In what Bloomberg News calls “unprecedented intervention into U.S. energy markets”, the Trump White House is preparing to mandate U.S. grid operators to bail out economically uncompetitive coal and nuclear plants at ratepayers’ expense, in a bid to extend the operating lives of the facilities.
White House Press Secretary Sarah Huckabee Sanders said Trump “has directed Secretary of Energy Rick Perry to prepare immediate steps to stop the loss of these resources,” Politico reports. “Keeping America’s energy grid and infrastructure strong and secure protects our national security,” she added. “Unfortunately, impending retirements of fuel-secure power facilities are leading to a rapid depletion of a critical part of our nation’s energy mix, and impacting the resilience of our power grid.”
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A May 29 memo, distributed ahead of a National Security Council meeting Friday and obtained by Bloomberg, envisions the U.S. Department of Energy exercising emergency authority to order the purchases and establish a “strategic electric generation reserve”, Bloomberg adds, in a story picked up by the Institute for Energy Economics and Financial Analysis (IEEFA).
“Over dozens of pages, the memo makes the case for action, arguing that the decommissioning of power plants must be managed for national security reasons and that federal intervention is necessary before the U.S. reaches a tipping point in the loss of essential, secure electric generation resources,” Bloomberg notes. “U.S. Defense Department installations are 99% dependent on the commercial power grid, one reason that electric system reliability is vitally important to national defense and homeland security, the memo asserts.”
Politico casts the bailout as “a move that would buoy a mining industry that offered [Trump] crucial support in 2016, but is riling other energy companies and even some free-market conservatives.” But “it’s “not clear the intervention could survive the inevitable political and legal challenges.”
“This would be an egregious abuse of power,” said Senator Ron Wyden (D-OR). “I fought this proposal before, and I will continue to fight this corrupt scheme to prop up the coal industry at the expense of American consumers.”
In seeking to justify the plan based on national security and grid reliance, the order goes against a united front of grid experts, including past and present members of the Federal Energy Regulatory Commission, all opposed to an earlier attempt at a bailout. “Any federal intervention in the market to order customers to buy electricity from specific power plants would be damaging to the markets and therefore costly to consumers,” said mid-Atlantic grid operator PJM Interconnection. “There is no need for any such drastic action.”
Under the terms laid out in the memo, DOE would oversee purchases of power or electric generation capacity from a designated list of coal and nuclear plants “to forestall any future actions toward retirement, decommissioning, or deactivation,” an extraordinary market intervention that the memo presents as a “prudent stopgap measure” pending a two-year review of the country’s “grid security challenges”.
Critics of the plan cast it as Trump’s latest attempt to bail out avid campaign supporters like coal baron Bob Murray, who warned last August that his company faced bankruptcy without special treatment from the candidate he helped to bankroll. “One way to view the release of this draft is that it is a trial balloon to see how fierce and fast the opposition will be,” Natural Gas Supply Association CEO Dena Wiggins told Politico. “The fact that we’ve now seen it in writing doesn’t really change anything. It does, however, underscore how hard it is to cobble together a sound legal rationale to bail out otherwise uneconomic coal and nuclear plants.”
