Federal energy proposal will hike consumer costs in freezing winter

As originally published in The Hill on January 6, 2018.


By Charles Hernick

Winter is here in full force, bringing subfreezing temperatures and costly heating bills to a large portion of the U.S.  Unfortunately, the U.S. Department of Energy (DOE) filed a proposal with the Federal Energy Regulatory Commission (FERC) in September that could raise energy prices for 65 million Americans. When it comes to being more responsible with our spending in 2018, higher energy costs are not what we should have in mind—especially in an era when clean energy is pushing down energy costs nationwide.

DOE’s proposal would subsidize coal and nuclear power plants that can stockpile 90 days’ worth of energy onsite. It is being proposed under the guise of improving the reliability of the electricity grid. Beneath its surface, however, the proposal is clearly about the government subsidizing struggling energy companies with taxpayers left to pick up the tab. The consensus among energy experts is that it won’t improve reliability; rather, the proposal would stifle innovation and discourage new technology from being deployed. Recognizing the widespread public opposition to the rule and the weight of the decision at-hand, newly appointed FERC Chairman Kevin McIntyre requested a 30-day extension for its decision-making process as one of his first acts on the job. The Commission is expected to make a final ruling on January 10. FERC should reject this proposal for two reasons. 

First, the proposed Grid Resiliency Pricing Rule is still a solution in search of a problem. In 2017 the U.S. Department of Energy (DOE) published a report that assesses the resiliency and reliability of the grid. While the report did offer some ideas for improving resiliency, DOE’s own study doesn’t justify an intervention that would yield questionable results, while carrying billions of dollars in costs for ratepayers. 

Second, the proposal’s stated goal – increasing reliability and resiliency in the grid – isn’t supported by a good way to measure success. The proposal suggests that a power plant’s ability to stockpile 90 days’ worth of energy is a sign of reliability.  But we know that just because energy is stored at or near a power plant, it doesn’t mean that consumers will necessarily benefit in emergencies. Think of the last big storm, the Polar Vortex of 2014, during which many coal plants were forced offline because they – and all the stockpiled fuel within the plants – froze. Stockpiling does not equal reliability.

Consumers in the Mid-Atlantic region would see some of the largest increases in costs, with estimates from Energy Innovation and Climate Policy Initiative placing the increase at $7.3 billion per year. Paying more for energy makes no sense when the competitive market is driving energy prices down. From energy experts to consumer groups up and down the East Coast, there’s widespread agreement that this proposal will hurt the market and the families across America who rely on affordable electricity.

Outside of the proposal, we see the tangible ways in which the grid is becoming more reliable and resilient because of market forces and a shift towards clean energy. Older plants that have reached the end of their useful life or are no longer cost effective will retire, instead of fumbling along wasting money. In emergencies, diverse types of clean energy generation spread across each state and across the country means that plants can spring into action to meet demand. Indeed, a “free-market, all-of-the-above approach to energy” as CRES Forum said in comments to FERC, is the best approach to energy security.

We should embrace opportunities to have a thoughtful conversation about our national energy policy and the electric grid – but this proposal is not it. It is a solution in search of a problem that should be outright rejected on January 10. If the Department of Energy and FERC are serious about exploring ways to upgrade our national grid, they need to resolve to start over and embrace a process that engages all stakeholders – including consumers – from the beginning.  

Charles Hernick is the director of Policy and Advocacy at Citizens for Responsible Energy Solutions (CRES) Forum, a nonpartisan, nonprofit organization committed to educating the public and influencing the national conversation about clean energy.

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