The Department Of Energy Proposal Will Likely Do More Harm Than Good
Yesterday, the Heritage Foundation and the Institute of Energy Research held a panel on the U.S. Department of Energy’s proposal to the Federal Energy Regulatory Commission (FERC) to reward certain power plants for on-site fuel storage, which independent analysis has shown would raise energy prices by more than $10 billion each year, upend markets, and provide little to no benefit to electric grid reliability. As noted during the panel, the so-called “resiliency” proposal before FERC is likely to do more harm than good.
Between the lack of a clear definition of reliability and resiliency, this Notice of Proposed Rulemaking (NOPR) will cost consumers billions while attempting to solve a problem that just doesn’t exist. Even the Department of Energy’s 2017 grid study found the electric grid is reliable and likely improving – that is to say, the grid is already reliable without drastic changes to the market. After all, over the last five years, less than 0.00007 percent of all power disruptions were due to fuel supply problems.
And yet, the NOPR calls for subsidies that will distort the market at the cost of American consumers. Subsidies will be handed out to the arbitrarily-defined set of power plants – many of which are old or uneconomic – and the total bill could reach $11.2 billion annually. This cost won’t burden the beneficiary companies, however, as customers may see their electricity bills increase an average of 8 to 10 percent.
A consensus has quickly grown that this NOPR spells bad news for American consumers to benefit just a handful of select companies. Here’s what a variety of groups had to say:
New York Independent System Operator: “The NOPR’s approach would distort, if not destroy, wholesale market signals needed to attract and retain resources required for reliability.”
Shell: “The NOPR, including its discussion of the organized markets and its proposed resiliency mechanism, is confusing and demonstrates a lack of understanding of core tenets of the market design for competitive wholesale markets and cost-of-service ratemaking principles.”
Microsoft: “As drafted, the NOPR could impede the ability of FERC-jurisdictional markets to produce such an electricity system by imposing cost-of-service (‘CoS’) regulation in ISO/RTO regions that would undermine market competition. Accordingly, Microsoft believes that the NOPR would not advance resiliency or reliability nor help assure energy security for its operations or the country.
Even Dynegy, a coal company standing to benefit from the NOPR, had powerful words for FERC:
“Dynegy emphasizes that it remains opposed to the proposed rule, which amounts to a re-regulation of coal and nuclear facilities that would severely harm, and potentially represent a death blow to the competitive markets that the Commission has worked hard to develop.”
The widespread agreement that the NOPR will raise consumer prices and disrupt the energy market with no change to reliability is why the Affordable Energy Coalition is urging FERC to reject the proposal. As a diverse group of industry organizations, businesses, and communities, we are dedicated to keeping energy prices low for consumers.