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Tina Casey headshot

Tensions Rise as Federal Decision on Coal Protections Looms

By Tina Casey

What a mess Energy Secretary Rick Perry dumped into the lap of FERC, the Federal Energy Regulatory Commission. Perry has taken a lot of heat for proposing new protections for coal and nuclear power plants, but go-ahead has to come from FERC. The decision is not expected until December 11, and meanwhile the tension is mounting to a fever pitch.

FOIAs filed over coal protections

Perry's new proposal would essentially create new subsidies for outdated coal and nuclear power plants by requiring power plants to keep a 90 day supply of raw material on site. And no, the sun doesn't count.

The pushback has been fierce. In one recent development, on November 9 a group of environmental organizations filed Freedom of Information Act papers with both FERC and the Energy Department. According to the Sierra Club, among others, the Perry proposal could "force electricity customers to bail out old, expensive coal and nuclear plants that can no longer compete in America’s 21st century energy marketplace."

That pretty much sums it up. Perry based his proposal on a controversial new grid study, which essentially concluded that conventional coal and nuclear power plants could continue operating, but would require additional subsidies from taxpayers and ratepayers.

A draft version of the new grid study emphasized the benefits of microgrids and renewables, and even after some additional tweaking it still leaned in that direction.

The final version provided Perry with a platform for arguing that conventional baseload coal and nuclear power plants deserve special protection because they are needed to maintain grid stability.

Perry's FERC proposal would create an "unprecedented" new rate structure that would enable outdated baseload power plants to recover costs plus a "fair return on equity," even if they cannot compete with other sources.

According to The Sierra Club, a previous FOIA action revealed that Peabody Energy and FirstEnergy, got "closed-door access" to Energy Department strategy sessions aimed at keeping coal and nuclear plants afloat.

Miles Farmer, Clean Energy Attorney for the Natural Resources Defense Council, explains the goal of the new requests:

“If industry lobbyists helped draft this outrageous coal and nuclear bailout proposal, which could cost U.S. families and businesses billions of dollars in higher energy bills every year and at an untold price to their health, the American public needs to know that. Let’s pull back the curtain to find the truth.”

Even coal stakeholders hate Perry's FERC proposal

Perry's proposal has gained little support outside of the U.S. coal producing and nuclear generating sectors. Even within the fossil fuel sector, reviews have been mixed. Natural gas producers hate it, and electricity producers are generally not fans, either.

Energy giant NRG, for example, still has coal and nuclear power plants in its fleet but its renewable energy portfolio is burgeoning. The company has argued against enabling non-competitive, outdated power plants to continue operating.

Another good example is Xcel, which is depending on wind energy to power itself toward an 85 percent carbon-free future by 2030.

For that matter, Perry's own agency has been vigorously promoting microgrids and renewables. Just last week, the Energy Department spelled out a strong argument for utility scale concentrating solar power plants to provide for grid reliability without the drawbacks of coal and nuclear:

“One of the biggest advantages of CSP is its reliability as an energy source and predictable costs. Unlike conventional fuels, there’s nothing to mine, ship, burn, or store as waste; there’s an abundant, unending supply of sunshine.”

Yes, they really hate it

One standout example of the utility industry's fraught relationship with coal is the powered Navajo Generating Station. It is partly owned by four Arizona utility companies, and last winter they voted to shut it down after its lease expires in 2019.

Think Progress is out with a new long-form article providing many interesting details about the Navajo Generating Station's troubles. The full piece is well worth a read, but for those of you on the go here's a representative tidbit from Salt River Project, a public utility that owns the controlling share in the plant:

Mike Hummel, deputy general manager of the Salt River Project, told the Arizona Republic that without federal subsidies, a new owner of the plant would not be able to operate it cost-effectively. He noted that each utility owner of the Navajo Generating Station has owned and operated coal plants. “We are all very good at it, and we are all not able to make it work. That’s why the owners are choosing to exit,” Hummel told the newspaper.

The decision was based primarily on the availability of low-cost natural gas.

Somewhat ironically, the Energy Department supports the move to natural gas, with an analysis indicating that an economic turnaround was nowhere in sight for the plant.

Think Progress also cites The Institute for Energy Economics and Financial Analysis, which pins the cost of keeping NGS open just until 2019 at $414 million.

The price tag for an additional 10 years of operation after 2019 comes out to the $1-2 billion range.

The four utilities could get stuck holding the bag after all. The plant is a critical economic engine for The Navajo Nation, and as it turns out, Peabody Energy -- the same company with the "closed-door access" to the Energy Department -- is the coal supplier to the Navajo plant.

According to Think Progress, Peabody has been working with the Interior Department to find another operator for the plant.

Interestingly, Interior already has a partial stake in the Navajo plant in the plant through its Bureau of Reclamation, for the purpose of pumping water for the Central Arizona Project.

Some officials have floated the idea of Interior taking full ownership. That seems like a long shot under the terms of the Bureau of Reclamation's congressional mandate, but considering the Trump Administration's track record on adhering to laws and legal precedents, anything could happen.

Photo credit: Navajo Generating Station by elfon via flickr.

Tina Casey headshot

Tina writes frequently for TriplePundit and other websites, with a focus on military, government and corporate sustainability, clean tech research and emerging energy technologies. She is a former Deputy Director of Public Affairs of the New York City Department of Environmental Protection, and author of books and articles on recycling and other conservation themes.

Read more stories by Tina Casey