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PJM says plan to subsidize coal, nukes, “not workable”

-A Norfolk Southern freight train hauling coal makes it way through downtown Pittsburgh Thursday, Jan. 26, 2017. The Department of Energy has proposed subsidizing coal and nuclear power in the face of competition from natural gas and renewables.

Gene J. Puskar / AP Photo

A Norfolk Southern freight train hauling coal makes it way through downtown Pittsburgh Thursday, Jan. 26, 2017. The Department of Energy has proposed subsidizing coal and nuclear power in the face of competition from natural gas and renewables.The DOE says it's necessary for grid reliability but that argument is discounted by its own reliability study. Puskar / AP Photo

PJM Interconnection, the region’s electric power grid operator says the Trump administration’s proposal to subsidize coal and nuclear is “unworkable.” In comments filed with the Federal Energy Regulatory Commission on Monday, PJM opposes the effort by Department of Energy Secretary Rick Perry to have utilities compensate coal and nuclear plants that store a 90-day supply of fuel, in the interest of grid reliability.

The proposal would now specifically target the mid-Atlantic region where coal and nuclear plants are shutting down in the face of competition from cheaper natural gas, wind and solar. PJM’s footprint includes 13 states and the District of Columbia, where about half of the power generation comes from coal and nuclear. It operates a competitive electricity auction each year. If FERC follows through on the DOE’s request, it could mean higher energy prices for consumers in Pennsylvania, New Jersey, and Delaware as well as other ratepayers in PJM’s territory.

The DOE submitted the proposed rulemaking last month to FERC, which currently has a Republican majority among its commissioners but is also an independent agency. Secretary Perry has been stumping for his plan, which lacks details, and recently pitched it to a roomful of natural gas proponents at the Chamber of Commerce of Greater Philadelphia.

Perry says it’s the role of government to intervene in the free market. He said electric reliability and “resiliency” is at stake. And he compared the proposed ratepayer subsidies to the taxpayer supported military.

“We subsidize freedom, we subsidize freedom with the military, which we pay for, we subsidize,” he said in an interview. “And I suggest that electrical power is just as much a part of our national security and our personal security.”

But the Department of Energy’s own grid reliability study concluded the shift from coal to natural gas and renewables has not jeopardized the free flow of electricity. PJM Interconnection did its own reliability study earlier this year and came to the same conclusion.

Critics say it’s a way for Trump to pay back the coal industry for backing him in the election. A letter obtained by the AP from a coal industry executive to a presidential aide shows heavy lobbying on the part of the company Murray Energy. The letter quotes President Trump telling Secretary Perry “I want this done.”

PJM CEO Andy Ott did not comment on the motivation behind the move but says the proposal would undermine the competitive market, which has delivered lower prices and greater reliability.

“We don’t think it’s workable we don’t believe that it’s an appropriate response,” Ott told reporters during a conference call.

Supporters of the subsidies, including Perry, point to the 2014 Polar Vortex, a cold snap that taxed the power system and threatened blackouts.  

But PJM’s Ott says even some coal and nuclear plants couldn’t operate during that period. Ott says threats to the grid come more from downed power lines during big storms, and storing coal would not help that. During large storms, some nuclear plants shut down. Coal supplies froze during the Polar Vortex, and were saturated with water during Hurricane Harvey.

He says market-based solutions should form the basis of grid reliability.

“We think part of the problem with the DOE proposal is it really, fundamentally undermines competitive markets and competitive signals,” he said.

Ott says the proposal would not stand up to legal scrutiny under the Federal Powers Act, which forbids favoring one form of energy over another.

The Pennsylvania Public Utility Commission also opposes the plan, commenting that “the 2014 Polar Vortex is an inadequate and inappropriate justification for the proposed rule.”

The plan is backed by the coal and much of the nuclear industry, as well as labor unions, who say it will save good paying jobs.

Michael Welsh, vice president of the International Brotherhood of Electrical Workers, representing  union members in New Jersey, New York, Delaware and Pennsylvania, wrote in a public comment that market forces would not be disrupted.

“We believe that the proposed changes can be accomplished in a manner not to affect current market structure,” said Welsh in public comments. “In fact, we believe these measures to be the next logical steps to ensure our grid resiliency for generations to come.”

But a bi-partisan group of former FERC commissioners wrote a letter criticizing the proposal, saying it would “fundamentally distort the market,” leading to higher costs to consumers, loss of investor confidence and a collapse in the market.

Natural gas producers, renewable energy advocates, and environmentalists all weighed in against the plan, saying it would provide unfair advantage and ratepayers would end up paying the costs.

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