Power & Pipes

FERC, CFTC, and State Energy Law Developments

The White House announced late last week that President Donald Trump has directed Energy Secretary Rick Perry to “prepare immediate steps to stop the loss” of “fuel-secure power facilities,” noting that near-term retirements of these facilities could lead to “a rapid depletion of a critical part of our nation’s energy mix, and impact the resilience of our power grid.” Although the federal government has not yet disclosed what those steps might be or which generators are at issue, press reports from CNN and Bloomberg, among others, have emerged suggesting that the US Department of Energy (DOE) is considering a directive that would require Independent System Operators and Regional Transmission Operators (ISOs/RTOs) to purchase energy from designated “fuel-secure” plants for a period of up to, and possibly more than, 24 months to avoid any near-term decommissioning.

According to those press reports and the draft memorandum they rely upon (which is not final and the provenance of which remains uncertain), the DOE appears concerned that the retirement of “fuel-secure” plants could create a number of threats including:

  • Increased reliance on pipeline-dependent plants, which the memo asserts “represent a major point of vulnerability”
  • Difficulty in serving peak load when more of the generation mix is from intermittent resources
  • “Fuel-secure” resources becoming less evenly distributed
  • A less robust civilian nuclear industry, reducing the workforce available to address national security nuclear needs
  • Reduced energy security for the domestic industrial base used for national defense
  • Reduced energy security for military bases and defense facilities

To better understand these risks and the steps that could be taken to address them, the reports and draft memorandum suggest that the DOE National Labs will be undertaking a detailed review that is likely to last at least 24 months. To prevent additional retirements while that effort is underway, DOE may be considering the use of rarely-invoked authority granted under Section 202 of the Federal Power Act and the Defense Production Act to (1) require ISOs/RTOs to purchase electricity from at-risk coal and nuclear plants for two years; and (2) direct the establishment of a “Strategic Electric Generation Reserve.”

It remains unclear whether (or when) DOE or the other authors of the draft memorandum will finalize it and, if finalized, when and how it will be implemented. Action by both DOE (under Section 202) and White House (under the Defense Production Act) may be required to adopt the draft memorandum’s proposals. The role of the Federal Energy Regulatory Commission, if any, is also unclear.