Business News

Trump Faces Test on Coal With FirstEnergy Appeal

The Trump administration’s commitment to coal is under its stiffest test yet after an Ohio energy company made a plea to favor that power source over its many rivals, including oil and natural gas, in a clash that could end with higher costs for consumers.

FirstEnergy
Corp.’s

fleet of coal- and nuclear-power plants filed for bankruptcy over the weekend, just days after the company asked the federal government for an emergency declaration that would keep many of them open. That forces President

Donald Trump’s

Energy Department into a decision on whether to intervene under a lightly used, 83-year-old law and compel the nation’s largest electric-grid operator to dispatch power from FirstEnergy’s coal and nuclear plants effectively before any other.

Mr. Trump has been one of the coal industry’s biggest boosters, campaigning on reviving a downtrodden industry, and his administration has voiced support for nuclear, too. Both of those fuels are facing tough competition as alternatives—including natural gas, and wind and solar power—have become cheap and more plentiful.

Should the Ohio company’s plea succeed, it could protect thousands of jobs at nuclear and coal plants, as well as their suppliers. But it would hurt rival energy businesses and could raise electricity prices for companies and consumers across the Midwest and mid-Atlantic states. That poses significant risk to Mr. Trump by antagonizing supporters among electricity users and companies in the oil-and-gas industry that have become primary suppliers to power plants.

A broad alliance formed last year opposes a bailout for nuclear and coal plants. The group includes traditional Republican allies in oil, gas and manufacturing that have joined in an unusual pairing with wind and solar producers and environmentalists.

This alliance is a rising power in the energy industry. Steadily improving technology and the shale-drilling boom have made natural gas, wind and solar the growing sources of electricity.

Natural gas recently became the most common source of power, accounting for 32% of the nation’s electricity generation in 2017, up from 17% around the turn of the century. Coal’s share fell over the same period to 30% from 50%.

The result is that coal- and nuclear-power plant operators are struggling, creating political pressure for federal and state leaders to consider bailouts or tax incentives to slow that shift and to stop even more plants from closing.

“It’s urgent,” said Energy Secretary

Rick Perry

in an interview last year. “It is one of the highest priorities and one of the greatest concerns, to make sure we don’t lose these plants.”

FirstEnergy’s gambit has implications well beyond Ohio, and might affect dozens of nuclear and coal-burning plants owned by other companies across about a dozen states. There has been no outpouring of support from rival power companies in the region that would be affected, and some outright oppose its request to the administration, advocating that governments avoid giving bailouts and disrupt the competitive markets that have led to cheaper, cleaner electricity. Government approval would set an important precedent.

FirstEnergy delivered its appeal to the Energy Department the morning after it announced plans Wednesday to close three struggling nuclear-power plants in Ohio and Pennsylvania by 2021 if it can’t sell them.

One of FirstEnergy’s big coal suppliers is Murray Energy Corp., which warned in personal letters to the White House last year that bankruptcy at an arm of FirstEnergy could also push its mines to their own financial brink. On Sunday Murray Energy chastised the federal government for failing to intervene sooner.

Murray Energy and its controlling owner,

Robert Murray,

have been generous donors to Mr. Trump’s political groups, federal records show, and Mr. Murray’s letters last year made the same request for emergency action that FirstEnergy did in its formal request Thursday.

Mr. Trump campaigned hard on promises to revive the coal industry in states like Ohio, Pennsylvania and West Virginia. He derided concerns about pollution and climate change caused by fossil fuels, promising to ease environmental regulations and help coal mines reopen.

FirstEnergy and Murray have warned financial troubles could lead to a national-security risk by leaving the grid too reliant on natural gas. While it may be cheap now, it is historically one of the most volatile commodities and, with fewer competitors, prices might be vulnerable to surges should supplies be disrupted, raising costs that would be passed on to energy consumers, whether households or factories, they say.

“Immediate action is needed,” wrote FirstEnergy lawyers in their appeal, to ensure that nuclear and coal receives “compensation commensurate with the value it provides to the Nation.” Research from Mr. Perry’s Energy Department has also stressed the need for nuclear or coal to assure a reliable and diverse mix of fuels for the power grid.

Those claims are disputed. Several states have surplus capacity, and the grid’s mix of fuels is one of its most diverse ever. Competitive markets have helped lower wholesale prices nationwide, and developers are building new capacity anyway, deploying newer, more efficient technology.

“For FirstEnergy to cry wolf on the issue of grid reliability is irresponsible and is the company’s latest attempt to force consumers to pay for a bailout,” said

Todd Snitchler

 of the American Petroleum Institute, which represents the oil-and-gas industry and opposes the FirstEnergy request of the government.

The cost of emergency federal intervention would indeed fall to consumers. FirstEnergy’s request would force the market’s biggest grid operator, PJM Interconnection LLC, which helps transmit power to homes and businesses from Newark, N.J., to Chicago, to take supply from nuclear and coal-fired plants. It would have to set prices that guarantee profits for those plants, with retail and industrial electricity consumers ultimately picking up the tab.

Mr. Perry had made a similar proposal in September, ordering a review at the Federal Energy Regulatory Commission, which oversees interstate, wholesale power markets. FERC rejected the plan in a unanimous ruling, concluding the Trump administration hadn’t proved an imminent threat to the grid’s reliability.

FirstEnergy’s move sidesteps FERC with an appeal directly to Mr. Perry.

Critics questioned the legitimacy of FirstEnergy’s claims and their timing. The plant closings it announced Wednesday are at least two years away, and it said it would reconsider if it gets government help. If it does, rate increases could be huge, said 

John Hughes,

chief executive of the Electricity Consumers Resource Council.

“It’s silly because there’s such a surplus of power out there,” Mr. Hughes said. “There’s no emergency, that’s clear.”

Write to Timothy Puko at tim.puko@wsj.com

Appeared in the April 2, 2018, print edition as ‘Trump’s Loyalty To Coal Is Tested.’

Source link

To Top