Today’s lede: Invoking national security for power market intervention ‘entirely valid,’ FERC’s McIntyre says. Federal Energy Regulatory Commission Chairman Kevin McIntyre, in remarks today at the Energy Information Administration’s 2018 energy conference in Washington, D.C., was asked to comment on the “dilemma” posed by the Trump administration’s intent to intervene in competitive wholesale power markets to provide financial succor to economically struggling baseload coal and nuclear plants.
“I would not characterize this as a dilemma,” McIntyre replied, offering his opinion that invoking national security as the “rule of law” for requiring consumers to subsidize uneconomic baseload generation “would be entirely valid.”
Should the administration move forward and intervene in the markets under Section 202(c) of the Federal Power Act and/or the Korean War-era Defense Production Act, as President Trump apparently ordered Energy Secretary Rick Perry to do Friday (click through here and here), then the issue would likely land in FERC’s lap in terms of a cost-of-service ratemaking docket, McIntyre said, calling such proceedings the commission’s “bread and butter.”
In a scrum with some 14 reporters outside the conference hall, McIntyre said any contested rate cases generated by the administration’s pending market intervention policy would be subject to the Federal Power Act’s “just and reasonable” standard. If the matter came before the commission in terms of a negotiated settlement, it would be subject to a less stringent “fair and Reasonable” standard, he said.
In his formal remarks as a conference keynoter, McIntyre began by noting his “philosophical underpinnings” as a “strong believer in the rule of law.” This would appear to lend some heft to his later statement that invoking national security as the “rule of law” to intervene in the marketplace would be an “entirely valid” exercise by the administration, despite protestations to the contrary from a wide range of industry interests.
Trump’s direction to Perry on Friday is an extension of an effort begun last year when the energy secretary, pursuant to his authority under the Federal Power Act, forwarded to FERC a notice of proposed rulemaking that would have required electricity consumers to subsidize economically struggling baseload coal and nuclear plants. Preserving baseload generation was necessary to preserve electricity grid “resilience,” Perry said, introducing a new buzzword into the electric industry lexicon.
The issue awaited McIntyre when he joined the commission as chairman in December. In January, a unanimous FERC rejected the proposed rule and instead embarked on a fact-finding proceeding to assess what exactly grid “resilience” is and whether or not it represents a problem the commission should address in a market-based manner (click through here).
McIntyre told the conference crowd that FERC was in the process of “working through the record” amassed in the proceeding (RM18-1) and noted that he hoped FERC would “take action soon.” During the Q&A session, the FERC chairman said the concept of power grid “resilience” should be much broader than just wires and should encompass generation as well. He said he expected to “build a concept of resilience” and to address the “attributes” of power grid resilience.
DOE Under Secretary Menezes forcefully defends power market intervention. Warning of “dire consequences . . . if our lights go out and stay down,” Under Secretary of Energy Mark Menezes, in a keynote address to the Energy Information Administration’s 2018 energy conference in Washington, D.C., strongly defended the Trump administration’s intent to intervene in competitive wholesale power markets to financially prop up uneconomic baseload coal and nuclear power plants.
Menezes underscored the importance of bolstering the power grid’s “resilience,” which he appeared to define as the ability of the grid to “withstand a high-impact attack or disaster.” The many retirements of baseload coal and nuclear plants “threatens our ability to recover” from such a high-impact event, he said, suggesting the administration needed to intervene to counter the electric industry’s “historic shift from diverse, fuel-secure resources to pipeline-dependent resources.”
Menezes noted that the North American Electric Reliability Corp., which has authority from FERC to oversee mandatory reliability standards for the electric industry, including cybersecurity protocols, has no authority over natural gas pipelines, which are not subject to mandatory cybersecurity protocols.
The former Republican congressional aide and lawyer who represented utilities that stand to gain from the administration’s planned initiative also defended the proposed market intervention as a means of shoring up the nation’s ability to export its nuclear power expertise to other countries. With half of the U.S. nuclear fleet retiring, he said, countries that might want to purchase U.S. nuclear power plant technology are questioning why they should invest in U.S. technology rather than, say, China’s.
