Week Ending June 15, 2018

FERC Commissioners Answer Questions Before U.S. Senate Energy Committee

This Article Appears as Published in Foster Report No 3203
FERC Commissioners Answer Questions Before U.S. Senate Energy Committee

All five FERC commissioners testified at an oversight hearing before the U.S. Senate Committee on Energy and Natural Resources June 12, and when asked, none would agree that there is currently an emergency that would require subsidies for retiring coal and nuclear plants.

Not surprisingly the issue of a recently leaked draft National Security Council memo that would require the Department of Energy (DOE) to order ISOs and regional transmission organizations (RTOs) to buy power from coal and nuclear units to limit any future retirements for two years, was the subject of questions from many senators.[1]

The commissioners repeated FERC’s position that a proposed emergency rule about coal and nuclear subsidies from DOE Secretary Rick Perry was rejected by the Commission in January, and instead the Commission opened a new proceeding and is taking comments on the definition of resilience and other issues.

FERC Chairman Kevin McIntyre noted that the Commission has received many comments on the issue and FERC staff is currently studying all the comments, but McIntyre didn’t say when the Commission expects to release any recommendations.

Committee Chair Lisa Murkowski (R-Alaska) said that because of the changes in the energy industry in the last few years and the retirement of several coal and nuclear plants, there is a “policy vacuum” about grid resilience that needs to be addressed.

In a prepared statement, McIntyre said that the most important thing FERC can do is to uphold the rule of law, and only act where the Commission has authority to act. McIntyre gave an overview of current important projects before FERC, including a review of the 1999 pipeline certificate application process.

In their statements the commissioners observed that it has been 10 years since the full commission appeared before the committee, and in that time there have been fundamental changes to the power grid with the discovery of significant natural gas supplies around the country and the new technology to get the gas out of the ground cheaply.

Commissioner Neil Chatterjee talked about the affect the weather can have on the electric grid, noting in particular that winter snowstorms sometimes exert significant pressure on the electric grid, and that the Commission must be vigilant about making sure the grid can respond quickly to weather emergencies.

Commissioner Robert Powelson agreed with Chatterjee that the Commission must remain vigilant about grid resilience, but noted that as various coal and nuclear plants have closed, there has been no interruption of power.

PJM is ground zero for grid resilience, said Commissioner Richard Glick, and PJM has made the determination that there is currently no emergency that requires subsidies for coal and nuclear plants.

Murkowski said that she favors competition over regulation in the electricity market, and a market solution might be best.

Ranking Member Maria Cantwell (D-Wash.) said that in the northwest the perspective is that affordable electricity is important and there is no reason to supplant the market with an order to use something more expensive. Cantwell questioned whether the Trump administration is simply seeking to reregulate electricity, because there is no shortage of electricity or a grid emergency.

Sen. John Barrasso (R-Wyo.) asked about the role of coal in the power grid, and Powelson said it is critically important that there is an ample supply of electricity at low prices but that market forces will deliver certain outcomes, which includes the retirement of less efficient forms of power. The organized power markets are doing well, said Powelson, and there is a “phenomenal success story in the restructuring of power markets” in the last few years.

Powelson also observed that the markets value reliability, which includes the orderly entry and exit of resources, but that in some markets coal and nuclear will survive.

By Denise Ryan DRyan@fosterreport.com

[1]   For more information, see, Industry Eyeing DOE for Next Step on Grid Resilience; McIntyre Addresses Legal Authority, FR No. 3202, pp. 1-6.

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