In an unprecedented move, Trump administration officials are preparing to order U.S. grid operators to purchase electricity from struggling coal and nuclear plants, in an effort to prevent them from shuttering. “Federal action is necessary to stop the further premature retirements of fuel-secure generation capacity,” states a 41-page draft memo first obtained by Bloomberg. The memo, also obtained by GTM, is dated May 29, and was circulated ahead of a National Security Council meeting to address the issue on Friday. UPDATE: President Trump ordered Energy Secretary Rick Perry to stem coal and nuclear power plant retirements in White House statement issued Friday afternoon. “Unfortunately, impeding 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,” said Press Secretary Sarah Sanders, in a statement. “President Trump has directed Secretary of Energy Rick Perry to prepare immediate steps to stop the loss of these resources, and looks forward to his recommendations.” According to the leaked memo, the Department of Energy plans to exercise emergency authority under the Defense Production Act of 1950 and the Federal Power Act to direct system operators “to purchase or arrange the purchase of electric energy or electric generation capacity from a designated list of Subject Generation Facilities (SGFs) sufficient to forestall any further actions toward retirement, decommissioning or deactivation of such facilitates during the pendency of the DOE’s Order.” The Energy Department also plans to direct power plants on the SGF list outside of RTO/ISO territories to continue operating under their existing contractual arrangements with load-serving entities. The DOE is also planning to establish a “Strategic Electric Generation Reserve,” in the name of promoting national defense and maximizing domestic energy supplies. The Order is described as a “stop-gas measure” that would remain in place for 24 months as the DOE completes a more in-depth analysis — never before undertaken — to designate “Critical Defense Facilities served by the Defense Critical Electric Infrastructure.” This analysis includes research on specific vulnerabilities in the U.S. energy delivery systems, including interdependencies between electric generation and transmission, natural gas and petroleum pipelines, and supply chains. The memo confirms earlier reports that the Energy Department has been looking to use its emergency authority to shore up coal and nuclear power plants – which are struggling to compete against low-cost natural gas and renewables. The leaked memo adds a new justification for federal intervention, citing the risk of cyberattacks causing disruptions to gas and petroleum pipelines. "This exposure is minimized where electric generation facilities are able to maintain fuel stockpiles on site, as with coal and nuclear." This isn’t the Trump administration’s first attempt to save the two ailing industries. Last September, Energy Secretary Rick Perry introduced a plan to provide support for power plants with 90 days of fuel on site – something only nuclear and coal plants can do — citing a critical need for enhanced grid resilience and reliability. However, the plan was rejected by the Federal Energy Regulatory Commission, which opted to open its own resilience proceeding instead. Then in March, FirstEnergy requested the DOE use its emergency authority under Section 202(c) of the Federal Power Act to provide a lifeline to its coal and nuclear plants. The White House denied a similar request from coal mining company Murray Energy last year. Assistant DOE Secretary Bruce Walker said in February that DOE “would never” consider using these emergency powers to provide uncompetitive plants an economic bailout. Secretary Perry said in an April talk that “202(c) may not be the way that we decide is the most appropriate — the most efficient way to address this.” The Trump administration has not confirmed a final strategy. However, the recently obtained draft memo represents the administration’s most fully developed plan to intervene on behalf of coal and nuclear power plants to date, which is now being presented to top security advisers at the NSC. Reactions to the memo were swift, strong, and almost universally negative. Grid operator PJM Interconnection tweeted out a statement Friday afternoon that it had not received any official documents from the DOE, and that there is no need take drastic action to support the grid. "Our analysis of the recently announced planned deactivations of certain nuclear plants has determined that there is no immediate threat to system reliability," the operator stated. "Markets have helped to establish a reliable grid with historically low prices. 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." The same unusual coalition of renewable energy, natural gas and big energy customer trade groups that came together to oppose DOE’s push to give coal and nuclear plants out-of-market payments, also filed its opposition to using emergency wartime powers to accomplish the same task. “To invoke the concept of 'national defense' for what is transparently a domestic effort to boost an uneconomic segment of industry would be an unprecedented abuse of the Act Using this statute to favor a particular industry that is struggling in the competitive markets would threaten that support and risk the loss of an important tool that could be needed to ensure national security," according to a statement from the Affordable Energy Coalition. While the Defense Production Act was used during the 2001 California energy crisis to secure energy supplies for Pacific Gas & Electric amidst its bankruptcy, the law was amended in 2009 to restrict its use, according to Susan Tierney, a senior advisor for Analysis Group and former DOE Assistant Secretary. “I believe this is an enormous stretch, and it would surprise me if lawyers in other administrations would find this a valid use.” And the conservative Heritage Foundation joined with the free-market think tank R Street Institute to decry the move. “The motives couldn't be more obvious — the same politically-tied companies that drove the last proposal are back at it again because they can't compete in the marketplace,” the groups wrote. This story was updated with comments from PJM.