Rick Perry’s plan to bail out coal aligning disparate groups
‘I haven’t seen the industry this rattled in a long time’
In his 20 years of promoting renewable energy in Washington, Gregory Wetstone has made common cause with a range of special interest groups:- environmentalists, power utilities, even a handful of natural gas producers. But President Donald Trump’s efforts to bail out the coal industry led Wetstone, the head of the American Council on Renewable Energy, to find a surprising new partner: Big Oil.
Within hours of Energy Secretary Rick Perry releasing a proposal to overhaul the country’s power markets to advantage unprofitable coal and nuke plants, Wetstone was busy pulling together a team of unlikely allies, including solar installers, oil refineries and natural gas drillers, all of whom were worried that the plan would raise electricity costs and undercut their fuel source in the power markets.
With uncharacteristic speed for a collection this broad, Wetstone’s renewable energy council joined the American Petroleum Institute and 19 other groups to submit comments that noted their unlikely alliance, slyly noting the proposal’s "power to unite." They dubbed the plan ill defined, unwarranted and unreasonable.
“It’s not often that our interests align, but I think everyone recognizes the importance of standing up together,” he said in an interview. “It’s a reflection of how disruptive the policy put forward would be.
The lobbying is aimed at the Federal Energy Regulatory Commission, which oversees the nation’s electricity markets and is set to decide by Dec. 11 whether or how to act on the Energy Department’s proposal. If approved, it could help achieve Trump’s goal of putting some U.S. coal miners back to work by giving unprofitable coal power plants an edge against more economical ones that run off cheap wind, solar and natural gas.
When he proposed his grid overhaul, Perry relied on an obscure statute to argue that regulators should reward coal and nuclear plants because of their ability to keep enough fuel on hand to operate in case of emergency. Perry has asked FERC to allow power plants with 90 days of fuel on site to charge customers more money. Coal and nuclear plants store their fuel at the plant; natural gas and renewables typically don’t.
No one is really sure how much that would raise Americans’ power bills. Estimates range from a few hundred million dollars to more than $200 billion.
Perry’s proposal caught energy lobbyists across Washington off guard. One oil company executive described frantic emails and phone calls trying to suss out details on it the night before it was released. Energy lobbyists scrambled to prepare executives, including at least two chief executive officers for phone calls and face-to-face meetings with top Perry and FERC officials. Ben van Beurden, the chief executive of Royal Dutch Shell Plc, pressed the issue with Perry when the two crossed paths at an energy event in Paris.
“I haven’t seen the U.S. gas or power industry this concerned in a long time,” says Orlando Alvarez, the head of BP Energy Co.’s natural gas and power marketing and trading business. “It’s getting attention of senior executives at many energy companies we deal with.”
BP Plc and other oil companies are now big producers of natural gas, and therefore worried about bailouts to their rivals. Cheaper, cleaner-burning gas has displaced coal at power plants around the country, and now supplies more than a third of the nation’s electricity.
The proposal is upsetting the balance of power among the energy and electricity industries in Washington, creating friction among traditional corporate allies and turning old foes into (temporary) allies. It’s also created an odd match of supporters as coal miners -- who reject efforts to address climate change -- join with the nuclear industry, which has asked to be rewarded for the fuel’s carbon-free attributes.
The solar and wind energy associations faced a flurry of questions from anxious executives, alarmed by what the plan would mean for their business models.
“It was everybody panicking together,” said Christopher Mansour, vice president of the Solar Energy Industries Association.
BP, the American Wind Energy Association and others hastily formed another alliance to combat the grid rule. That new "Affordable Energy Coalition" also included the R Street Institute, a free-market think tank, and Advanced Energy Economy, a trade group representing companies such as First Solar Inc. and Amazon.com Inc.
In naming the coalition, critics turned to a tried-and-true tactic in D.C. of highlighting the consumer costs of a potential policy change, rather than the corporate interests fighting it.
Coal interests in recent years used a similar approach to combat the Obama-era Clean Power Plan, by highlighting how that rule to cut carbon dioxide emissions from power plants, would hike electricity costs, picking winners (solar, wind) and losers (coal).
"Washington is picking winners and losers in the market, rather than let the markets operate themselves, and that has a negative impact for consumers," Michael Steel, a spokesman for the Affordable Energy Coalition and former House Republican leadership aide, said in an interview. The group is using op-eds, letters and local media to try and get state ratepayers to weigh in with FERC.
Tensions have also erupted among longtime allies. After Trump officials heralded a newly updated U.S. Chamber of Commerce-backed study as justifying Perry’s proposal by asserting that losing coal-fired power plants would raise electricity costs and lead to a loss of 1 million jobs, oil and gas members of the business group revolted. Not only were those results at odds with the Energy Department’s own staff analysis, but oil and gas companies were outraged that a study from a group they paid dues to was being used against them.
On a conference call, representatives of those companies took turns bashing Karen Harbert, the head of the U.S. Chamber Global Energy Institute for promoting the study and providing a supportive quote in a news release accompanying the report, say two participants in the call. These groups lined up behind Harbert as she fought against the Obama administration’s Clean Power Plan; now they wanted the Chamber to publicly rescind its perceived support for Perry’s plan.
Harbert said her institute did not know of the proposed grid rule before it was formally released, and the updated study was completed earlier. The institute "will fully evaluate any proposed actions by the FERC to ensure our member interests are well understood," she said.
On Nov. 30, the Heritage Foundation hosted an energy and climate forum that featured coal-magnate Robert Murray, CEO of Murray Energy Corp., who called Perry’s coal plan the most important thing that’s been done for the power grid in 60 years.
“I met privately with President Trump on that three times,” he said. “We must stop these closings of these power plants."
A few hours before Murray spoke, Heritage held a separate public event meant to highlight skepticism of Perry’s grid plan, complete with a critic from the free-market Institute for Energy Research.
"The actual subsidy structure of the proposed rule is simply unacceptable,” Kenny Stein, a policy director at the institute, said at the event. “Ultimately, the answer to government distortions can’t be to introduce new distortions that just favor different companies."