FERC Regains Full Five Members as Regulatory Fights Loom

The post FERC Regains Full Five Members as Regulatory Fights Loom appeared first on POWER Magazine.

The U.S. Senate on Nov. 30 confirmed Federal Energy Regulatory Commission (FERC) nominees Allison Clements and Mark Christie, filling out all five seats at the helm of the federal energy regulator with a bipartisan panel for the first time in nearly two years.

Clements, a Democrat, replaces former Commissioner Cheryl LaFleur for a term that ends on June 30, 2024. Christie, a Republican, replaces former Commissioner Bernie McNamee for a term that ends on June 30, 2025.

Clements founded clean energy and advanced grid strategy and policy consulting firm Goodgrid LLC in January 2017, after a decade-long stint as corporate counsel for the Natural Resources Defense Council (NRDC). Before the NRDC, she spent several years in private law practice with Troutman Sanders and Chadbourne & Parke LLP, providing federal regulatory advice to utilities and independent power producers, as well as negotiating power purchase, engineering, procurement, and construction, interconnection agreements, and lending documents involved in financing renewable energy projects.

During her confirmation hearing in September, Clements told senators that her experiences will shape her approach at FERC. First, representing large utilities at a law firm opened my eyes to the magnitude of administrative compliance that regulated entities face across the maze that is the U.S. energy regulatory landscape," she said. The role also provided my first encounter with a lesson affirmed repeatedly throughout my career: Precision and integrity are critical for success in the practice of law."

Clements also said her experience as an attorney representing borrowers and lenders to infrastructure project financing allowed her to realize the powerful impact that one policy change can have on a deal worth hundreds of millions of dollars, and the related high bar for regulatory certainty that capital markets expects as a precursor to investment." Roles she has held representing renewable energy interests-at committees for the Bipartisan Policy Center and the National Academies of Sciences, for example-deepened her awareness of the complexities of grid policy and its effects on grid resilience, she said.

This role also taught me to appreciate the boundaries of FERC's jurisdiction as a technology-neutral economic and reliability regulator. Finally, this work made clear that FERC regulation does not exist in a vacuum," she added. While the issues are often technical and arcane, we must not forget that ultimately, the Commission exists to serve the public interest."

Christie Has Legal Background

Christie, a former Marine, began his career as an attorney in private practice, serving as legal counsel and director of policy for the governor of Virginia. He then served briefly on the Virginia Board of Education before he was elected to the Virginia State Corporation Commission (VSCC) by the Virginia General Assembly in 2004, where he has served since. During his tenure as chairman of the three-member state agency, which primarily oversees many industries, including financial and public utility firms, Christie frequently interacted with the National Association of Regulatory Utility Commissioners (NARUC) and the Organization of PJM States (OPSI).

During his confirmation hearing in September, Christie indicated that his perspective is rooted in state concerns. However, he noted that while states have many commonalities," each state is unique and has different needs and approaches." He also added that his lengthy experience as a state regulator for the independent nonpartisan VSCC undergirds an emphasis on how important independence is to making good decisions in the public interest."

FERC, Christie said, has three essential roles. First, a statutory role, which is to follow the law in each and every case." Where the law does give discretion, my belief is that an agency should be deeply sensitive to the impacts of its decisions on consumers," he said. As a state regulator, I am intensely aware that while FERC does not regulate retail rates what FERC does affects retail rates. And with millions of Americans struggling to pay their bills, FERC should always be sensitive to costs to consumers as it fulfills its duty to ensure the reliable power supply that is essential to modern life and jobs for Americans."

FERC's second important role is to inform and advise legislators and policy makers about policy choices, and its third role is to inform the public about the true costs and benefits of public policies. The public has a right to know the realistic costs that it will be forced to pay-and the realistic benefits it can expect-of policies with that agency's area of expertise," he said.

Drama at FERC

The Senate's confirmation of Clements and Christie adds a new chapter to dramatic happenings at FERC across 2020. It is also significant for the power industry, which is already in the midst of a dramatic transformation driven primarily by market forces, technology innovation, and customer and investor preferences, and this year, also grappled with the pandemic and its economic implications. President-elect Joe Biden has outlined a Clean Energy Revolution," a detailed, wide-ranging plan focused on climate change and the environment that promises to further transform the sector.

Over the past year, FERC remained in flux, partly owing to an increase in partisanship and politicization, struggling to reach equilibrium on a number of significant power-related issues. FERC enforcement activity over its three divisions-Investigations, Audits and Accounting, and Analytics and Surveillance-also notably dropped sharply in FY2020.

The Trump administration on Nov. 5 abruptly replaced the commission's chairman, Republican Neil Chatterjee, with another Republican, James Danly. Industry speculated that the replacement suggested disapproval of recent FERC actions, including to modernize regulations that govern Public Utility Regulatory Policies Act of 1978 (PURPA), technical conferences on distributed energy, hybrid resources, and carbon pricing, and pivotal rules to address the effects of state clean energy rules on organized wholesale electricity markets.

