President Trump “has directed Secretary of Energy Rick Perry to prepare immediate steps” to stop the retirements “fuel-secure power facilities,” according to a statement from the White House Press Secretary. This is the latest development in a series of efforts to have the federal government prevent the retirement of coal and nuclear baseload generation.
Back in September 2017, Secretary Perry submitted a proposed rule to FERC that would have required RTOs and ISOs to compensate fuel-secure resources for the reliability and resiliency benefits they provide. FERC, however, did not adopt that proposed rule, although it did open a separate proceeding to examine grid resiliency issues. More recently, in March 2018, FirstEnergy Solutions Corp. requested that DOE issue an emergency order under Section 202(c) of the Federal Power Act to require PJM to enter into contracts providing full cost recovery for certain nuclear and coal-fired generators with a 25-day onsite fuel supply. DOE has opened an unofficial comment period for all Section 202(c)-related comments, but it has not yet acted on FirstEnergy’s request.
While the most recent White House Press Secretary statement offers few details, it was issued after a 40-page draft DOE memo was first reported on by Bloomberg. The memo builds upon arguments for supporting fuel-secure resources for resiliency and national security purposes that were raised in the context of the DOE proposed rule and FirstEnergy’s Section 202(c) request. It attempts to more precisely define the term “resiliency,” something FERC found DOE failed to do in the earlier proposed rule, explaining that resiliency is the “ability to withstand high-impact events,” such as attacks or natural disasters. The memo suggests that DOE should act to delay the retirement of fuel-secure resources while it continues its analysis of the comprehensive resilience needs of the U.S. electric generation system.
As the source of DOE’s legal authority to delay the retirement of coal and nuclear resources, the memo relies upon Section 202(c) of the Federal Power Act and Section 101 of the Defense Production Act of 1950. The Defense Production Act authorizes the President, or the Secretary of Energy acting by delegation from the President, to “require the allocation of, or the priority performance under contracts or orders (other than contracts of employment) relating to, materials, equipment, and services in order to maximize domestic energy supplies” based on certain findings. DOE has not created a website describing its use of Section 101 of the Defense Production Act, as it has for Section 202(c) of the Federal Power Act, and there are only a few examples of its use. In 2001, during the California Energy Crisis, the Secretary of Energy issued an emergency order under the Defense Production Act to require natural gas sellers to sell to PG&E under existing contracts in order to ensure that natural gas plants could generate electricity. The Obama Administration used the Defense Production Act to invest in the production of jet and naval biofuels.
DOE has yet to take official action on President Trump’s direction to take “immediate steps” to prevent the retirement of coal and nuclear resources. Nevertheless, a range of entities, including PJM, Sierra Club, and a group of energy industry associations, have already voiced their opposition to any such action.