The competitive wholesale markets were designed to support baseload nuclear and coal generation, and natural gas was intended to provide mid-merit and peaking capacity, Menezes suggested. “We’ve inverted the price stack,” he said. “We do have a problem.”
PJM official warns chief benefit of industry restructuring at risk. A barrage of state and federal efforts to reregulate the electric industry is putting at risk the greatest consumer benefit of industry restructuring, the reassignment of financial risk from captive ratepayers to investors, Craig Glazer, PJM Interconnection’s federal government policy vice president, said Monday at the Energy Information Administration’s 2018 energy conference in Washington, D.C.
The “selective reregulation” represented by state-mandated subsidies for nuclear power and the Trump administration’s ongoing efforts to financially buttress floundering baseload coal and nuclear plants in wholesale power markets ignore the fact that “the good old days” under regulation “weren’t so good,” Glazer said. He likened the mood of the industry and electricity consumers back then to that of Howard Beale, the protagonist in the 1976 film “Network,” who captured the public mood by saying, “We’re mad as hell and we’re not going to take it anymore.”
Glazer, a former Ohio utility regulator, said a key factor in the decision to engage in competitive restructuring of the industry was a wave of nuclear power development in the 1970s that came in dramatically over budget, resulting in billions of dollars being passed through to captive ratepayers. In today’s competitive markets, consumers are not at risk if a resource investment fails or comes in substantially over budget. Glazer noted that Enron’s post-restructuring bankruptcy passed without imposing costs on consumers, and markets absorbed the economic cratering of such a central player in the sector without any significant price impacts. “There was no Enron rate case,” he observed.
Glazer’s remarks came as a panelist in a breakout session moderated by Stan Kaplan, director of EIA’s Office of Electric, Renewables, & Uranium Statistics, who noted factually that captive ratepayers in the Southeast are having to absorb the multibillion-dollar costs of failed investments in nuclear power and clean-coal plants. He asked Glazer if the fact that such big baseload power plants aren’t being built in organized wholesale power markets like PJM’s represented a good outcome or an indicator that the markets aren’t working.
“We didn’t restructure this market to pick technology (winners). We restructured to drive efficiency. The market is doing what it was designed to do – drive efficient investment,” Glazer replied. Rather than continue down the path of piecemeal reregulation, he concluded, “the challenge for all of us is to make this restructured industry work.”
Stepping on Adam Smith’s Invisible Hand: Trump’s unwarranted intervention in power markets. Despite the fact that the country’s grid operators vehemently disagree with this assessment, the Trump Administration appears bent on slowing the demise of these uneconomic resources, at least until the DOE (with other agencies) “further evaluates national security needs and additional measures to safeguard the Nation’s electric grid…” The issue of resiliency related to generating assets is not so immediate as to require a subsidy to line the pockets of coal mining companies, coal plants, and nuclear facilities. For a President from the GOP – whose traditional mantra has been a strict reliance on market forces – this is a radical departure from the norm.
How Trump’s ‘Soviet-style’ coal directive would upend power markets. A federal order to keep coal and nuclear plants from retiring could reshape government’s relationship with the power sector, regulators and analysts say. “What Trump’s doing is going back to a Soviet-style system,” said former FERC Chairman Jon Wellinghoff, a Democrat appointed by President George W. Bush. “This will blow the market up.”
We’ve already bailed out Three Mile Island twice. The third time isn’t a charm. It wasn’t that long ago that Pennsylvania policymakers proclaimed that the market is best suited to determine which energy technologies should move Pennsylvania forward. Remember when nuclear power generators embraced the marketplace and were betrothed to electric deregulation after they received a $9 billion engagement ring? Now two nuclear corporations, Exelon and FirstEnergy, are suing ratepayers for a divorce. Hold on to your wallets. Turns out that a handful of politicians and their donors know what’s best for Pennsylvania ratepayers. Alimony is going to be in the billions. Welcome to this century’s version of corporate socialism.
