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Rick Perry's Bailout for Coal, Nuclear Companies Defies Common Sense

Today’s inexpensive wholesale electricity prices provide significant benefits for consumers, while preserving the power grid’s reliability.  The only losers are those who own inefficient coal and nuclear power plants that have been rendered uneconomic by cheaper, cleaner, safer and more sustainable power generation.

So what do economically failing owners of coal and nuclear power plants do? They conjure a new marketing buzzword – “resilience” – in a desperate effort to force consumers to pay for some sort of fictional attribute that their power plants supposedly provide.

Energy Secretary Rick Perry, attempting to create what Vox called a “fake grid crisis,”  is giving the Federal Energy Regulatory Commission until Jan. 10 to finalize his grid plan, meant to boost coal and nuclear power plants, after FERC’s new chairman, Kevin McIntyre, requested a 30-day extension. Perry said FERC’s inability to meet the original Dec. 11 deadline means that “the security of the nation’s electric grid will continue to be at risk.”

McIntyre’s decision to postpone action for 30 days on the U.S. Department of Energy’s (DOE) multibillion-dollar bailout of uneconomic coal and nuclear power plants doesn’t go nearly far enough. The factual record overwhelmingly demonstrates that FERC simply should dismiss the entire proceeding.

If our grid were truly at risk by the closure of failing coal and nuclear plants, then any delay of action would be reckless. The fact remains that the retirement of uneconomical coal and nuclear does not threaten the reliability of our national grid.

The disingenuous rationale for propping up these power plants has been dismissed time and again. It is outrageous that Perry continues to perpetuate this lie and that FERC continues to entertain this cockamamie proposal.

While condemnation of the Department of Energy bailout has been comprehensive and bipartisan, Public Citizen predicts that FERC’s next move in this fiasco poses a bigger threat to consumers: offering rival “market-based” bailout plans crafted by America’s largest private market operator, PJM, which serves mid-Atlantic states.

While the near-universal denunciation of Perry’s bailout has focused on its cost-of-service bailout remedy, a clever “bait-and-switch” is occurring, promoted by PJM and sponsored by Exelon Corp. While Washington, D.C. was losing its collective mind (rightfully so!) over Perry’s audacious coal bailout  last month PJM quietly unveiled a supposed “market-based” alternative: a “price formation” revamp that will require consumers to pay billions of dollars each year in new capacity payments to owners of power generation.

PJM’s Independent Market Monitor attacked this financial windfall for nuclear and coal generators, accusing the RTO of doing Exelon’s bidding in crafting the price formation proposal.

As Public Citizen has been predicting for months, FERC’s likely course of action will be to reject the DOE’s cost-of-service bailout in favor of PJM’s market-based bailout simply because of the “market-friendly” marketing PJM employs.

PJM’s constant rejiggering of its capacity markets – reflected yet again in its “price formation” offer – is evidence of its accommodation of its powerful members like Exelon. PJM’s “market-based” bailout isn’t any better than Perry’s cost-of-service giveaway just because PJM dresses up its bailouts in difficult-to-understand pseudo-economic jargon. Consumers are impacted exactly the same whether it’s a cost-of-service or a “market-based” bailout.

The problem is that, as with so many other Federal Power Act authorities, FERC appears ready to substitute consideration of Perry’s plan for PJM’s, thereby putting PJM in the drivers’ seat of designing and implementing billions of dollars in giveaways for Exelon, Vistra-Dynegy and NRG.

Independent Market Monitor  has implied that PJM, rather than acting as a “neutral” arbiter of administrating the market, is actually acting behind the scenes to benefit Exelon.

Because PJM is a private organization, there is little to no transparency in its operations. And while PJM is overseeing a “stakeholder” process to allegedly consider its price formation proposal, the RTO is structured to allow PJM to bypass this stakeholder process and offer its price formation bailout directly to FERC.

Given the billions of dollars a year at stake, FERC must immediately open a public, evidentiary hearing into the players involved in developing and promoting PJM’s price formation fiasco, especially given the public accusation by Independent Market Monitor that PJM’s plan was offered to help Exelon Corp. FERC is the only entity with the authority to regulate PJM, and that oversight must include an investigation into what role, if any, Exelon played in shaping PJM’s price formation proposal.


Tyson Slocum is Director of Public Citizen’s Energy Program. Follow him on Twitter @TysonSlocum