Biden once inaugurated will have the ability to name a new FERC chair, likely Richard Glick, who served as the lone Democratic commissioner since August 2019 (when fellow Democrat LaFleur departed the commission), until Clements was confirmed. The confirmation of Clements and Christie, pivotally, also restores the full five-member commission for the first time since the death of Commissioner Kevin McIntyre in January 2019. FERC last lost its quorum in 2017 when the commission was operating with just two commissioners.

While both Clements and Christie largely received bipartisan support in the voice vote at the Senate that confirmed them on Monday, FERC will still have a 3-2 Republican majority until at least next June, when an additional vacancy opens. As some industry observers noted Monday, while the partisan breakdown could have big implications for some issues before the commission, a Biden-appointed chair could influence the commission's agenda.

Key Issues to Watch

Key areas to watch are electricity transmission and natural gas pipelines," lawyers from law firm WilmerHale said on Tuesday. The extent of FERC's authority to consider greenhouse gas emissions in its review of natural gas pipelines has been the subject of litigation, but there is room for FERC to place greater emphasis on those emissions. A more stringent environmental review for pipeline projects by FERC could affect pipeline project approvals over the next few years."

FERC's prioritization of a more coordinated electricity transmission policy could also boost the deployment of clean energy. An increase in interregional transmission could accelerate the growth of the kind of large-scale solar and wind projects that will be needed to make progress toward the goal of carbon free electricity generation by 2035," they said.

Clements and Christie's addition to the commission also gives FERC more perspective on how out of market" interventions affect wholesale electricity markets. In a much-watched development, for example, FERC in a December 2019 order directed PJM to expand its minimum offer price rule (MOPR)-and it largely accepted PJM's March 2020 and June 2020 MOPR-related compliance filings this October. However, FERC's orders have been challenged in court, with nearly 29 petitions for review recently consolidated in the Seventh Circuit.

Some states are, meanwhile, mulling opting out of the PJM capacity market using the Fixed Resource Requirement (FRR) option as a preferred path to decarbonization. FERC in mid-October, notably, encouraged regional market operators to explore and consider the benefits" of establishing wholesale market rules that incorporate state-determined carbon pricing.

Other important issues that the commission may soon act on concern potential risks to the bulk power system posed by the use of equipment and services produced or provided by entities deemed foreign adversaries. FERC issued a notice of inquiry (NOI) (Docket No. RM20-19-000) to gauge industry input on six key supply chain security challenges to better understand how the federal entity should move forward to address any identified risks. Industry comments on that issue were due on Nov. 24.

FERC Confirmations Received Positively

Power stakeholders on Tuesday responded to the Senate confirmation of Clements and Christie with enthusiasm, albeit for different reasons.

The confirmation, which brings the FERC to a full quorum, is excellent news," said National Association of Regulatory Utility Commissioner President Paul Kjellander (Idaho). A full complement of commissioners is essential to adjudicate the myriad issues that are before the agency. We look forward to continuing to engage FERC members on matters that are of importance to state regulators," he said.

The American Council on Renewable Energy (ACORE), a pan-renewable organization, also celebrated the confirmations. For the first time in years, FERC will have a full, bipartisan complement of five commissioners," said ACORE President Gregory Wetstone. We look forward to working with Commissioners Clements and Christie to address the significant wholesale energy market and electric transmission challenges facing our nation. With fresh voices from clean energy and state regulatory backgrounds, we hope this reinvigorated, independent FERC will look anew at how to achieve the long overdue regulatory reforms needed to accelerate our energy transition."

The nation's coal power industry responded similarly. FERC has become an increasingly important policymaker for the nation's coal fleet, which helps maintain grid reliability and resilience. Having two new Commissioners with considerable expertise should enable the Commission to ensure the nation's electricity supply is both reliable and resilient," said Michelle Bloodworth, president and CEO of America's Power.

Bloodworth noted the trade group has urged FERC to take basic steps that would lead to better protection for the electricity grid in the event of disturbances that could have extreme consequences." In an Oct. 20 letter to the commission, the group called on FERC to act with urgency on a 34-month-old grid resilience docket, which FERC opened when it terminated rulemaking proposed by the Department of Energy that would have required system operators to establish just and reasonable" wholesale rates for power plants that show reliability and resiliency attributes."

Pointing to California's load-shedding events this August, Bloodworth urged the commission to consider three basic questions that she said are consistent with its January 2018 order: What exactly does resilience mean?"; What attributes are necessary to ensure the bulk power system is resilient?"; and Is the bulk power system truly resilient?"

We write to urge the Commission to at least finalize a definition for resilience in accordance with the January 8, 2018, order," she wrote. Hopefully, a uniform definition would then lead to a description of attributes that are necessary to promote resilience."

-Sonal Patel is POWER's senior associate editor (@sonalcpatel, @POWERmagazine).

The post FERC Regains Full Five Members as Regulatory Fights Loom appeared first on POWER Magazine.