The clock is ticking to save TMI and keep our air clean. It has been one year since the announcement that Three Mile Island will close prematurely in the fall of 2019. That means we are just 16 months away from Central Pennsylvania losing this critically important asset if action isn’t taken by government officials to prevent this unnecessary closure. The clock is ticking.
Activist decries N.M. utility political contributions as ‘corruption.’ PNM Resources, the parent corporation of Public Service Company of New Mexico, has contributed $440,000 in the last few weeks to a political action committee supporting the reelection of two incumbents to the Public Regulation Commission, Andrew Oxford writes in the Santa Fe New Mexican.
“The company that probably powers your home is wielding a very different kind of power ahead of Tuesday’s primary election,” Oxford writes. “The Public Regulation Commission has power over the rates electric utilities such as PNM can charge customers. That can have a big influence on the sources of energy these utilities invest in and develop — a big issue in the ongoing debate over coal vs. renewable energy sources.”
Oxford notes that in the northwestern corner of New Mexico, Janene Yazzie is running for the commission’s District 4 seat with the backing of environmental groups. “They say incumbent Lynda Lovejoy has been too friendly to electric utilities. With no Republican running, the primary election will almost certainly decide this race.” In the state’s southwestern corner, former state senator Steve Fischmann is running for the commission’s District 5 seat “and also is enjoying the backing of major environmental organizations that say incumbent Sandy Jones is deferential to the energy industry,” Oxford reports.
“The new political committee funded by PNM has gone on the attack against the challengers,” he writes. “And while it is a Democratic Party primary, the attacks appear directed by consultants tied to the GOP.”
The group, New Mexicans for Progress, spent more than $200,000 during the last several weeks — more than any other PAC in the state during the same period, Oxford reports, noting that most of that money was spent on advertising and mailers produced by McCleskey Media Strategies, the firm of a top adviser to Republican Gov. Susana Martinez.
The utility’s political spending is “the definition of corruption,” said Mariel Nanasi, executive director of the advocacy group New Energy Economy. “There’s no longer even the pretense of regulation. When PNM’s parent company spends $440,000 to bankroll the regulators of their choice, we have to seriously question the ability of the commission to govern on behalf of the public,” Nanasi said.
Pahl Shipley, a spokesman for PNM Resources, said the company’s donations to the PAC are legal, appropriate and necessary to help ensure a fair election. “PNM Resources is supporting New Mexicans for Progress to ensure that voters have the facts regarding key energy and economic issues that will impact our customers and the state as a whole,” he said.
Alabama PSC candidate won’t be certified by GOP. A Republican candidate for a seat on Alabama’s Public Service Commission is under fire for comments he’s made on social media and radio that could be offensive to women, blacks, Jews and Muslims, prompting the Alabama Republican party to censure the candidate and to declare that they won’t certify the votes of a statewide candidate who’s come under scrutiny for “egregious” comments, the Associated Press reports.
“The decision announced Thursday means Jim Bonner, who’s running for the utility-regulating Public Service Commission, won’t get the party’s nomination even if he’s the leading vote-getter in Tuesday’s primary,” AP reports. Bonner says his public comments are being taken out of context, and he’s appealing the party’s decision. A two-time delegate to the Republican National Convention, Bonner is trying to unseat incumbent Jeremy Oden.
DOE contractor cites ‘growing promise for tidal energy.’ “Tidal energy has been slow to develop into a reliable form of grid power, but recent demonstration projects suggest that might be changing,” David Hume, a marine engineer contractor supporting the U.S. Department of Energy Water Power Technologies Office’s marine renewable energy portfolio and founder of The Liquid Grid, writes in Axios. “If the technology continues to mature, tidal energy could become a significant renewable power source in many countries.”
