Energy Secretary Rick Perry’s testimony before a House energy subcommittee this morning got attention from the mainstream press for his mistake of calling Puerto Rico a country, and his defense of what is, in the scope of the Trump administration, a relatively small $56,000 private air travel bill.
But Perry also found time to defend DOE’s surprise request to the Federal Energy Regulatory Commission (FERC) to rush through a rule that would upend decades of energy market policy by guaranteeing cost recovery for power plants with 90 days of fuel supply on-site -- something that only nuclear power, a few hydropower sites, and some larger coal power plants can provide.
Perry’s prepared statement called the notice of proposed rulemaking (NOPR) "just the first step," although he left that phrase out of his opening remarks. Instead, he repeatedly called the proposal “a way to kick-start a national discussion about resiliency and reliability about the national grid,” with a "very robust and open conversation" between parties his primary goal.
This does not sound like a description of the NOPR that DOE filed with FERC, however. That document implies a looming threat to grid reliability due to coal and nuclear power plant retirements, based on a sketchy and incomplete analysis of one cold weather event (the 2014 polar vortex) that grid operators have already taken steps to address.
It then leaps to proposing that FERC must rush through a rule to establish “cost recovery” for its definition of grid resources that meet its reliability and resiliency requirements, with the 90-day fuel supply qualification completely overshadowing the remainder.
DOE’s proposal for pushing this rulemaking through on a 60-day timeline prompted an immediate outcry across the energy industry spectrum, with 14 energy trade groups including solar, wind, natural gas, oil and major commercial and industrial power users filing a motion with FERC to extend DOE’s 60-day timeline. FERC rejected that request on Wednesday, with no explanation.
Many Democratic members of the subcommittee zeroed in on the NOPR for criticism. “You are distorting the market, damaging the environment and delivering preferential treatment to favored industries,” said Rep. Frank Pallone Jr. (NJ), the top Democrat on the full House Energy and Commerce committee. Pallone also sent a letter to Perry on Thursday, demanding the names of DOE staffers involved in the NOPR and a record of who they met with as it was created.
Rep. Kathy Castor (D-FL) cited a study by research firm ICF that showed the rule could cost ratepayers from $800 million to $3.8 billion annually through 2030. “There is just no rational basis for this FERC rule you are trying to move through as quickly as possible,” she said. "I am concerned that a discussion about how this will increase prices for consumers is being short-circuited. How do you give voice to consumer concerns about massive price increases?”
Rep. Paul Tonko also asked Perry if he had considered the costs to ratepayers when crafting the rule. Perry responded, “I think you take costs into account, but what’s the cost of freedom? What’s the cost to keep America free? I’m not sure I want to leave that up to the free market.”
Perry several times evoked the specter of blackouts as justification for expediting the proposed rule. In response to Rep. Mike Doyle (D-PA), who asked him to clarify whether the NOPR was a 60-day rush order for major energy market policy overhaul or a conversation-starter, he said, “It is both. It can be both. We can have a conversation, and I think they must act.”
Perry also undercut the free-market side of the argument against the NOPR -- that by subsidizing expensive and outdated power it will shove out more competitive alternatives and suppress innovation -- by questioning the idea of a free market in energy itself.
“We subsidize a lot of different energy sources. We subsidized wind energy, we subsidize ethanol, we subsidize solar, we subsidize oil and gas,” he continued. “The question is: How do you make it as fair as you can?”
Perry also left open the possibility the rule would be rejected. "If the letter to FERC is what you say it is, they won't go forward," he said.
FERC Commissioners Rob Powelson and Cheryl LaFleur have voiced their concerns about rushing ahead with a rule that could upend energy markets, while Chairman Neil Chatterjee has previously expressed his support of examining market forces that could threaten coal and nuclear power’s role in grid resiliency.
Come join us for GTM's first annual U.S. Power & Renewables Conference in November. We'll hear directly from former FERC chairman Norman Bay and you'll get an in-depth look at how the renewable energy market will interact with the U.S. power market, and how those interactions can impact overall industry development and market growth. Learn more here.