<doc-sep>It’s hard to overstate how negative the reactions have been to Friday’s news that the Trump administration is directing the Energy Department to find ways to force Americans to buy power from failing coal and nuclear plants in the name of national security. But in the face of this unprecedented plan being revealed in a leaked document — and the White House confirming Trump’s order to direct Energy Secretary Rick Perry to “prepare immediate steps to stop the loss of these resources” — it’s worth compiling the long list of evidence on why it’s a bad idea, and what opponents are doing to try to stop it. We’ve covered the fundamentals of the leaked memo, which refers to an as-yet-unseen order. That order would exercise DOE's authority under the Defense Production Act of 1950 and the Federal Power Act to direct system operators “to purchase or arrange the purchase of electric energy or electric generation capacity from a designated list of Subject Generation Facilities (SGFs).” While this list of SGFs appears nowhere in the document, it’s clearly linked to what the DOE and White House are now calling “fuel-secure facilities.” These are the same nuclear and coal-fired power plants with 90 days of fuel on-site that DOE singled out in its failed attempt to get the Federal Energy Regulatory Commission to change its regulations to provide them out-of-market payments. And while the leaked document doesn’t lay out any data on the costs of this proposed market intervention, DOE’s original proposal to FERC could have added as much as $11 billion per year in additional costs to energy consumers, according to an analysis by Energy Innovation and the Climate Policy Initiative. And of those payments, more than 80 percent of the coal subsidies would go to just five companies — NRG, Dynegy, AEP, Talen Energy, and most notably, FirstEnergy, the company that originally asked DOE for an emergency intervention shortly before declaring bankruptcy for its coal and nuclear generation business in March. “The Trump administration would have customers shoulder billions of dollars in costs to support a withering industry that has failed to remain competitive with the abundance of new natural gas, cheap renewable resources, flat demand growth, and growing energy efficiency,” Robbie Orvis, policy director at Energy Innovation, wrote in a Friday statement. “What’s being discussed here is disgraceful and threatens to undermine the very foundation of competitive electricity markets.” A blow to market certainty and investor confidence If anything, the policies laid out in the leaked memo could lead to even larger costs passed on to consumers, Gregory Wetstone, CEO of American Council on Renewable Energy, said in a Friday interview. DOE’s notice of proposed rulemaking would only have applied to power plants within the territory of independent system operators (ISOs) and regional transmission organizations (RTOs). But the new directive would allow power plants on the SGF list outside of RTO/ISO territories to continue operating under existing arrangements with load-serving entities, which means “we could be looking at a measure that has an impact on electricity prices for all Americans,” he said. Of course, without the SGF list referred to in the leaked memo, those impacts are impossible to calculate at present, he said. “It becomes almost reminiscent of how investors might view an unstable country, where they’re concerned about the government intervening, and not having a marketplace with integrity. The repercussions from that are going to be very negative toward reliability and resilience. You need those investments to keep modernizing the grid.” Still no proof that closing power plants = national emergency As for the purported threat to national security caused by closing coal and nuclear plants, those arguments from DOE have been undermined by evidence from its own grid reliability study released last year, as well as by grid operators across the country. The vast majority of grid outages are caused at the distribution and transmission grid network, and almost none are caused by lack of fuel supplies. And coal-fired power plants are subject to the same weather-related outages, such as frozen or flooded fuel piles, that cause problems for natural-gas delivery. Mid-Atlantic grid operator PJM, home to most of the power plants that would be guaranteed payments under the plan, took the unusual step of issuing a statement on DOE’s potential “market intervention,” even though it had not received any notification from DOE about it. PJM’s statement laid out its studies that show no threat to grid reliability from coal and nuclear closures, and the fact that its current market regime has led to wholesale prices falling 40 percent from 2008 to 2017. It also noted that it’s following FERC’s directive, along with all other ISOs and RTOs, to examine and enhance its