Trump Administration Coal Plan Could Have Big Impact On Pennsylvania

Dec 8, 2017

The Trump administration’s plan to prop up money-losing coal and nuclear plants could have a big impact on how Pennsylvanians get their electricity. Federal regulators will now decide what to do with it.

The Department of Energy has asked the Federal Energy Regulatory Commission to act on its proposed “Grid Resiliency Pricing Rule.” The plan would likely help a few energy companies in the mid-Atlantic, but it would just as likely make ratepayers in the region pay more for their electricity. State utility commissions, grid operators, and the oil and gas and renewables industries have all voiced opposition.

 

Energy secretary Rick Perry said the rule was meant to keep coal and nuclear plants on the grid. Some of these plants are closing because they simply can’t compete with dirt-cheap natural gas, and, increasingly, renewables. Perry thinks this presents the electric system with a problem.

“Can you guarantee me tomorrow that the wind is going to blow? Can you guarantee me tomorrow that the sun is going to shine? Can you guarantee me tomorrow that a gas pipeline is not going to be disrupted in some form or fashion?” Perry said. “The answer’s no.”

Propping up coal and nuclear

The plan would force grid operators to guarantee “full recovery of costs” plus “a fair rate of return” to companies that operate power plants can keep 90 days of fuel on-site. Only coal and nuclear plants can do that. Perry says that would protect the grid from power shortages during a man-made or natural disaster. But it’s not clear whether the grid needs a 90-day backup, says Dan Klein, a coal analyst at S&P Global Platts.

“There’s never been anything remotely close to a disruption that would require 90 days of supply on the ground until things can get back on their feet,” Klein said.

Klein sees the rule as less about grid security and more about propping up coal, and to a lesser degree, nuclear power companies.

Highest potential impact on Pennsylvania and the Northeast

The plan would impact Northeastern states the most–especially a few specific companies in the region.

FirstEnergy, whose generating company is fighting off bankruptcy and is trying to sell six power plants in Pennsylvania–stands to benefit, as would one of its main suppliers of coal–Murray Energy. Its owner, Bob Murray, has personally lobbied Rick Perry to help the coal industry. Both companies support the plan.

“We support the grid resiliency rule as a way to ensure these plants remain part of the balanced energy mix,” said FirstEnergy spokeswoman Jennifer Young, in an email.

Bob Murray labeled the move “the single greatest action that has been taken, in decades, to support low-cost, reliable electric power in the United States.”

The proposal is opposed by interest groups including the oil and gas industry and wind and solar producers, but also government agencies like the Pennsylvania Utility Commission.

The DOE plan “threatens the efficient functioning of organized competitive wholesale electricity markets,” said PUC spokesman Nils Hagen-Frederiksen, in an email.

The rule would have the most impact on PJM, the country’s largest electric grid, which covers Pennsylvania and much of the mid-Atlantic.

Mike Bryson, vice president of operations at PJM, worries about coal and nuclear plants closing. But he thinks the Department of Energy’s proposed solution is simply too blunt an instrument. By guaranteeing profits for coal and nuclear energy, he thinks it would distort the free market for electricity in the region.

“We think that the market is a better way to reflect that,”  Bryson said.

Dueling plans

PJM has its own plan to keep nuclear and coal plants in the mix that it thinks will work better. It allows coal and nuclear plants to charge more for their electricity.

That plan has critics, but PJM says it would be “better for consumers” than the Department of Energy’s rule. PJM’s says its proposal would cost its ratepayers an additional $440 million and $1.4 billion annually, for between a 2 and 5 percent increase. Estimates of the Department of Energy’s proposal put the cost at anywhere between $300 million and $11 billion a year.

But the price isn’t just monetary.

Burning more coal means more pollution, and pollution from coal plants is linked to deadly heart and lung diseases, says Jay Apt, an engineering professor at Carnegie Mellon University.

“I think it’s clear subsidizing coal plants is in no way cost-effective,” Apt said. “It will not help human health, it will greatly affect human health.”

Still, Apt thinks having many different kinds of power is a good idea. He thinks giving tax credits for nuclear energy–which produces no carbon emissions or air pollution–is the best way to do that.

The Department of Energy asked FERC to act on its proposal by Dec. 11. But after receiving 1,500 comments on the proposal, FERC says it needs another month to come to a decision.

Find this report and others at the site of our partner, StateImpact Pennsylvania