Dive Brief:

The Federal Energy Regulatory Commission on Monday rejected a proposal from the Department of Energy to subsidize to coal and nuclear plants, instead turning to regional grid operators to assess how best to enhance the resilience of the power system.

The five-member FERC voted unanimously to reject the proposed rule from Secretary of Energy Rick Perry to provide cost recovery for plants with onsite fuel supplies, writing that neither the DOE proposal nor comments in the record showed that existing market rules are unjust and unreasonable.

The decision notably rejected calls from coal and nuclear plant operators to enact short-term support for struggling power plants. A wide array of power sector critics argued that moving many generators into cost recovery could upend wholesale power markets.

Dive Insight:

After months of hand-wringing for the power sector, Secretary Perry's coal and nuclear plan died Monday with a whimper, not a bang.

In a brief order on Monday, FERC rejected the DOE's Notice of Proposed Rulemaking (NOPR), which would have provided cost recovery for power plants that keep 90 days of fuel onsite. Instead, the Commission asked regional grid operators to review an extensive list of questions about improving power system resilience and report back within 60 days.

In its September letter announcing the NOPR, the DOE argued that the expected retirement of coal and nuclear plants in the nation's wholesale power markets could put the U.S. power supply at risk. FERC, however, said the agency and supporters of the rule failed to prove that to the commission.

"While some commenters allege grid resilience or reliability issues due to potential retirements of particular resources, we find that these assertions do not demonstrate the unjustness or unreasonableness of the existing RTO/ISO tariffs," FERC wrote in the order. "In addition, the extensive comments submitted by the RTOs/ISOs do not point to any past or planned generator retirements that may be a threat to grid resilience."

Additionally, DOE and its allies did not convince the commission that the NOPR's cost recovery proposal would be an improvement on existing market structures.

"[T]he Proposed Rule would allow all eligible resources to receive a cost-of-service rate regardless of need or cost to the system. The record, however, does not demonstrate that such an outcome would be just and reasonable," FERC wrote. "It also has not been shown that the remedy in the Proposed Rule would not be unduly discriminatory or preferential."

The 90-day fuel supply requirement, FERC noted, would "appear to permit only certain resources to be eligible for the rate, thereby excluding other resources that may have resilience attributes."

The order notably rejected calls from coal and nuclear interests for FERC to lend short-term support for plants at risk of retirement as regulators took on a long-term assessment of resilience. Those arguments became the centerpiece of a short-term plan to preserve the struggling generators floated by Commissioner Neil Chatterjee, then chairman of the commission, in November.

Chatterjee, however, concurred with the final decision, writing that while he would have preferred short-term subsidies, the order is a "positive step forward in addressing these critical issues."

The two Democrats at the agency, Commissioners LaFleur and Glick also issued concurrences, while Chairman Kevin McIntyre and Commissioner Robert Powelson (R) signed onto the decision without additional comment.

In a statement, Perry said he appreciated FERC's effort to address "market distortions" that put the power system at risk.

"As intended, my proposal initiated a national debate on the resiliency of our electric system," he said via email. "What is not debatable is that a diverse fuel supply, especially with onsite fuel capability, plays an essential role in providing Americans with reliable, resilient and affordable electricity, particularly in times of weather-related stress like we are seeing now."

This post has been updated with additional information from the decision and concurrences.