Dive Brief:

• A trade group representing owners of independent power plants wrote to President Donald Trump last week urging him to reject a proposal from generator FirstEnergy to provide cost recovery to coal and nuclear plants in the PJM market. 
• The Electric Power Supply Association (EPSA) wrote that no reliability crisis exists to justify subsidies for uneconomic generators and enacting them would raise power prices for consumers. FirstEnergy and its supporters claim the grid would be at risk without cost supports for the plants. 
• EPSA last week also spoke out against a bill passed in New Jersey that would provide subsidies for nuclear plants in the state based on their carbon-free generation. The trade group pushed Gov. Phil Murphy (D) to veto the bill. 

Dive Insight:

In both the New Jersey and FirstEnergy cases, EPSA's argument is the same: providing cost supports for uneconomic generators will raise prices for consumers with little benefit to the grid. 

In its letter to Trump on FirstEnergy's request, the trade group argued there "is simply no emergency" in wholesale power markets to justify the payments and warned of "widespread negative ramifications" if it is approved.

The argument echoes those of regional grid operators and a number of former energy regulators.

Last year, when the DOE proposed a similar cost recovery plan at the Federal Energy Regulatory Commission, PJM and other grid operators told regulators that no short-term reliability risks existed to justify the payments. And former FERC commissioners argued that moving so many plants into cost recovery would unravel wholesale power markets. 

FERC sided with those arguments, rejecting the DOE's request unanimously in January.

FirstEnergy, whose generation subsidiary is now in bankruptcy, responded by asking DOE to use its emergency powers under the Federal Power Act to circumvent FERC's decision and save coal and nuclear plants. 

It remains unclear how the DOE will respond. The Trump administration reportedly turned down a request from the coal lobby for emergency action last year, and senior officials have said the agency "would never use" such an order to stave off economic issues for plant owners. 

Secretary of Energy Rick Perry, however, has made clear he views the FirstEnergy proposal as a national security issue, not an economic one. Last week, he told House lawmakers that some form of emergency action to save coal and nuclear plants is "exactly what has to happen," but did not commit to a particular strategy. 

DOE last week also opened up an unofficial comment period on its interpretation of emergency powers under the Federal Power Act. Perry told lawmakers responses would be posted publicly online, but so far none have appeared.

As FirstEnergy pushes for cost recovery on the federal level, other nuclear plant owners are making more progress in the states. Last week, New Jersey lawmakers passed a bill to provide zero-emission credit (ZEC) subsidies to the state's three nuclear plants, similar to programs already in place in New York and Illinois. 

In those cases, nuclear owners have made their case on environmental grounds, rather than reliability claims. Keeping existing nuclear plants open is necessary for the states to meet their climate change goals, utilities like New Jersey's PSE&G argue, while closing them would likely mean their generation would be replaced by gas plants. 

EPSA did not address those climate arguments in its statement opposing the New Jersey bill, instead focusing on costs to consumers and impacts on the wholesale power market. The trade group pushed FERC, which is already reviewing two PJM proposals, to mitigate the impact of market subsidies, to act against the policy.

“Should it become law, a bailout of New Jersey’s profitable nuclear power plants would undermine competition in the broader PJM markets and thus unfairly harm competitors who depend on those markets," EPSA wrote. "A New Jersey nuclear bailout makes it more urgent than ever for the Federal Energy Regulatory Commission to swiftly implement effective countermeasures to protect the integrity of PJM’s energy and capacity markets."