Focus on FERC: Keep energy markets free markets
Last month, U.S. Energy Secretary Rick Perry proposed that the Federal Energy Regulatory Commission (FERC) intervene in state electricity markets to establish new rules that would have electricity consumers subsidize uneconomical coal and nuclear power plants. The proposal is theoretically intended to promote “resiliency” of the electrical grid, but it is a thinly disguised effort to help politically connected interests at the expense of electricity ratepayers.
In its proposal, the Department of Energy (DOE) gives FERC only 60 days to decide whether to upend the nation's electricity markets. If FERC decides to enact the DOE proposal, it would undermine 25 years of progress in the development of competitive electricity markets that save consumers money.
As the federal government intervenes to pick winners and losers, it undermines the growth of two thriving industries that have been huge drivers for economic growth both in Pennsylvania and across America — renewable energy and natural gas.
The notion that we need this new government intervention to address concerns about resilience is undermined by DOE's own recent study of the nation's grid. The study failed to document any way that either coal or nuclear power could help. In fact, when the grid has been tested in extreme circumstances, the on-site coal and nuclear fuel that DOE now says is necessary has proven to be a vulnerability.
During the 2014 polar vortex, coal piles froze. During Hurricane Harvey, coal units near Houston went down due to flooding. Tsunami-force floods led to the shutdown of the Fukushima nuclear plant in Japan and the release of dangerous radiation.
There is also no evidence that on-site fuel supply, as called for by DOE, will reduce electricity outages. A recent study by the Rhodium Group concluded that less than 0.00007 percent of power outages are related to fuel-supply issues.
DOE's proposal seeks to override state authority by imposing a guaranteed cost-recovery mechanism for existing, and potentially for new, coal and nuclear units. Every eligible unit would receive full cost recovery whether it is needed by the system operator or wanted by customers.
That means electricity consumers would be saddled with billions of dollars in unnecessary charges.
Fortune 500 companies and small businesses are choosing the kind of electricity they want to meet requirements for energy, lower costs, critical functions and sustainability. If finalized, this rule would force businesses to pay more for power they don't want.
The decision will ultimately rest with FERC, which has a majority of Trump-administration appointees, none of whom in the past have supported this sort of interference in state and regional electricity markets.
A broad coalition is standing together in support of a competitive electricity marketplace, including such diverse groups as the American Petroleum Institute and the American Council on Renewable Energy. It is our hope that the bipartisan collection of commissioners at FERC will rule against this heavy-handed distortion of the electricity marketplace and avoid new bureaucratic initiatives that increase prices.
James Spencer is president and CEO of EverPower, a Pittsburgh-based developer, owner and operator of utility-scale U.S. wind projects. Greg Wetstone is president and CEO of the American Council on Renewable Energy, a national nonprofit dedicated to advancing renewable energy through finance, policy and market development.