Utility Seeks DOE Emergency Assistance to Resolve Alleged Market Emergency

At the end of March, FirstEnergy Solutions Corp. (FirstEnergy) sent a letter to the Department of Energy (DOE) requesting that the agency issue an emergency order under Section 202(c) of the Federal Power Act.  Section 202(c) allows for orders during times of war and emergencies that require “temporary connections of facilities and such generation, delivery, interchange, or transmission of electric energy [that] will best meet the emergency and serve the public interest.”

According to FirstEnergy, there currently exists an emergency in PJM because PJM’s power markets fail to compensate nuclear and coal-fired generators for the full value of the benefits they provide.  As a result, many of these units are either planning to retire or are at risk of retirement.  FirstEnergy, whose generation subsidiary filed for bankruptcy a few days after the letter to DOE, has requested that DOE order PJM to enter into contracts that provide full cost recovery for certain nuclear and coal-fired generators that have a 25-day fuel supply onsite.

Several entities have voiced their opposition to emergency action.  PJM sent DOE a response requesting that DOE not take any action at this time, stating that there is no immediate threat to reliability and that PJM’s tariff provides a process to determine whether the retirement of certain nuclear and coal plants would create reliability concerns.  The Environmental Defense Fund and the Natural Resources Defense Council filed a joint letter arguing that an emergency order is unnecessary and would undermine ongoing FERC efforts regarding reliability.  The Sierra Club similarly told DOE that there is no reliability emergency in PJM, and that if DOE does not outright reject FirstEnergy’s request, then it should open a formal proceeding to solicit public comment before acting.

Although DOE has yet to act on FirstEnergy’s request, its website lists several examples of emergency orders it has issued under Section 202(c) over the past two decades, including orders in response to the California energy crisis, the Northeast Blackout of 2003, Hurricane Rita, and a decision by Mirant Corporation to cease generation of electricity at its Potomac River Generating Station.  More recently, DOE has issued Section 202(c) orders regarding coal-fired units not in compliance with EPA’s Mercury and Toxics Standards (MATS).

In April 2017, DOE issued emergency Order No. 202-17-1 in response to a request by the Grand River Dam Authority to keep a non-MATS-compliant coal unit online to ensure reliability in SPP.  Although the Grand River Dam Authority had two other generation units, one was offline because of a lightning-caused fire and the other had construction delayed because of flooding.  SPP filed a letter of support explaining that keeping this first unit online was needed for reliability.  DOE agreed that there was an emergency and ordered that the first unit remain online until one of the Grand River Dam Authority’s other units was brought online or SPP determined that generation from the first unit was no longer needed to maintain grid reliability.

A few months later, DOE issued emergency Order No. 202-17-2.  There, PJM filed a letter requesting an emergency order to preserve the reliability of the bulk power transmission system in the area east of Richmond, VA.  Two coal-fired units in that area were planned to be deactivated because of failures to comply with MATS, but PJM determined that the generation from these units was necessary to prevent the possibility of uncontrolled power disruptions.  DOE ordered that these two units were to operate as directed by PJM as needed to address reliability for 90 days.  DOE has since issued a series of 90 day extensions of the emergency order, the most recent of which allows the two units to continue operating under certain conditions until June 11, 2018.

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