New Analysis Finds Dramatic Costs of Perry's Directive to FERC

New findings shows massive subsidy for coal and nuclear facilities would cause electricity customers’ bills to skyrocket, destroy energy marketplace

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WASHINGTON, D.C. - Sierra Club released new findings today showing that Secretary Rick Perry’s recent directive to the Federal Energy Regulatory Commission (FERC) to force electricity customers to bail out uneconomic coal and nuclear plants would severely distort America’s energy markets and cause ratepayers’ bills to skyrocket. The bailout would benefit wealthy Wall Street firms that made a bad bet on aging coal and nuclear plants, by increasing the electricity bills for customers in the Midwest and Mid-Atlantic to subsidize these plants. After looking into the 2016 operations and maintenance costs for all merchant coal and nuclear plants in the four markets subject to Perry’s directive, Sierra Club found that their 2016 costs amounted to $14 billion that could be passed onto working Americans to benefit hedge funds and other large investors, based on data reported by S&P Global Market Intelligence.* Additional findings showed that:

• Around 100 coal and nuclear plants could be subsidized by the Trump Administration's proposal, primarily in the Mid-Atlantic and Midwest. Any uncertainty is due to lack of definition in DOE's proposal regarding what plants are subject to cost of service recovery by a "state or local regulatory authority" and whether or not all eligible plants could stockpile 90 days worth of fuel.  

• While the DOE proposal insists plants with 90 days of fuel on site are needed for reliability, this has almost never been an actual real-world problem - according to data compiled by the Rhodium Group, disruptions of power supply due to "fuel supply emergencies" were 0.00007% of the power outages reported from 2012-2016, and nearly all of the fuel-related outages were due to a coal plant in Northern Minnesota.

• Consumers would be charged billions more for no clearly defined benefit.  

• The owners of the most coal plant capacity that would benefit from Perry’s directive include FirstEnergy, NRG, and Dynegy.

“The price tag of Rick Perry’s outlandish directive to FERC is becoming clear now, and it’s more catastrophic than we originally thought. Trump's DOE is proposing to pick the pockets of regular Americans in the Midwest and Mid-Atlantic to benefit Wall Street. Perry is essentially demanding America’s manufacturers, small businesses, and families pay what will likely be billions in higher bills to hedge funds and big banks that made a bad bet on coal, to bail out uneconomic power plants that can’t compete in the market anymore,” said Mary Anne Hitt, Director of Sierra Club Beyond Coal campaign. “Perry’s obsession with propping up these expensive, dirty facilities will cost Americans real money. These aging coal plants are making Americans sick, and now Secretary Perry wants to force us to pay tens of billions of dollars to Wall Street to keep them running, so they can continue polluting our air and water.”

To reach its findings, Sierra Club looked at the operations and maintenance costs for all merchant coal and nuclear plants in the four markets subject to Perry’s directive. Since Perry’s proposed rule would require customers to pay for the full cost of service of ultimately eligible plants plus an additional amount for profit, the annual operations and maintenance costs are an important data point for estimating the total impact to consumers. In 2016, those costs amounted to $14 billion.

“Perry’s directive to FERC is nothing but a ploy to prop up Donald Trump’s campaign contributors with working people’s money,” Hitt said. “There is no evidence whatsoever to show that replacing coal and nuclear with clean energy will adversely impact the grid; in fact, studies have shown the opposite. Clean energy lowers costs, cuts pollution, and makes the energy marketplace more efficient and reliable.”  

As Secretary of Energy, Perry commissioned the release of a comprehensive study on the reliability and resiliency of the grid in the wake of mass retirements of coal and nuclear plants and their increasing replacement with solar, wind, and energy efficiency resources. Perry openly claimed, without evidence, that coal and nuclear plants are necessary for the grid’s reliability and resilience. The study, however, found that the continued retirements of coal and nuclear facilities didn’t threaten the grid’s reliability, their retirements were due to basic market forces, and that clean energy’s penetration into the grid helps with efficiency and reliability.  

Since Perry’s directive has become public, DOE has been cast -- under a hail of criticism by manufacturers, energy trade groups, business interests, and former FERC commissioners -- as trying to destroy America’s energy markets by trying to unfairly prop up some energy resources over others.

*All merchant power plants with primary or secondary fuel type listed as coal or nuclear and that operate in MISO, PJM, NYISO, or ISO-NE were included in this analysis. Data from S&P Global Market Intelligence and is sourced from the Federal Energy Regulatory Commission Form 1 (FERC Form 1) and the Environmental Protection Agency's Continuous Emissions Monitoring Systems (CEMS). In the absence of current-year filings, S&P Global Market Intelligence utilizes regression analysis to generate cost estimates. Inputs to the model are taken from the EIA 923, FERC Form 1 and CEMS. Costs include 2016 fuel costs, variable O&M costs, and plant fixed costs.