The Edison Electric Institute, which represents investor-owned utilities, has been one of the few groups outside the coal mining and nuclear industries to support Rick Perry’s controversial proposal to pay coal and nuclear power plants for their “reliability benefits” of having fuel on-site.

Perry’s proposal has drawn ridicule from most corners of the energy world, from environmentalists who say it will provide bailouts to uneconomic coal plants, to consumer groups who say it will raise electric bills, to markets advocates who say it will undermine the competitive aspects of the wholesale electric system.

EEI, however, has Perry’s back. The trade group released a statement that was supportive of the rulemaking (unlike its peer trade associations representing municipal utilities and rural cooperatives, in a rare split.) More significantly, EEI had set the table for the request, joining the Nuclear Energy Institute and U.S. Chamber of Commerce to commission a report which laid the groundwork for the proposal; Perry’s proposal cites that report as a basis for the payments to coal and nuclear plants.

EEI Executive Vice President Philip Moeller, a former FERC Commissioner, said when EEI released the report that “wholesale electricity markets should address price formation and the valuation of essential reliability services for customers.” [emphasis added]

But Moeller has amnesia when it comes to this point about the “valuation” of different resources. When it came to rooftop solar energy, Moeller said the exact opposite 10 months ago.

Moeller testified against “non-cost based benefits” for rooftop solar

Phil Moeller of EEI testifies against the inclusion of rooftop solar benefits in rates at the Arizona Corporation Commission in December, 2016.

Phil Moeller of EEI testifies against the inclusion of rooftop solar benefits in rates at the Arizona Corporation Commission in December, 2016.

At issue is a larger philosophical question of whether regulators who determine electric rates should consider the “benefits” of a fuel type or technology. Regulators traditionally determine the cost of producing, transmitting and distributing electricity, and then divvy those costs out among customers. Battles have raged in several states between some solar advocates, who say utility regulators should also consider the benefits of distributed solar energy in addition to the costs, and utilities, who have argued against inclusion of those benefits.

Last December, Moeller testified on EEI’s behalf to the Arizona Corporation Commission on that very point:

“On the issue of externalities, we strongly agree with the conclusions of the RUC regarding the exclusion of unquantifiable environmental, societal and economic development benefits … Such speculative, non-cost based societal and economic benefits have no place in ratemaking.”

Video of Moeller in Arizona is here, at 02:23.

When Moeller talks about rooftop solar, any benefits are “unquantifiable and speculative.” When he talks about coal and nuclear, the benefits are “essential.”

Moeller’s “reliability services” argument for coal is specious

Aside from Moeller’s hypocrisy in saying that benefits of rooftop solar should not be considered in ratemaking, while benefits of coal and nuclear should, his argument that there are reliability benefits to big piles of coal also has little bearing in fact.

Perry’s proposal would call on FERC to issue new rates that would pay power plants with 90 days of “on-site” fuel – thinly veiled code for coal and nuclear plants. But it turns out that big piles of coal actually don’t help at all with reliability.

An analysis from the Rhodium Group this week used DOE’s own data to analyze the causes of 3.4 billion customer-hours of major electricity disruptions from 2012 to 2016, according to Greentech Media.

Only .0007 percent of those disruptions were due to fuel supply problems. And almost all of that .0007 percent were due to problems at – you guessed it – a coal plant in northern Minnesota.

The analysis found that the biggest causes of blackouts were severe weather and the havoc that it wreaks on the transmission and distribution system. Keeping coal plants online longer than otherwise necessary do nothing to solve those problems, and burning more coal, which leads to climate change and more extreme weather, would only exacerbate them.

FERC is expected to rule on Perry’s proposal in early December.

Posted by David Pomerantz

David Pomerantz is the Executive Director of the Energy and Policy Institute.

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