Grid resiliency plan draws scrutiny in US Congress
Washington, 12 October (Argus) — US energy secretary Rick Perry faced tough questioning from lawmakers regarding a "grid resiliency" proposal that would offer guaranteed profits to struggling coal and nuclear plants in the northeast and the midcontinent.
Perry appeared today at a congressional hearing two weeks after ordering the US Federal Energy Regulatory Commission (FERC) to act quickly on his plan. Natural gas companies and other industry critics say the proposal is a rushed effort that would upend power markets, raise electricity prices and might not even improve grid reliability.
Democratic lawmakers led criticism of the plan the hearing, held by the power subcommittee of the US House Energy and Commerce Committee. But Republicans also noted the controversy that it had generated.
"You said you wanted to start the debate, well my friend, mission accomplished," said US House Energy and Commerce power subcommittee vice chairman Pete Olson (R-Texas).
Perry's proposal would allow power plants with 90 days of on-site fuel to recover their costs and a fair rate of return. Those payments would only apply in power markets that pay for energy and capacity, a classification that would cover New England, New York, the mid-Atlantic and parts of the midcontinent. FERC is required to approve or deny the proposal by 8 December.
Democrats said the proposal would distort markets and appeared designed to give preferential treatment to industries President Donald Trump wants to support. And they said Perry had not provided evidence that a 90-day fuel supply would improve reliability. A recent independent report said fuel supply problems were responsible for just 0.00007pc of recent power outages.
"Killing off competitive electricity markets just to save generation assets that are no longer economic will lead to higher prices for consumers," subcommittee ranking member Frank Pallone (D-New Jersey) said.
Democrats said the plan would pick "winners and losers," borrowing a refrain that Republicans used to criticize former president Barack Obama for using loan guarantees and tax breaks to promote renewable energy. Representative Michael Doyle (D-Pennsylvania) said Perry's proposal could "reshape or destroy electricity markets very quickly" and was a "rather extreme" proposal that did not allow FERC to look for other ways to improve grid resiliency.
Perry defended the idea and portrayed it as an attempt to start a "conversation" on an issue he said had not received sufficient attention. He said there is no such thing as a free market in energy markets because they are regulated at the state and federal level and are also subject to targeted subsidies.
"I do not know if I want to bet my grandmother's — or someone's grandmother's — safety and security on whether or not the lights are going to come on, on a pure and totally, absolutely unregulated market," Perry said.
Republican lawmakers from coal producing regions defended the proposal and cited the "polar vortex" in January 2014 that strained northeast power grids. Representative Morgan Griffith (R-Virginia) noted northeast gas prices during that event spiked above $100/mmBtu during the event. Representative David McKinley (R-West Virginia) said he was "alarmed" people were ignoring grid reliability threats. Northeast power markets made changes after the polar vortex to avoid plant outages.