The Nickel Report

On April 14, 2017, the Department of Energy (DOE) quietly issued an emergency order under Federal Power Act (FPA) § 202(c) to keep open a power plant slated for shutdown under the Environmental Protection Agency’s (EPA) Mercury and Air Toxics Standards (MATS). While DOE has issued FPA § 202(c) emergency orders in the past, this marks the first time that DOE has used such authority to address electric reliability concerns arising from MATS implementation. In doing so, DOE effectively inaugurated the so-called Reliability Safety Valve that was heavily discussed during MATS’ consideration nearly six years ago.

In the run-up to EPA’s 2011 release of MATS, numerous commenters from industry as well as state and local government raised concerns that the regulation would force substantial coal-fired power plant retirements, undermining reliability of the electric grid. The issue grew to such concern that the Federal Energy Regulatory Commission (FERC) held a technical conference in November 2011 examining reliability issues related to EPA regulations. Even EPA was eventually forced to acknowledged in the MATS preamble “that there could be localized reliability issues in some areas” due to the regulation.

Stakeholders and DOE cited FPA § 202(c) as a potential source of authority for a “Reliability Safety Valve” to counteract reliability problems that could arise from MATS power plant closures. However, as noted in testimony to the 2011 FERC Technical Conference by the owner of two power plants that were ordered under FPA § 202(c) to operate despite federal environmental requirements, at that time “neither DOE nor any of the relevant environmental authorities [had] taken the position that authority under Section 202(c) of the FPA trumps environmental law.” [Disclosure: Hunton & Williams LLP represented clients in obtaining one of those FPA § 202(c) orders, requiring the Potomac River Generating Station to operate.] Citing difficulties from its experience, the owner called for a “solid legal basis to prevent the possibility of private citizen lawsuits” associated with an FPA § 202(c) emergency order.

Four years later, Congress passed such protections in § 61002 of the Fixing America’s Surface Transportation Act of 2015 (FAST Act). This language, originally introduced by Rep. Pete Olson (R-TX), protects parties ordered to act under an FPA § 202(c) emergency order from “any requirement, civil or criminal liability, or a citizen suit” resulting from noncompliance with a federal, state or local environmental law or regulation.

DOE’s April 14 order is the first application of FPA § 202(c) since the FAST Act, and constitutes use of the section as a “Reliability Safety Valve.” It authorizes the Grand River Dam Authority (GRDA), a state-owned utility in Oklahoma, to operate its Unit No. 1 at the Grand River Energy Center (GREC) despite an impending deadline under MATS either to install controls or cease operations. The order notes that GRDA had anticipated replacing Unit 1 with power from MATS-compliant GREC Units No. 2 and 3. However, Unit 2 was put out of commission by a lighting strike and construction on Unit 3 was delayed by flooding in Louisiana. The April 14 order authorizes GRDA to operate Unit 1 as needed to provide dynamic reactive power support in the GRDA service area until replacement generation capacity at GREC becomes available.

It is important to note that FPA § 202(c) provides DOE significantly broader authority than the Department applied in this order.  The provision may be used to address “a sudden increase in the demand for electric energy, or a shortage of electric energy or of facilities for the generation or transmission of electric energy, or of fuel or water for generating facilities, or other causes” of an emergency. Such emergencies may be localized or broad-based.

DOE’s April 14 order not only addresses local emergency needs for reactive power support, but signals the importance that DOE places on maintaining grid attributes that are necessary to maintaining secure electric service.