Trump’s Coal Bailout Is Dead
One of the Trump administration’s most ambitious plans to buoy the struggling coal and nuclear power industries has been shot down.
The Federal Energy Regulatory Commission unanimously rejected a proposal to subsidize coal-burning and nuclear power plants on Monday. Its defeat hands a victory to the motley coalition—of environmental groups, natural-gas companies, free-market advocates, and Democratic state attorneys general—who had opposed the rule and promised to fight it in court.
The 5-0 rejection was all the bitterer for the administration because four of the five commissioners who lead the agency were appointed by President Trump, and three are Republicans.
As proposed, the rule aimed to improve the resilience and stability of the electrical grid. Citing some electricity problems that struck during the “polar vortex”-induced cold snap of 2014, Secretary of Energy Rick Perry proposed that utility companies should pay coal and nuclear plants to keep weeks of extra fuel on hand.
The Department of Energy, which Perry leads, doesn’t have the power to force utilities to follow such a rule itself. But the Federal Energy Regulatory Commission, or FERC, is charged by Congress with regulating interstate electricity sales and some power utilities. Perry asked FERC’s five commissioners to adopt his proposed rule within 60 days.
The plan was always controversial. Critics argued that Perry’s bailout would harm natural-gas plants, slow the growth of solar and wind energy, and introduce new and costly distortions to U.S. energy markets.
They also doubted the logic of the rule, saying that power plants rarely went down because they didn’t have enough fuel on hand. The Rhodium Group, an economics-research firm, found that only 0.00007 percent of U.S. power-outage hours between 2012 and 2016 were caused by a lack of available fuel.
Energy economists and environmental groups also maintained the rule would effectively subsidize carbon-dioxide pollution, which causes global warming. “Doing nothing [about climate change] is already not merited by economics,” Michael Greenstone, a professor of economics at the University of Chicago, said in October. “This is like doubling down.”
Worst of all, critics said, the plan would spike Americans’ electricity bills. The energy-consulting group ICF estimated that the rule would cost ratepayers an extra $800 million to $3.8 billion every year.
In a statement on Monday, FERC thanked Perry for his attention to grid resiliency and said it would continue to research and pay attention to the issue. But individual commissioners were more cutting in their replies.
“The proposed rule had little, if anything, to do with resilience, and was instead aimed at subsidizing certain uncompetitive electric generation technologies,” said Richard Glick, a Trump-appointed FERC commissioner, dubbing the plan “a multi-billion dollar bailout targeted at coal and nuclear generating facilities.”
He added that he was sympathetic to the plight of coal miners and nuclear workers, but that helping them was outside the agency’s legal power. “We have a history in this country of helping those who, through no fault of their own, have been adversely affected by technological and market change. But that is the responsibility of Congress and the state legislatures. It is not a role that the Federal Power Act provides to the commission,” he said.
Though Perry could use the same mechanism to propose a new rule, FERC’s decision on this one is final.
In a statement, Perry said that he only wanted to start a conversation. “As intended, my proposal initiated a national debate on the resiliency of our electric system,” he said. “I appreciate the commission’s consideration and effort to further assess the marketplace distortions that are putting the long-term resiliency of our electric grid at risk.”
Thus ends one of the biggest policy initiatives of Perry’s first year as energy secretary. Perry had been pushing for the rule since the first months of the Trump administration, commissioning a high-speed study on grid resilience in the spring before proposing the new rule in September.
But from the start, even conservatives noted the proposal was out of step with virtues that Perry had long extolled. “Secretary Perry didn’t sound very much like Governor Perry that I remember back here in Texas, because Governor Perry, of course, was a big fan of free markets in electricity,” Josiah Neeley, the energy-policy director of the conservative R Street Institute, told me in October.
By the end of the year, the plan’s opponents speculated that Perry was embracing the rule merely to please the coal industry, which had supported President Trump during the election and lashed itself to him politically afterward.
Robert Murray, the CEO of the coal-mining company Murray Energy—which appeared to benefit more than any other firm from the rule—told reporters in November that he “had nothing to do” with the proposal.
“This was done by the Trump administration,” he said. “I didn’t have any involvement.”
But in December, the reporter Kate Aronoff of In These Times obtained photos of Rick Perry and Robert Murray meeting in a Department of Energy office in March 2017. In the photos, Murray appears to be presenting a thick “coal action plan” to Perry. At the top of this apparent policy wishlist? A bullet point that new FERC policies should favor “base-load generating assets, especially coal plants.”