Energy Stocks

Perry’s Bid to Prop Up Coal and Nuclear Gets Shot Down

What a difference a few months make.

Last April, Secretary of Energy Rick Perry ordered a comprehensive study of the state of the U.S. power grid.

He wanted to prove that Obama-era renewable energy policies were responsible for coal and nuclear power plant closings. He believed these aging and costly plants must continue to operate to avoid any grid reliability issues.

Perry directed the Department of Energy to publish a Notice of Proposed Rulemaking (NOPR). The purpose of this notice was to “establish just and reasonable rates for wholesale electricity sales.”

In addition, the notice focused on an important aspect of grid reliability: on-site fuel storage. This is only applicable to coal, biomass and nuclear plants.

But it turned out that Perry was wrong…

The study showed that Obama’s renewable energy policies had no effect on grid reliability. Nor did they cause coal and nuclear plants to close.

One thing is now crystal clear: Perry’s NOPR was an attempted bailout for these uneconomic nuclear and coal-fired power plants.

As for grid reliability? The wires and poles in the distribution and transmission system determine grid reliability.

FERC Says “No” to Perry’s NOPR

On January 8, 2018, the Federal Energy Regulatory Commission (FERC) unanimously killed Perry’s NOPR.

This happened despite the Trump administration having appointed four of the FERC members.

But I’m not surprised by the unanimous vote. A number of legal experts said Perry’s plan to shake up the energy markets was doomed from the start.

It was simply meant to prop up unpopular, unprofitable and uncompetitive nuclear and coal plants. It had nothing to do with grid reliability.

From a legal standpoint, the FERC had no choice but to reject the unusual request. The DOE never conclusively proved that existing market regulations were “unjust, unreasonable, unduly discriminatory or preferential.”

In addition, the DOE’s notice failed to show that the new regulations were a “just and reasonable” alternative – and that the regulations were nondiscriminatory.

Regulations can’t prefer one resource over another. And they can’t discriminate against solar, wind and geothermal.

Unintended Benefit From Perry’s Rejected NOPR

One good thing did come out of the ruling: The commission initiated a new proceeding to evaluate what it calls “grid resilience.”

The FERC asked all regional transmission organizations and independent system operators to provide data regarding grid resilience.

This makes all the sense in the world if you ask me…

Why not ask the people managing the grid to provide resilience and reliability data? It’s what Perry should have done in the first place.

Wasting FERC’s time trying to sneak a huge subsidy through for coal and nuclear just doesn’t make any sense.

What do you think? Let me see your comments below.

Good investing,

Dave