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Perry pursuing policy on coal, nuclear power at odds with Texas record

As multiple Texas coal plants wind down operations, U.S. Energy Secretary Rick Perry is pushing a widely decried proposal to subsidize coal and nuclear plants in the name of grid resiliency.

U.S. Secretary of Energy Rick Perry testifies at a Committee on Energy and Commerce hearing in Washington, D.C., on Oct. 12, 2017.

An unusual coalition of fossil fuel interests, environmentalists and free-market adherents has criticized a proposal from U.S. Energy Secretary Rick Perry that would prop up coal and nuclear plants across the country. And some of those familiar with Texas politics are wondering if the Perry that served as governor for 14 years would have opposed the plan, too.

In a 2011 interview, then-Gov. Perry told blogger and radio host Erick Erickson, “Get rid of the tax loopholes, get rid of all of the subsidies. Let the energy industry get out there and find — the market will find the right energy for us to be using in this country.”

That statement was par the course for Perry, who as governor helped oversee the deregulation of Texas’ electrical sector and has championed competitive markets and opposed federal interference.

But to some, his views have shifted since he became President Donald Trump's Energy Secretary in March.

“The boot is on the other foot," Perry said at an event in April. "Are there issues that are so important to the national security of this country that the federal government can intervene on the regulatory side? I’ll suggest to you that there are.”

Perry raised eyebrows in September when he urged the Federal Energy Regulatory Commission to give certain fuel sources what amounts to a subsidy, but one borne by consumers rather than the government. And at a hearing on Capitol Hill last week, Perry called the notion that there’s a free market in electrical generation a “fallacy.”

“We subsidize a lot of different energy sources. We subsidize wind energy, we subsidize ethanol, we subsidize solar, we subsidize oil and gas,” Perry said at the hearing. "Government’s picking winners and losers every day,” he said later.

Lawmakers on the committee were quick to point to the disparity between Perry's current position and those during his tenure leading Texas.

"It seems like with your new effort you are gaming the system and not doing what we did when you were governor in Texas,” U.S. Rep. Gene Green, D-Houston, said at one point.

U.S. Rep. Pete Olson, R-Sugar Land, warned Perry that he was creating the impression that "you prefer government control over the free markets."

“We both know that’s a pile of Bevo longhorn poo-poo,” Olson said.

Threat of energy outages

Perry's proposal says generators that can store 90 days’ worth of fuel onsite — like coal and nuclear plants — should be shored up because they can keep the electric grid running in the event of a disturbance.

Many of these generators face premature retirement, Perry wrote last month. Referencing a 2014 "polar vortex" and the hurricanes that have battered Texas and other coastal areas, he said, “It is time for [FERC] to issue rules to protect the American people from the threat of energy outages.”

If approved, critics say the plan would increase residents’ electricity bills, penalize other sources of energy and signify a break from FERC’s free-market tendencies. Perry has asked the independent commission to make a decision on his recommendation in 60 days — a timeline some say is too fast.

But opponents have taken issue with more than the proposal’s pace. A broad coalition has criticized the plan as an ineffective solution put on too hasty a path. Some criticize it as pollution-causing and backward-looking; others say it amounts to a bailout and argue against government putting its thumb on the scale.

Industrial Energy Consumers of America, a group that represents Koch Industries and is supportive of nuclear and coal power, penned a letter saying the proposal would “distort, if not destroy, competitive wholesale electricity markets.”

Pat Wood III, a former chairman of Texas’ Public Utility Commission, expressed his antipathy in more colorful language, likening the plan to a “lovely little Christmas turd” while at an industry conference, according to news reports.

Perry “clearly is acting based on what his boss, Trump, would like him to do,” said Lenae Shirley, a senior director at the Environmental Defense Fund. “When institutes that represent the Koch brothers are aligning with environmentalists on this, that sends a pretty strong message that this is not the right move."

On the campaign trail, Trump promised to revive the coal industry, and his administration has already dismantled some policies favored by renewable energy advocates.

Even companies that support reforming wholesale electricity markets disagree with the specifics of Perry’s proposal.

“DOE is saying we need to have fuel security in the event of some catastrophic failure of the transportation or natural gas systems,” said Abraham Silverman, vice president and deputy general counsel at NRG Energy, which owns the retail electricity business of Reliant Energy in Houston. “That's not crazy.”

“That said,” he added, “we are not proponents of bailouts. We're not proponents of subsidies to targeted generators. We think the DOE was on the right path in highlighting the problems, but the specific proposal that they put forward was, I think, problematic.”

"Good for American energy"

At last week's hearing, Perry said he’s committed to an “all-of-the-above” energy strategy — and pointed to his “real track record” as governor. “But the wind doesn't always blow,” he added. “The sun doesn't always shine. The gas pipelines, they can't guarantee every day that that supply is going to be there."

