API Urges Trump Not To Bail Out FirstEnergy

In a rare instance of agreement between environmentalists and the oil industry, the American Petroleum Institute last Friday sent a letter to the White House urging the President not to throw a lifeline to struggling FirstEnergy’s nuclear and coal businesses. The two subsidiaries of the utility filed for bankruptcy protection earlier this month.

Prior to that, however, the parent company had called on Energy Secretary Rick Perry to use emergency powers to force regional power grid operator PJM Interconnection to compensate FirstEnergy’s local power plant operating unit for the benefits its business provides the region through the negotiation of a new contract. Among these benefits, FirstEnergy listed reliability of power supply and the employment they provide.

The utility’s nuclear and coal business has been hit hard by the abundance of cheap gas unleashed by fracking, just like pretty much every other coal or nuclear power company in the country. The API, however, sees nothing wrong with that, just like environmentalists, although the reasons differ. For the API, it’s a question of “letting the market work.”

“The natural gas industry and the shale revolution” the letter reads “are poster children for ‘letting the markets work”. The energy abundance wrought by the ‘shale gas revolution’ is a prime example of competition at work. Regulators chose to unfetter the natural gas market and allow a truly competitive model to emerge.”

Secretary Perry last year proposed a subsidy plan for the industry, but regulators rejected it. The proposal suggested that coal and nuclear plant operators should get paid for providing base load electricity—that is, round-the-clock electricity generation.

The regulator said it will study the national grid’s resilience to supply interruptions, but many grid operators said they are already factoring in everything that has to do with their grid’s resilience to disruptions. The API also noted that the U.S. grid is already resilient enough, featuring a mix of primary energy sources—including coal and nuclear—but noted the important place of gas in this mix as a cleaner fossil fuel than coal that contributes to the decline in emissions.

By Irina Slav for Oilprice.com

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