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Rick Perry Asks FERC to Adopt Rules for Coal and Nuclear Plants

October 3, 2017

Last week, U.S. Energy Secretary Rick Perry issued a letter asking the Federal Energy Regulatory Commission (FERC) to consider adopting rules that would provide non-market compensation to generating units like coal and nuclear power plants. Per federal statute, the FERC is obligated to at least consider Perry’s proposal, but is not required to accept it. Perry called on the need for the country to “recognize the value of each resource, being mindful of [its] role in…national defense, economic security, and pursuit of environmental outcomes.” Moreover, Perry framed the proposal as addressing the issue of “protecting the resiliency of the [country’s] electric grid.” The rule would create a class of generating units known as “grid reliability and resiliency resources.” Under the rule, a unit is any resource that:

  • Is an electric generation resource physically located within a Commission-approved independent system operator or regional transmission organization;
  • Can to provide “essential energy and ancillary reliability services, including but not limited to voltage support, frequency services, operating reserves, and reactive power;”
  • Has a 90-day fuel supply on site making it possible to operate during an emergency, extreme weather conditions, a natural or human-made disaster;
  • Complies with all federal, state, and local environmental laws, rules, and regulations that apply; and
  • Is not subject to cost of service rate regulation by any state or local regulatory authority

All licensed nuclear power plants and a significant portion of existing coal plants can meet those requirements today. Inevitably, the announcement of Perry’s letter and the accompanying proposal were met with support and opposition. Some in the nuclear energy industry praised Perry’s action. They argue that the proposal, would help nuclear energy remain an asset for energy security, reliability, economic growth, and environmental protection. Moreover, they point of that the timing of the action is crucial. Once plants close, they close forever, and the benefits they provide in terms of jobs, economic growth, and environmental also disappear.

Some in renewable energy, however, worry that Perry’s proposal will give life to plants that are not necessary. Renewable energy technologies can already provide the security, reliability, flexibility, and growth that Perry seeks; coal is not necessary. The R Street Institute, a “nonprofit, nonpartisan, public policy research organization [that engages] in policy research and outreach to promote free markets and limited, effective government,” also criticized the proposal. R Street argued the proposal was a risky subsidy to coal and nuclear. Others further argued that such a proposal would effectively be an attack the country’s healthcare, environment, and wallets. Even the American Petroleum Institute (API) expressed concern, stemming from what they saw as an overreaction to past weather-related events. On the API’s view, additional markets have already proven that they can benefit customers and give flexibility to meet electricity demands. Additional regulation is not the answer. Regardless of whether the FERC will approve Perry’s proposal, the outcome is sure to spark further debate.