A nuclear October surprise?

The Trump administration has been plotting for many months to seize power over the electrical generation sector by executive order, and despite widespread opposition and infighting that set the effort back this week, analysts say President Trump is personally invested in the idea, and that he and Energy Secretary Perry remain committed to ordering a bailout of failing coal and nuclear plants.

It wouldn’t exactly nationalize the industry or impose martial law. But the administration has invoked false national security claims and inappropriate “emergency” powers to claim the right to upend the market and force ratepayers and taxpayers to subsidize nuclear and coal plants against their will.  It would commandeer their money to prop up aging, unsafe, uncompetitive plants that should, and otherwise would, shut down.

Throughout the summer the administration signaled that soon, likely before the midterm election, Trump would issue a Section 202(c) emergency order imposing a two-year moratorium on nuclear and coal plant closures, ostensibly for the Department of Energy to study the ramifications of letting them close.{mosads}

Meanwhile, grid operators would be required to buy electricity from struggling coal and nuclear plants, creating the equivalent of tariffs guaranteeing large profits for nuclear and coal plants. Grid managers would be forced to buy power from them, even though it’s more expensive than other sources of electricity, including renewables and efficiency.

The Electricity Consumers Resource Council has argued against the plan. Ratepayers are a captive market, so utilities are supposed to shop around for cheaper electricity on their behalf. A Trump executive order would prevent that, on the specious theory letting uncompetitive nuclear plants close threatens electrical grid reliability and national security, so consumers should get a big rate hike to keep them open. 

While in effect over the next two years, such an order could preempt closure of uncompetitive nuclear plants, including those already scheduled to close. It might also delay or derail nuclear plant closures scheduled more than two years out, including New York’s Indian Point.

The Heritage Foundation opposes the Trump plan and points out there is no evidence that subsidizing aging nuclear plants helps grid reliability or national security. Keeping them open actually increases risks of radiological accidents and cyberattacks. But there’s plenty of evidence subsidies help nuclear plant owners.

Over the last year, owners ramped up spending on lobbying and pushed through billion-dollar state subsidies to guarantee large profits at public expense, first in New York ($7.6 billion) and Illinois ($2.4 billion), then in New Jersey ($3.6 billion) and Connecticut (estimated up to $3 billion).  They are now aiming at Pennsylvania and other states. They argue they deserve subsidies for fighting climate change, by supplying “clean energy” with “zero emissions.” 

In fact, these aging plants are dirty and dangerous. Propping them up worsens climate change by undermining growth of renewables and efficiency measures. Owners got their subsidies anyway, after threatening state politicians with the fallout from closing their plants early.

By my calculation, most of the windfall is going to the largest US nuclear operator, Exelon. New York and Illinois subsidies accounted for about 60 percent of its profit growth this year. New Jersey and other state subsidies will swell it further. A Trump executive order would transfer yet more wealth from ratepayers to Exelon and other nuclear owners.

Is all this even legal? We’re about to find out. There are a slew of lawsuits waiting to challenge Trump’s executive order from consumer advocates and non-nuclear/non-coal generators. Many grounds for challenging it exist.

Since there is no energy or national security emergency, invoking them in a Section 202(c) order misapplies the Federal Powers Act and the Defense Production Act.  Trump’s order would be unprecedented, anti-competitive, government interference in power markets. It’s a federal mandate forcing individuals and businesses to pay for uneconomical power they don’t want. Those in New York and other states already coughing up billions for state nuclear subsidies will be subject to double jeopardy from this new federal surcharge, even if they object to subsidizing nuclear power and try to opt out through renewables-only purchasing programs.

There’s a fundamental question of whether nuclear subsidies serve the public interest, or whether they violate due process and the public trust. 

In New York and other states, subsidies were rammed through with only perfunctory public input. Tens of thousands of New Yorkers filed complaints after they were passed. A lawsuit in New York State Supreme Court (Matter of Hudson River Sloop Clearwater v. NYS Public Service Commission, Albany County, 7242-16) is the first to challenge state subsidies on such fundamental, public interest grounds. 

The organization I lead is a plaintiff in that case, which is also the last remaining legal challenge to state nuclear subsidies still standing, since federal suits asking the more technical question of whether state subsidies interfere with federal regulation of wholesale electricity markets were struck down. The NYS Supreme Court case survived motions to dismiss, and will soon go into evidentiary hearings. That means the question of whether New York’s nuclear subsidies are unfair, illegal or improper will finally get adjudicated in court. 

The suit can’t reverse nuclear subsidies already established in Illinois and other states, but it could end them in New York and deter new states from adopting them.  

It may also provide a glimpse of how lawsuits against a Trump executive order could get traction. Nuclear subsidies via government fiat contradict the public will, severely distort markets, and misapply the law. Executive overreach extended so far is ripe for remedy in court.

Tim Judson is the Executive Director of the Nuclear Information and Resource Service (NIRS), one of the plaintiffs in the New York lawsuit.