own system’s resilience to storms, cyberattacks and other grid disruptions. PJM also noted that in its most recent capacity auction, coal power plants actually increased their participation, “along with a diverse mix of natural gas generation, nuclear generation, renewable resources, demand response and energy efficiency,” all while keeping reserve margins at 23 percent, far above what’s required to provide assurance of reliable power in times of grid stress. The legal challenges to come As to DOE’s legal power to circumvent traditional energy market policymaking, that’s under attack by the attorneys general of Massachusetts, Connecticut, Illinois, Maryland, North Carolina, Oregon, Rhode Island, Virginia, Washington and the District of Columbia. In a May objection to FirstEnergy’s emergency bailout request, they wrote that “FirstEnergy fails to identify any ‘emergency,’” making the requested Section 202(c) order unlawful. It would also “undermine competitive regional power markets, burden customers with excessive costs, undercut state energy laws and policies, and exacerbate pollution and public health harms.” The challenge with DOE’s new directive is that it combines three laws in a novel way to assert its authority, Ari Peskoe, director of the Electricity Law Initiative at Harvard University, said. Those laws are the Defense Production Act, the Federal Power Act, and the “Fixing Americas Surface Transportation,” or FAST Act of 2015, which included law on designating critical infrastructure for the power sector that has become part of the FPA.<doc-sep>Update 2:43 pm: This afternoon White House Secretary Sarah Sanders said that President Trump told Energy Secretary Rick Perry to "prepare immediate steps" to prevent coal plants from early closure. Original Story 9:10am: In a draft memo to be circulated on Friday, the Department of Energy (DOE) argues in favor of using a wartime rule called the Defense Production Act to bail out failing coal and nuclear plants, according to Bloomberg, which obtained a copy of the memo. The memo suggests that the Energy Department could force grid operators to buy power or electric generation capacity from a list of pre-determined power plants for two years, “to forestall any future actions toward retirement, decommissioning or deactivation.” During that time, the DOE would conduct a study of vulnerabilities in the US power grid system. The justification for using the Defense Production Act would be that keeping unprofitable power plants running is a matter of national security until the two-year vulnerability study is complete. The memo allegedly wrote that "Too many of these fuel-secure plants have retired prematurely and many more have recently announced retirement." According to Bloomberg, the memo added that these coal and nuclear plants are being replaced by natural gas and renewable power generation that is not secure or resilient. Such a statement has been contradicted by several power grid operators, including PJM, one of the largest independent system operators in the country. The recent "bomb cyclone" system of extremely cold weather in the Northeast this winter showed off that the grid could operate well despite coal retirements. Advertisement Boosting the flagging coal industry was one of the key campaign promises of President Trump, despite the fact that it's one of the most polluting forms of energy that the US has, and it employs significantly fewer people than either the natural gas, oil, or solar power industries. Over the previous year, Energy Secretary Rick Perry has tried to justify a number of different actions to make good on Trump's promise, to little avail. Initially, Perry issued a politically charged memo commissioning a study to find the regulatory causes of coal retirements. The resulting study, however, said that no particular regulation was causing coal plants to retire: instead the cheap cost of natural gas was convincing power companies to switch over to that fuel. Perry then proposed a rule that would require power purchasers to compensate coal and nuclear plants over and above the compensation they were already due for their part in supplying "baseload" energy. However, the rule had to be approved by the Federal Energy Regulatory Commission (FERC), and that regulatory body found that there wasn't sufficient evidence to approve Perry's rule. Failing that, coal and nuclear plant operator FirstEnergy requested that the DOE use an emergency order to bail out one of the company's subsidiaries shortly before it declared bankruptcy. In April, E&E News reported that an interagency group was exploring the use of the Defense Production Act, which gives the president broad power to boost industries that are deemed necessary for national defense. The draft memo circulated today is not an official proposal for a rule, but it does suggest that the Trump administration is getting more serious about invoking the Defense Production Act to the benefit of coal and nuclear.