He suggested the Obama administration had been biased toward renewables and, in April, he commissioned a study to see if regulations, mandates or other tax policies are “responsible for forcing the premature retirement of baseload power plants” such as coal and nuclear generators.

That report, which had been highly anticipated by both members of the energy industry and environmentalists, noted 531 “coal generating units” closed across the country between 2002 and 2016 and laid most of the blame for those closures on the “advantaged economics of natural gas-fired generation” — with regulations and rising output from wind and solar energy as lesser factors. The study's authors did not find that such closures had made the grid unreliable.

That trend has been largely borne out in Texas, where Perry, as governor, helped oversee the deregulation of the state’s electricity market. Under Perry, natural gas production surged thanks to technological advances like hydraulic fracturing, and Texas became the nation’s leader in wind energy generation. Data from the state’s largest grid operator shows wind capacity grew from 116 megawatts in 2000 to more than 11,000 megawatts by 2014.

“If we go back in time, I'm sure we could find a dozen quotes from Gov. Perry very excited about these kinds of developments,” said Chrissy Mann, a senior representative of the Sierra Club’s Beyond Coal campaign.

Brandy Marty Marquez, one of the state’s Public Utility commissioners who previously served in the governor's office as Perry’s chief of staff, said Perry “probably was among the first people to coin the phrase ‘all-of-the-above approach’ because Texas is one of the early adopters of renewable energy, specifically wind.”

While Perry long touted free-market principles as governor, he also championed spending millions in tax subsidies for firms relocating or expanding in Texas, programs critics derided as “corporate welfare.” And as governor, he did push for the permitting of new coal plants while other states were scaling back amid pollution concerns.

But those facilities, or Perry's lobbying for them, weren’t highlighted in a December 2016 op-ed from a former state regulator about why Perry becoming Trump's Energy Secretary would be “good for American energy.”

Barry Smitherman, the former chairman of Texas’ Public Utility Commission and Railroad Commision, cited the building of new transmission lines for wind energy, the encouragement of more competition in the electric market and the “shale revolution” as “three particular areas where Perry’s leadership led to significant benefits for working Texans, energy consumers and the broader energy industry.”

Coal plants closing

Marquez said Perry's proposal is a responsible and reasonable way to approach issues with the grid — and that he's consistently advocated for a diversified energy portfolio. Anybody surprised by his plan "hasn't been paying attention," she said. "He sent it over to FERC so that there can be a transparent dialogue, an open dialogue about it," she said.

But even if FERC adopts Perry's plan as is, it would largely not impact nuclear or coal-powered plants in Texas.

The Electric Reliability Council of Texas, the state’s largest grid operator, is not under the purview of FERC. “Only action by the Texas legislature or the [Public Utility Commission] would affect our rate structure,” said Robbie Searcy, an ERCOT spokesperson. Diverse energy sources, she added, have helped ERCOT maintain a reliable system and competitive market.

According to ERCOT data, coal made up 22 percent of the state’s generation capacity last year. But the coming closure of several coal-powered plants in the state has set the stage for wind to overtake coal in Texas' overall energy mix in 2018, according to Joshua Rhodes, a research fellow at the University of Texas at Austin’s Energy Institute.

Vistra Energy’s subsidiary, Luminant, announced earlier this month that three of its Texas coal plants will shutter next year, if ERCOT gives the okay. In environmental groups’ crosshairs for years, the Monticello, Big Brown and Sandow plants have earned the dubious distinction of being among the “dirtiest” in the country. But the plants succumbed to financial, not activists’, pressure, according to company officials.

“The long-term economic viability of these plants has been in question for some time,” Curt Morgan, president and CEO of Vistra, said in a statement. Because a few of the retiring plants were built in the 1970s, Rhodes said they probably needed some capital investment just to upgrade and maintain the facilities.

If ERCOT determines the plants aren’t needed to keep the state's energy grid reliable, their retirements could prompt the elimination of more than 800 jobs.

“Coal's powered America for a long time,” Mann, the environmental advocate said; but the closures align with Perry’s proposal. Natural market forces — and for some, an inclination toward renewable sources — means “coal has to get phased out,” Mann said. “Perry's report recognizes that and is looking for a way to artificially prop up a dying industry rather than finding ways to help transition communities that have relied on coal.”

Bill Peacock, vice president of research at the conservative-leaning Texas Public Policy Foundation, said a better solution is to rid the market of subsidies, rather than adding more. “We support markets as a way to decide which fuel is best to meet the energy needs of America,” he said. “To that extent, we don't believe in subsidies for wind or solar or coal or nuclear or natural gas. It's across the board. We're not trying to pick winners and losers and we don't think anybody else ought to either.”

Disclosure: The Environmental Defense Fund, NRG Energy, Vistra Energy and the Texas Public Policy Foundation have been financial supporters of The Texas Tribune. A complete list of Tribune donors and sponsors can be viewed here.

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