Other electric industry news of note:
Will FERC uphold state support for clean energy? FERC says it’s up to FERC. And that’s a worrisome sign. The energy law community is abuzz with the news that the Federal Energy Regulatory Commission (FERC) weighed in on a high-profile case challenging a state-level support program for nuclear generators. In a May 29 amicus brief joined by the U.S. Government, FERC argues that the Seventh Circuit should not resort to the “extraordinary and blunt” remedy of preempting Illinois’ nuclear subsidy program. Some are now celebrating the brief’s apparent defense of state environmental policies, but that reaction is premature. Rather than defend state programs, FERC has asked the court to let it decide what’s right. If the Commission follows its recent practice in approving capacity market reforms that shift costs to generators that receive state environmental policy support, that could spell bad news for state-supported clean energy.
Nevada electric utility seeks to partner with 6 solar firms. Nevada’s main electric utility said Thursday that if voters reject a statewide energy choice constitutional amendment in November, it plans to partner with six solar power development firms to buy enough power from projects to be built around the state to supply more than 600,000 homes, NV Energy announced it will submit to the state Public Utilities Commission on Friday an energy resource plan to have projects on an Indian reservation near Las Vegas, two southwest of Boulder City, two in Washoe County and one near Battle Mountain serving customers by 2022, according to a company statement. Company chief executive Paul Caudill put costs at more than $2 billion, and called it the largest investment of its kind in state history.
NV Energy rolls out renewable energy supply plan, Sandoval wavers on support for Energy Choice Initiative. The unveiling of the NV Energy Integrated Resource Plan, a state-mandated document laying out the company’s future energy supply and demand management required every three years, typically attracts little public attention outside of energy attorneys and policy wonks. But prominent state lawmakers, Democratic gubernatorial candidates Steve Sisolak and Chris Giunchigliani, Rep. Ruben Kihuen and Gov. Brian Sandoval were all on hand Thursday at the Springs Preserve to applaud the company’s proposal to add massive solar and battery storage projects to double the state’s renewable energy capacity over the next five years. The event on Thursday also marked a significant withdrawal of direct support for the Energy Choice Initiative, a proposed constitutional amendment which would require NV Energy to divest its generation and power contracts in favor of a retail market by 2023, from a major figure — Sandoval.
NV Energy CEO criticizes Energy Choice ballot amendment. The president and CEO of NV Energy told a business luncheon on May 23 that while energy choice should be good for major electric customers, it likely won’t be for residential customers. “Our company thinks this is a really bad idea, not so much for us and our employees but for the state of Nevada,” Paul Caudill told the Northern Nevada Development Authority luncheon in Minden. The Energy Choice Initiative, Question 3 on the November ballot, is up for a vote for the second time. If voters approve it again, it would put deregulation of electric utilities into the Nevada Constitution. In his talk May 23, Caudill said he wasn’t talking about protecting NV Energy, which serves 90 percent of electric customers in Nevada. “Our company will be fine,” he said. Rather, his concern is the 1.2 million residential customers and “the jury is out on whether residential customers as a group will benefit,” he said. “Major customers commercial and industrial will likely have the opportunity to save some money,” he said. “Residential customers kind of take the brunt of this transition.”
Cryptocurrency mining in Tri-Cities requires new electricity policy. Growing interest in cryptocurrency mining and related blockchain operations in the Tri-Cities area has Benton PUD taking steps to ensure reliable electricity delivery.
The world set a new record for renewable power in 2017, but emissions are still rising. In 2017, the world deployed an ever-expanding amount of solar and wind power, setting a new record for renewable-power capacity added to the grid. In fact, the money spent on renewable installations was more than twice the sum spent on nuclear and fossil-fuel power, according to the annual Global Status Report (click through here) published by renewables policy group REN21.
CORRECTION. The June 4, 2018, issue of Electric Industry News has been corrected to note the Trump administration is looking to employ presidential powers under the 1950 Defense Production Act, not the Defense Authorization Act, to require financial support for uneconomic baseload power plants in competitive markets. The copy editor has been hanged, drawn and quartered.