04/25/2018

FERC Commissioners Testify on Energy Infrastructure, Resiliency, State-Federal Tensions

On April 17, 2018, the five Commissioners of the Federal Energy Regulatory Commission (“FERC”) testified before the House Energy Subcommittee in a hearing titled “Oversight of the Federal Energy Regulatory Commission and FY2019 Budget.”  Chairman Kevin McIntyre, along with Commissioners Cheryl LaFleur, Neil Chatterjee, Robert Powelson and Richard Glick discussed a number of topics ranging from cyber security and grid resiliency to baseload resources, removing barriers to entry for energy storage, review of the pipeline approval process, as well as potential modifications to the Public Utility Regulatory Policies Act (“PURPA”) and the Federal Power Act (“FPA”).

Key topics and takeaways included:

  • Tension between state energy policies and wholesale electricity markets.  Chairman McIntyre commented that finding a balance between state energy policies and FERC’s jurisdiction over the wholesale markets is one of the trickiest areas the Commission faces.  He explained that states have the authority to prefer certain energy resources, and FERC has the obligation to ensure that electricity generated by these resources is sold at just and reasonable rates.  On the other hand, Commissioner Powelson emphatically said the sanctity of the wholesale markets must be protected.  Commissioner Chatterjee expressed his support for states’ rights, and Commissioner Glick noted that FERC must accommodate but not override state policies.  There was significant discussion of the role of whether Minimum Offer Price Rule (“MOPR”) approaches should be a “standard solution” as the Commission found in a recent ISO New England order, or if their appropriateness should be considered on a case-by-case basis.
  • Resilience.  There was significant discussions on both sides regarding the next steps that FERC will take now that it has rejected the DOE NOPR on resilience styled as compensation for maintaining on-site fuel reserves.  The Commissioners noted that the ISO/RTOs recently filed reports on what constitutes resilience, and these reports are now open for comment.
  • Infrastructure.  Infrastructure was a significant theme of the hearing.  Several Representatives discussed the need for new pipeline infrastructure, and the Subcommittee expressed strong support across the board for FERC revisiting its 1999 Certificate Policy Statement.  Several Committee members and Commissioners made comments supportive of storage as a solution to both transmission and generation.  Commissioners also expressed the need to consider revisiting the transmission incentives policy, to make sure it is incentivizing the right things.
  • Cybersecurity.  Chairman McIntyre said FERC is working with the Department of Energy (DOE) and other federal components to ensure energy regulators stay on top of cybersecurity issues.  He said FERC has the authority to ensure reliability vis-à-vis cyberattacks, and the agency is making good use of this authority.
  • PURPA.  All of the Commissioners agreed that PURPA should be modified or updated given that the energy industry has undergone significant change in the 40 years since it was initially passed; however, a significant change would have to be enacted by Congress.  FERC itself, the Commissioners acknowledged, can make some changes around the edges of existing PURPA policy.  While the NARUC letter arguing for PURPA reform did not come up at the hearing, the letter does set forth policy positions for potential changes.[1]

The hearing gave significant insight to the policy positions of the various Commissioners now that “FERC 2.0,” as Commissioner LaFleur called it, is fully seated and in action.  The hearing also clearly showed that issues related to energy infrastructure, ranging from pipeline construction to transmission incentives to the growing importance of storage, will be a significant focus of the Commission in the near future.

[1] NARUC letter to FERC Commissioners re PURPA Regulatory Reform (Dec. 18, 2017) available at https://pubs.naruc.org/pub/35409F29-0A60-FF1C-39C2-9985EDFCF478