WASHINGTON (Reuters) - The head of the Federal Energy Regulatory Commission said on Tuesday that a directive from the U.S. energy secretary to prop up struggling nuclear and coal power plants has initiated an important conversation, but hinted the agency may not pass the plan without changes.
Late last month, U.S. Energy Secretary Rick Perry directed FERC, an independent agency, to pass a rule within 60 days that would allow certain coal and nuclear plants that store 90 days of fuel on site to recover full costs through regulated pricing, saying the plan increases reliability of the nation’s power grid.
“There’s real value in Secretary Perry initiating a conversation” on whether FERC adequately compensates certain power generators for their contributions to reliability, FERC Chairman Neil Chatterjee told an energy conference in Washington on Tuesday.
Last week, Chatterjee told reporters that he did not want to do anything to disrupt the existing power market structure, formed over nearly two decades and large investments.
His Republican counterpart on the commission, Robert Powelson, said this month that Perry was being thoughtful, but there were “many different approaches on how we can tackle this issue.” Powelson said he would leave his job if a new rule undoes organized and competitive power markets, according to a report by S&P Global Market Intelligence’s SNL.
Cheryl LaFleur, the Democrat on the commission, tweeted that Powelson’s comment was a “Great Message.”
Chatterjee stressed at Tuesday’s conference that FERC makes its own decisions. “Let me be clear, I remain committed to upholding the commission’s independence on this and the many other issues that may come before us,” Chatterjee said.
Later on Tuesday Senator Maria Cantwell, the top Democrat on the Senate energy committee and 10 of her Democratic colleagues, wrote a letter urging FERC to reject Perry’s proposed rule because it would result in higher power bills for consumers.
Power markets are changing with swift closures of both coal and nuclear plants but also a rapid rise in solar and wind power, said Chatterjee, a former adviser to Senate Majority Leader Mitch McConnell of Kentucky and one of two Republicans on FERC. The grid has maintained its reliability during these changes but only with the vigilance of regulators, he said.
Chatterjee said that a conversation about how to improve reliability can “ensure that we don’t find ourselves coming to regret not having asked hard questions ... amongst all the changes in the energy industry.”
Reporting by Timothy Gardner; Editing by Cynthia Osterman and Lisa Shumaker