See the full white paper here: Energy Emergencies vs. Manufactured Crises: The Limits of Federal Authority to Disrupt Power Markets by Ari Peskoe and Sharon Jacobs
We live in an age of governance by emergency. In February, President Trump declared a national emergency to build a wall on the southern border after lawmakers repeatedly denied his funding requests. Next, he declared a national economic emergency to prevent U.S. firms from doing business with the Chinese technology company Huawei. Most recently, he invoked a national emergency to sell arms to Saudi Arabia, the UAE, and Jordan without Congressional authorization.
These invocations are each significant. But they are also piecemeal, making them even more dangerous than a more comprehensive power grab. Each individual emergency declaration may appear justifiable, or at least insufficiently threatening to warrant dramatic response. Before long, however, we may find that the executive has come to rely on emergency invocation as a tool of governance in peacetime.
We fear that the electricity industry may be next in line for governance by emergency. Since early 2017, the Administration has sought to support certain unprofitable coal (and sometimes nuclear) power plants. The Administration’s justifications for bailing out decades-old power generators are a moving target, and have included reliability, a nebulous concept called “resilience,” and, most recently, national security.
Make no mistake: power system reliability is vitally important, and the electric system must be able to recover from both routine and extraordinary shocks. We do not deny that natural disasters and physical- or cyber-attacks are real threats. Our disagreement is with the Administration’s flirtation with statutory emergency authorities to remake the energy system.
In a jointly authored paper released today, we make two primary arguments. First, the electric power sector is not in crisis. Despite recent closures of coal-fired power plants, interstate power networks operate reliably, and the nation has more than enough generation capacity to meet demand. A mix of federally regulated market rules and reliability standards, including standards related to physical and cyber security, as well as industry protocols and state oversight, keeps the system in balance.
Second, we argue that statutory emergency authority in the energy space is highly circumscribed. We look at four statutes: the Federal Power Act, the Fixing America’s Surface Transportation Act, the National Energy Act of 1978, and the Defense Production Act. With respect to the first three statutes, emergency authorities may only be invoked in the face of an actual threat to the grid. These statutes permit a narrow range of actions tied to the particular emergency, and their authorities terminate upon the emergency’s end (or, in some cases, sooner). The Defense Production Act enables government subsidy of private sector goods and services, but only where deemed critical to national defense.
One thing is clear: these statutes are not roving licenses to advantage particular types of generation. Over the past two years, the Trump Administration has attempted to invent a crisis in order to funnel support to ailing coal-fired generators. Its rationales are unrelated to the public interest and unsupported by the government’s own research. Most recently, Secretary Perry has suggested that multiple statutory authorities might be combined to achieve these ends. But as we explain in the paper, addition of these statutory authorities does not create anything greater than the sum of their parts.
Lawmakers, regulators, and industry actors are confronting genuine questions about adapting the power system to modern challenges, from introducing greater levels of renewable generation to mitigating climate impacts. These complex challenges are properly dealt with in the context of existing reliability frameworks and established stakeholder processes. They are not the sort of questions that lend themselves to effective resolution by reflexive reaction to imagined emergencies.