Administration favors change in electricity pricing

The Trump administration is pushing for changes in the way electricity is priced to better reward coal and nuclear power, which face growing competition from natural gas and renewables.

Energy Secretary Rick Perry on Friday called on the Federal Energy Regulatory Commission to act within 60 days to adopt rules raising payments to power plants that are considered more resilient. He maintained that a diverse mix of energy sources would strengthen the power grid, especially during natural disasters, by ensuring an adequate supply of backup power. The decline of traditional sources of power, on the other hand, would undermine reliability.

Advocates of renewable energy reacted warily.

"This would prolong the lives of a number of 50-year-old coal and nuclear power plants at the expense of newer and cleaner sources of electricity including wind and solar," said Rob Gramlich, a consultant who formerly worked at a wind-energy trade association.

FERC is an independent agency that regulates wholesale power markets, and it is not required to follow Perry's recommendation. However, two of the three current commissioners were nominated by President Donald Trump, which environmentalists fear could make the agency inclined to accept Perry's recommendation.

The commission did not respond to a request for comment.

Perry's proposal comes a month after the Energy Department staff issued a report that called for more research into whether reliability and resilience could be factors in pricing wholesale electricity.

The amount of U.S. electricity generated by coal has fallen to about one-third in the last decade, mostly as fracking has made natural gas cheaper. Renewables led by solar and wind remain a small portion of the energy mix but are growing.

Coal and nuclear plants are considered "baseload" energy sources because they provide large and steady amounts of electricity from material stored on site, which reduces the risk of interruptions in fuel supply.

"America's greatness depends on a reliable, resilient electric grid powered by an 'all of the above' mix of generation sources," Perry wrote in a letter to the energy-regulating commission. The grid's resiliency, he wrote, "is being threatened by the premature retirements of these fuel-secure traditional baseload resources."

Coal groups applauded Perry's move. Paul Bailey, the president of the American Coalition for Clean Coal Electricity, commended Perry for starting a process "that will finally value the on-site fuel security provided by the coal fleet."

Maria Korsnick, president of the Nuclear Energy Institute, said electricity markets are overly based on short-term prices and don't value everything that matters to the electricity system. Nuclear reactors, she said, "find themselves struggling to survive when the nation needs them most."

But advocates for natural gas and renewables criticized Perry's proposal.

"We worry today's proposal would upend competitive markets that save consumers billions of dollars a year," said Amy Farrell, a senior vice president for American Wind Energy Association. She said electricity prices should be based on performance, "not guaranteed payments for some, based on a government-prescribed definition."

The president of the Interstate Natural Gas Association of America, Don Santa, said Perry's plan would favor "a very limited set of fuels and technologies" and ignored the reliability of natural-gas power in recent hurricanes.