, suggesting that baseload resources be provided value for reliability and resiliency “during the capacity auction process" used by most interstate grid operators to secure generation supply for reliable operation across all hours, days and seasons of the year.
They also repeat some of the DOE's assertions that opponents claim are inaccurate. For example, the lawmakers write that “the current price advantages of natural gas and subsidized renewable energy in the electric markets are the result of volatile market forces and impermanent federal policies.” That’s arguable on the market volatility issue, and perhaps prophetic in terms of federal policies. That argument fails to capture that renewable energy’s price advantages are increasingly driven by technology improvements and economies of scale.
In a Thursday filing, U.S. Rep. Kevin Cramer (R-ND) took the DOE’s argument further, suggesting that cost recovery be extended to include power plants owned by investor-owned utilities, municipalities and rural cooperatives that participate in wholesale markets, not just merchant generators. This argument would appear to extend to power plants that are already subject to cost recovery under North Dakota’s rate-regulated markets, and ask FERC to interfere in the state’s process for determining their status.
The Regional Growth Partnership, a northeastern Ohio economic development agency, references several other points that have been questioned in relation to the NOPR. It writes that baseload coal and nuclear plants are “able to operate in all types of weather,” ignoring the weather events that have frozen on-site coal piles or forced nuclear plants offline.
The Regional Growth Partnership also cites a “changing and less diverse resource mix, resulting in an electrical grid with untested resiliency and a diminished ability to respond to crisis,” although these statements don’t accurately describe the grid’s condition today, according to U.S. grid operators and the North American Electric Reliability Corporation.
FERC’s docket has a number of other filings from economic development organizations and labor unions promoting the rule as a way to preserve jobs and economic activity in the face of coal and nuclear power plant closures.
In comments submitted this week, the Utility Workers Union of America provided this argument for why the NOPR is necessary: “The on-site fuel at baseload coal and nuclear EGUs [energy generation units] provides the electricity grid with reliability and resiliency characteristics that are unique across the fleet. This conclusion is not based on theoretical market models or complex algorithms, but on the experience of our members working day and night to run these EGUs. […] The modern electricity grid is increasingly becoming a place where theory replaces experience.”
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