Members of the Federal Energy Regulatory Commission testified in oversight hearings before a subcommittee of the House Energy and Commerce Committee regarding recent actions taken by the FERC to ensure that the nation has reliable and affordable energy supplies and their plans to continue doing so in the future. In testimony prepared for delivery on June 12, 2019, each of the Commissioners discussed highlights of the FERC’s regulatory agenda.
Chairman Neil Chatterjee
Chairman Chatterjee testified that two of his regulatory priorities are (i) to eliminate potential barriers to participation of electric storage facilities in wholesale electricity markets, and (ii) to protect the nation’s bulk power system from cyber and physical threats. He noted that FERC is working with the North American Electric Reliability Corporation to develop and enforce mandatory reliability standards to protect against threats to the bulk power system while supporting voluntary initiatives with federal, state and industry partners. In response to utility industry concerns, he said that the FERC is also considering potential reforms to regulations under the Public Utility Regulatory Policies Act of 1978 that would reflect changes to the energy landscape during the past 40 years.
Commissioner Cheryl LaFleur
Commissioner LaFleur noted that in many states, investment decisions on retention of existing generation facilities and development of new generation facilities are affected both by state actions and by market rules within the FERC’s jurisdiction. In her view, one of the most significant issues pending before the FERC is whether resource adequacy responsibilities in regions served by regional transmission organizations with centralized capacity and energy markets are being, or should be, rebalanced towards greater state control. She also observed that the addition of nontraditional generation resources to the generation mix and development of new forms of pricing of energy products may cause the FERC to undertake a review of wholesale electricity market designs.
Commissioner LaFleur is also concerned with the impact of FERC infrastructure decisions on climate change. She believes that the FERC must do a better job of assessing and considering the climate impacts of gas pipelines and liquefied natural gas projects, and that projects approved by the FERC without such an analysis will face significant legal risk that their certificates could be vacated. She therefore recommended that the FERC review its policies for evaluating the need for new natural gas pipeline capacity and that the FERC undertake robust climate analysis when considering proposals for new natural gas pipelines and LNG facilities.
Commissioner Richard Glick
Commissioner Glick concurred with Commissioner LaFleur that the FERC can and should do more to consider the effect of its actions on climate change. In his view, “evidence that anthropogenic climate change is an existential threat to our way of life is incontrovertible.” Although the FERC is primarily an economic regulatory agency, Commissioner Glick asserted that “the Commission’s responsibility to eliminate barriers to wholesale electricity market competition, how FERC addresses state energy policies and their impacts on wholesale markets, and the Commission’s energy infrastructure permitting responsibilities have particularly important consequences for greenhouse gas emissions.”
Commissioner Glick explained that the FERC can facilitate a reduction in greenhouse gas emissions by eliminating barriers to competition in wholesale electricity markets and ensuring that new, relatively clean technologies can compete on a level playing field. Because state actions will shape the number and type of resources available to participate in the wholesale electricity market, Commissioner Glick recommended that the FERC refrain from adopting market rules that might interfere with implementation of state policies addressing environmental externalities of generation resources, including greenhouse gas emissions. Lastly, Commissioner Glick noted that new natural gas pipelines may have either a positive or negative impact on greenhouse gas emissions. Regardless of the impact, he believes it is the FERC’s obligation to assess the environmental impacts of proposed natural gas pipeline facilities and its concomitant duty to explore possible mitigation measures to reduce any significant adverse effects.
Commissioner Bernard L. McNamee
Commissioner McNamee noted that the FERC has a number of initiatives pending before it, including (i) procedures for review of applications for construction and operation of interstate natural gas pipelines; (ii) implementation of the Tax Cuts and Jobs Act of 2017; (iii) regulation of rates of oil pipelines; (iv) policy issues affecting wholesale electricity markets and development of electric storage facilities. Insofar as electric storage facilities are concerned, he expressed his belief that “the FPA does not provide the Commission with the authority to require that distribution facilities permit ESRs to use [distribution] facilities to access wholesale markets,” and stated that even if the FERC does have such authority, it should permit states to opt out in the spirit of “cooperative federalism.”
Changes at the FERC
At the present time, the FERC is evenly split between Republicans (Chairman Chatterjee and Commissioner McNamee) and two Democrats (Commissioners LaFleur and Glick) with one vacancy. This difference has been noteworthy in orders involving climate change, in which the Commissioners have divided along party lines. However, changes in membership of the FERC are on the horizon. As a result of the untimely death of Commissioner Kevin McIntyre earlier this year and the expiration of the term of Commissioner LaFleur at the end of June 2019, it is reasonable to expect that there will be two new commissioners joining the FERC in the next few months. The addition of those commissioners is expected to result in a Republican majority that may affect the manner in which the FERC addresses the challenges before it.