White House Memo May Indicate Future Coal And Nuclear Subsidies

Federal Energy Regulatory Commission ("FERC") members on June 19, 2018, affirmed their commitment to regional energy market stability. Their remarks came in response to a leaked Trump administration draft plan and President Trump's own June 1, 2018 public statement that Secretary of Energy Rick Perry "take immediate steps" to prevent coal and nuclear plant closures.

Such a directive could mean a policy of requiring regional grid operators to buy electricity from selected coal and nuclear plants, which, in turn, could undermine the current power markets developed with FERC assistance over recent decades. "Avoidance of any significant distortion in organized markets would very much be a concern of ours that we would keep an eye on as we proceeded with the rate matter," said FERC Chairman Kevin McIntyre in response to a leaked draft plan from the White House. "I don't see any reason why any of that should interfere with our ongoing consideration of the grid resilience issues and the very good input we've gotten on those issues."

The directive of the leaked draft plan relies on novel statutory authorities, Section 202(c) of the Federal Power Act and the Defense Production Act of 1950, with the aim of guaranteeing financial returns for all produced energy from select coal and nuclear plants for two years. If the Department of Energy were to use Section 202(c) or the Defense Production Act of 1950 to keep specific power facilities open and force grid operators to buy power from such facilities, neither the profitability of such power facilities nor the greenhouse gas emissions would be a consideration in the selection these plants, according to the draft plan. The main thrust of basing such action on Section 202(c) is that the Department of Energy would claim the authority to order specific power facilities to remain open during times of crisis. Historically, "times of crisis" has meant events such as hurricanes or war. The Defense Production Act of 1950 allows the federal government to intervene in private industry in the name of national security. While President Trump made commitments to revive coal during his campaign, data recorded by the Sierra Club indicates over 25 coal factories have closed during his presidency, likely heightening the administration's sense of urgency to intervene.

President Trump furthered speculation about a potential energy market intervention when he made mention of Section 202(c) of the Federal Power Act during an...