FERC Rejects Coal Plant Saving Plan

In a setback for an Ohio utility company and the coal company that supplies its generating plants with fuel, the Federal Energy Regulatory Commission unanimously rejected an effort by Energy Secretary Rick Perry to prop up beleaguered coal and nuclear power plants.

Perry had asked FERC to guarantee financial payments to power generating plants that face closure due to competition from natural gas and renewable energy.

The proposed “grid resiliency pricing rule” would have covered the costs of power plants that keep on hand a 90-day fuel supply.

FERC Commissioner Cheryl LaFleur spurned Perry’s effort to support the policy because the nation’s electric grid is in danger.

She said Perry failed to produce evidence to prove that point and said he was actually trying to freeze resources of yesterday into place indefinitely.

“I believe the Commission should continue to focus its efforts not on slowing the transition from the past but on easing the transition to the future,” she wrote.

Akron-based FirstEnergy Corporation and Murray Energy based in St. Clairsville, a coal mining company, had heavily supported Perry’s proposal.

Critics of the Perry plan had argued that it would undermine the power markets that regulators have spent decades building.

FERC did order the nation’s regional grid operators to submit information within 60 days about their ability to judge “naturally occurring and man-made threats.”

Energy industry observers had said that had the rule been implemented it would have had its greatest effect in the PJM power grid that stretches over 13 states between the Midwest and East Coast.

FirstEnergy warned in a statement that “without timely action, more of these facilities will close prematurely, jeopardizing the ability to provide clean, reliable and affordable power to customers while harming economies across the region.”

A Wall Street Journal article about the FERC vote said there is a widespread belief that another round of coal-powered generating plant closures are coming, which would not be good news for railroads.

Last November, FERC had projected that 20.6 gigawatts of coal-fired electric generating capacity will be retired by 2020 with less than 2 gw of coal-producing electricity coming online to replace it.

By contrast, more than 92 gw of natural gas produced electricity will come online with just 11 gw of gas-fired electric generating capacity retired.

At present, natural gas generates 40 percent of the nation’s electricity while coal accounts for 23 percent. Nuclear and renewable energy provide 9 percent apiece of the generating capacity.

A Department of Energy study ordered by Perry early in his tenure at the urging of Murray Energy and released last August concluded that less expensive and abundant natural gas is the primary driver of changes in the U.S. electric generating industry.

Murray had urged Perry to use DOE’s emergency power to order the firm’s coal customers to keep running. Perry had sought to frame as a national security issue the proposed rule that FERC rejected.

When asked at a House Energy and Commerce Committee hearing last October if the proposed rule would cost consumers several billion dollars a year, he responded, “What’s the cost of freedom? What does it cost to build a system to keep America free?”

Perry argued that the power grid’s vulnerabilities posed a threat to national security.

In a September letter to FERC calling for it to act quickly, Perry asserted that “the resiliency of the electric grid is threatened by the premature retirements of these fuel-secure traditional baseload resources.”

In its decision, FERC said the feedback it received from grid operators on the Perry proposal “do not point to any past or planned generator retirements that may be a threat to grid resilience.”

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