<doc-sep>Matthew Daly Associated Press Washington – President Donald Trump on Friday directed Energy Secretary Rick Perry to prepare “immediate steps” to bolster struggling coal-fired and nuclear power plants to keep them open. White House press secretary Sarah Sanders said in a statement that Trump believes “keeping America’s energy grid and infrastructure strong and secure protects our national security, public safety and economy from intentional attacks and natural disasters.” Impending retirements of “fuel-secure” power plants that rely on coal and nuclear power are harming the nation’s power grid and reducing its resilience, Sanders said. The directive comes as the Trump administration considers a plan to order operators of the nation’s power grid to buy electricity from coal and nuclear plants to keep them open. The action by the Energy Department, if ordered, would represent an unprecedented intervention into U.S. energy markets. A draft memo by the Energy Department urges federal action to “stop the further premature retirements of fuel-secure generation” from coal and nuclear plants that have struggled to compete with natural gas and renewable energy sources such as wind and solar power. The Associated Press obtained a copy of the memo. The plan would direct grid operators to buy power from coal and nuclear plants for two years to ensure grid reliability, “promote the national defense and maximize domestic energy supplies.” The memo was first reported by Bloomberg News.<doc-sep>
President Donald Trump on Friday directed Energy Secretary Rick Perry to take 'immediate steps' to bolster struggling coal-fired and nuclear power plants to keep them open, calling it a matter of national and economic security. Trump, who has frequently promised to bring back coal jobs, believes that keeping America's energy grid secure 'protects our national security, public safety and economy from intentional attacks and natural disasters,' White House press secretary Sarah Huckabee Sanders said in a statement. Impending retirements of coal-fired and nuclear power plants are harming the nation's electric grid and reducing its resilience, and the president wants immediate action 'to stop the loss of these resources,' Sanders said. Trump, who has frequently promised to bring back coal jobs, believes that keeping America's energy grid secure protects US national security Energy Secretary Rick Perry (pictured) was ordered to take 'immediate steps' to bolster struggling coal-fired and nuclear power plants Environmental groups decried the support for coal over cleaner energy sources, while energy industry groups warned that it could raise prices. The directive comes as the Trump administration considers a plan to order grid operators to buy electricity from coal and nuclear plants to keep them open. The plan would direct regional transmission operators to buy power from coal and nuclear plants for two years to ensure grid reliability, 'promote the national defense and maximize domestic energy supplies.' The Energy Department action, if ordered, would represent an unprecedented intervention into U.S. energy markets. A draft memo urges federal action to 'stop the further premature retirements of fuel-secure generation' from coal and nuclear plants that have struggled to compete with natural gas and renewable energy sources such as wind and solar power. The Associated Press obtained a copy of the memo. The plan would exempt power plants from obeying a host of environmental laws and spend billions to keep coal-fired plants open. Amy Farrell (L), vice president of the American Wind Energy Association and Todd Snitchler of the American Petroleum Institute (R) both panned the move as ineffective and expensive A diverse group of energy industry groups - including oil, natural gas, solar and wind power - condemned the proposal, saying it would raise energy prices and distort markets. 'Unprecedented government intervention in the energy markets to support high-cost generation will hurt customers by taking more money out of their pockets rather than letting people keep more of what they earn,' said Todd Snitchler of the American Petroleum Institute, the top lobbying group for the oil and gas industry. Robert Murray (pictured), chairman and CEO of Murray Energy Corp., the nation's largest privately owned coal company, hailed the White House announcement 'Orderly power plant retirements do not constitute an emergency for our electric grid,' said Amy Farrell, vice president of the American Wind Energy Association. Farrell called the draft plan 'a misapplication of emergency powers' and said, 'There's certainly no credible justification to force American taxpayers to bailout uneconomic power plants.' But Robert Murray, chairman and CEO of Murray Energy Corp., the nation's largest privately owned coal company, hailed the White House announcement. Murray has been seeking emergency action to boost his industry since last year and has met with Trump to argue that federal help was needed to avert thousands of layoffs and maintain the reliability of the electric grid up and down the East Coast. 'We support all efforts to ensure the security of our nation's electric power supply, which is critical to the reliability of our electric power grids, to low-cost electricity and to our national defense,' Murray said Friday in a statement. The draft plan calls for the Energy Department to exercise emergency authority under a pair of federal laws typically reserved for wars or natural disasters. The plan calls for Perry to use the Federal Power Act and the Defense Production Act to temporarily delay retirements of coal and nuclear plants. A power plant lobbyist, who also is close to House Majority Leader Kevin McCarthy (Pictured), R-Calif., dined with Trump in April along with McCarthy and GOP donors 'This prudent stop-gap measure' will allow coal and nuclear plants to remain open while the department takes further steps to secure the grid, the memo said. Among those arguing for federal action is Jeff Miller , a well-connected GOP fundraiser who has served as an adviser to Perry and other Republicans and ran Perry's unsuccessful presidential campaign in 2016.