President Donald Trump directed Energy Secretary Rick Perry late last week to “prepare immediate steps to stop the loss” of “fuel-secure power facilities” arguing that a decline in coal and nuclear generation is jeopardizing the nation’s security. The federal government has not yet disclosed what those steps might be or which generation facilities are at issue. Nonetheless, press reports from CNN and Bloomberg, among others, suggest that the US Department of Energy (DOE) is considering a directive requiring Independent System Operators and Regional Transmission Operators (ISOs/RTOs) to purchase energy from designated “fuel-secure” plants for a period of up to, and possibly more than, 24 months to prevent any near-term decommissioning.
Reports suggest that although administration officials are working to develop and finalize formal recommendations, a draft DOE memorandum circulating in the press (which is not final and the provenance of which remains uncertain) might provide insight into a potential approach.
According to the draft memorandum, baseload generation (particularly nuclear generation) is important to national security as they enhance the resiliency of the electric system in response to extreme weather events, cyberattacks, and other emergencies. Accordingly, DOE may invoke its authority under Section 202 of the Federal Power Act and the Defense Production Act to (1) require ISOs/RTOs to purchase electricity from at-risk plants for a period of up to, and possibly longer than, 24 months; and (2) direct the establishment of a “Strategic Electric Generation Reserve.” During that period, DOE intends to study vulnerabilities in the American energy delivery system, an analysis that could form the basis of additional long-term action by the federal government.
The extent to which the White House supports the potential approach described in the draft memorandum is unclear. It is also unclear whether (or when) DOE or the other authors of the draft memorandum will finalize it and, if finalized, when and how it will be implemented. Action by both DOE and White House may be required to adopt the draft memorandum’s proposals. The role of the Federal Energy Regulatory Commission, if any, is also unclear.