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FirstEnergy’s request for an emergency order isn’t the only play to bolster coal and nuclear plants at customers’ expense.
It’s clear the lights will stay on in Ohio despite the bankruptcy of FirstEnergy’s generation subsidiaries. What’s less clear is how much electricity to run those lights will come from FirstEnergy power plants.
During an earnings call Monday, FirstEnergy President and CEO Chuck Jones stressed that he will continue to push for government measures to protect coal and nuclear generation from competition.
“We’re going to keep fighting for these plants,” Jones said.
FirstEnergy asked the Department of Energy for an emergency order to protect all coal and nuclear plants in the PJM territory just before its generation subsidiaries filed for bankruptcy. Proposals are also pending at the Federal Energy Regulatory Commission and in the Ohio legislature.
Approval of any of those plans could edge competitive suppliers out of the market and leave customers paying more.
Consumer advocates, environmental groups and economic analysts have hailed the potential benefits of competition for customers. Indeed, in Ohio, a major complaint has been that the state hasn’t yet fully moved to competition, but has continued to use electric security plans and other means to subsidize utilities’ affiliated generation.
On Monday, Jones characterized competition as an undesirable risk.
“More than 5 million of our utility customers are still exposed to the uncertainties of competitive markets,” he said. “Therefore, I will continue personally to advocate for regulatory or legislative solutions, including FES’s application for an emergency order under the Federal Power Act, that recognize the attributes of fuel secure baseload generation and to insure our customers continue to have a stable, reliable power supply.”
FirstEnergy’s emergency order request wasn’t limited to its own coal or nuclear plants. “They’re asking the DOE to declare that not just their power plants but every coal and nuclear unit in PJM should be given a profit guarantee,” said Dick Munson, director of Midwest Clean Energy for the Environmental Defense Fund. “If that is approved, it will destroy competitive markets. The boldness is just stunning.”
“It’s hard to dream up anything so anticompetitive,” agreed Devin Hartman, electricity policy manager at free-market research group R Street, based in Washington, D.C. By his count, about 80 plants could get protection under by FirstEnergy’s request, “and many of them probably would be retiring over the course of the next five years or so.”
“It’s just a Hail Mary attempt by a company going bankrupt,” Hartman continued. Even though FirstEnergy has announced its intent to exit the generation business, “they’re looking for ways to make sure that their assets get as much value as they can.”
Earlier this month, U.S. Energy Secretary Rick Perry said an emergency order is “not the only play” to prop up coal and nuclear plants.
One way to do that might be through “show cause” orders to regional grid operators, suggested Federal Energy Regulatory Commission Chair Neil Chatterjee. Basically, grid operators would have to prove why they shouldn’t keep noncompetitive coal and nuclear plants online. Chatterjee’s comments came after meeting with FirstEnergy representatives last November.
Grid operator PJM has already suggested two ideas that could help failing coal and nuclear plants. On April 9, grid operator PJM asked the Federal Energy Regulatory Commission to consider a “repricing” proposal for its annual capacity auctions. And last month, PJM asked federal regulators to consider changes in energy pricing.
PJM has floated both proposals before. And both have been “harshly opposed by most folks that are expert economists on electricity markets,” Hartman said.
The repricing proposal would ensure that state-subsidized coal and nuclear plants clear the annual capacity auctions. Subsidized plants could put in artificially low bids, letting them leapfrog ahead more competitive bidders. PJM would then adjust the final clearing price upward for everyone, above what the market price would have been.
That proposal would cover ratepayer guarantees such as those FirstEnergy has sought from Ohio regulators. It would also apply to still-pending bills to guarantee sales for two 1950s-era coal plants. And it would apply to proposed subsidies for FirstEnergy’s nuclear plants under a bill introduced in October after earlier “zero-emission nuclear” bills stalled. Some other states have already adopted various subsidies to help certain nuclear plants.
But PJM’s proposal is not the answer, Hartman said. In his view, the plan “to try to counteract the effect of the subsidy… doesn’t address the root cause of the issue, which is the subsidy.”
PJM has said its other plan to change energy pricing is necessary to better reflect the actual cost of producing energy. However, PJM referred to that general plan last fall in its comments on Perry’s proposal to guarantee sales and profits for all coal and nuclear plants with fuel storage on site. FERC rejected that proposal in January.
The energy pricing plan would not be a direct subsidy. However, PJM admitted in November that the proposal would raise prices overall.
Those higher prices could keep noncompetitive coal and nuclear plants in the market longer than they would otherwise stay, said attorney Jennifer Chen at the Natural Resources Defense Council.
The relevant provision of the Federal Power Act “is for serious grid emergencies… and not designed to bail out power plants that are losing money,” said U.S. House Rep. Frank Pallone (D-N.J.) at a committee hearing on April 12. In his view, FirstEnergy’s request “is like calling 911 because your credit card got declined.”