Week Ending June 14, 2019

Mandatory Standards for Pipelines, Grid Resilience, FERC Offices Discussed at Hearing

This Article Appears as Published in Foster Report No 3253
Mandatory Standards for Pipelines, Grid Resilience, FERC Offices Discussed at Hearing

Congress could enhance pipeline security by making standards mandatory instead of the voluntary standards that the Transportation Security Administration (TSA) oversees, Commissioners Cheryl LaFleur and Richard Glick said during a June 12 House of Representatives subcommittee hearing.

Chairman Neil Chatterjee is inclined to give TSA and the pipeline sector more time to show progress on security issues and commitments that they have made following a technical conference held earlier this year at FERC and rising interest in Congress. “Mandatory standards are one option. It is not the only option” to improve pipeline security amid growing cyber threats and increased interdependence between the power generation and gas pipeline sector, Chatterjee said during a brief recess at the hearing.

Chatterjee is willing to give TSA more time to show progress in the area and meet the commitments made by TSA Administrator David Pekoske. “TSA has stepped up. Industry has stepped up” and vowed to focus on physical security and cybersecurity measures, Chatterjee said. But if TSA and the pipeline sector do not meet their commitments, action by Congress on mandatory standards may be a reasonable option.

With all four commissioners testifying before the energy subcommittee of the House Energy and Commerce Committee, lawmakers touched on a range of topics involving FERC that are of interest to them. Those include power grid resilience, the stakeholder process at regional transmission organizations (RTOs) and Independent System Operators (ISOs), the gas pipeline review process and the rights of landowners, distributed energy resources’ participation in organized wholesale power markets, consideration of greenhouse gas emissions for gas pipeline projects, energy storage technologies, transmission development through Order 1000, reform of the Public Utility Regulatory Policy Act of 1978 and the office structure at FERC.

On the latter topic, Chatterjee told Rep. Pete Olson (R-Texas) that FERC is “actively working toward” having an office in Houston, the energy capitol of the U.S., with attorneys and engineering expertise to handle the wave of LNG export project applications. As FERC’s consideration and approval of LNG export projects has picked up, there is less of an impetus to have FERC staff based in Houston compared with a year ago when it looked like FERC might miss the opportunity to review projects on schedule, he said. He added that he wants FERC staff to be fully prepared when the next wave of LNG export applications comes to FERC, noting that a lot of the expertise in the sector is in the Houston area.

Another office structure issue was raised by Rep. Ann Kuster (D-N.H.), who has sponsored legislation to have an Office of Public Participation at FERC to “give a voice for average Americans” unfamiliar with the workings of the agency. There is a need for such an office to enable enhanced public interaction with the Commission and to help address the RTO stakeholder process, said Kuster and others. Congress has already passed a law calling for the office to be created, but it has not funded it in the past, noted Glick. Lawmakers could provide the funding to carry out the law as intended, he said.

Kuster said she is introducing legislation in the House with Reps. Jan Schakowsky (D-Ill.) and Joseph Kennedy (D-Mass.) as a companion bill to a Senate measure introduced by Sen. Jeanne Shaheen (D-N.H.), titled the Public Engagement at FERC Act (S. 1477). Shaheen has introduced legislation to create an Office of Public Participation and Consumer Advocacy at FERC since 2017, with the goal of having the office intervene in administrative and judicial proceedings on behalf of energy consumers on all matters under FERC’s jurisdiction. The office would monitor rates for energy services subject to FERC oversight, review consumer complaints and represent consumers and landowners in natural gas pipeline cases.

Under the proposed legislation, the office would be led by a director, appointed by the Secretary of Energy, who would be an attorney with experience in utility proceedings.  The director would be authorized to procure from a federal agency any information deemed needed to carry out the office’s responsibilities.  The director also would be charged with establishing an advisory committee responsible for holding meetings and publishing findings and recommendations on the office’s public website, according to a summary of the measure.

Subcommittee members that included Chairman Bobby Rush (D-Ill.) and Kennedy asked commissioners how they ensure that consumer voices are not overlooked when each RTO and ISO has its own stakeholder process with different rules for participation, or in the case of ISO New England, limit public participation.

Chatterjee vowed to be vigilant and consider the issues around the RTO stakeholder process. “People want to be heard. We take that seriously,” added Commissioner Bernard McNamee.

LaFleur noted that all six ISOs have stakeholder processes that include a consumer segment, and FERC has an obligation to ensure that utility customers are paying just and reasonable rates for the service provided.

Glick added that the level of frustration with RTO governance that he has seen around the country has been enlightening to him. FERC should take a look at the issues and ensure that public participation and transparency are not hindered, he said.

After the hearing, consumer group Public Citizen echoed the call of lawmakers who asserted that a comprehensive review of RTO governance is needed at FERC to ensure uniform standards are applied for all six of the ISOs and RTOs. “Piecemeal efforts on an RTO-by-RTO basis are insufficient and would result in too many transparency gaps,” said Tyson Slocum, energy program director at Public Citizen.

There is a desperate need for an Office of Public Participation at FERC that would not only promote assistance to the public to participate in cases at the agency, but at the RTOs as well, Slocum added.

Rep. Frank Pallone (D-N.J.), who chairs the Energy and Commerce Committee, called for greater scrutiny of wholesale capacity markets at ISOs and improvements in transmission development through Order 1000. “Frankly, the current state of affairs is a mess, especially in the PJM market where New Jersey participates. PJM participants are currently left in the lurch of both an old and new capacity market design. The result of this uncertainty is higher electricity bills,” Pallone said.

Subcommittee members Scott Peters (D-Calif.) and Marc Veasey (D-Texas) asked about FERC’s open docket on power grid resilience that was created when it denied a proposed rulemaking from DOE to provide financial support for coal and nuclear generation resources. Chatterjee said the Commission has a robust record after receiving comments a year ago, and he views the next step as engaging with ISOs on fuel security issues for generation resources. “I can assure you we will not put our thumb on the scale” to favor any particular power resource,” he told Peters.

Rep. Morgan Griffith (R-Va.) asked about the ongoing review of FERC’s pipeline certificate policy statement and the tendency to disregard the concerns of landowners in the pipeline application review process. FERC is trying to make some improvements to its website and the process for landowners to follow pipeline application proceedings, Chatterjee said, adding that pipeline owners also can improve in this area.

Rep. Fred Upton (R-Mich.) was among those who asked about pipeline security and whether TSA is up to the task of overseeing the large nationwide network given the limited resources of the agency. LaFleur and Glick said it would be worthwhile for Congress to address mandatory standards, telling Upton that it could be TSA, the Department of Energy or FERC that would carry out such a directive.

It has become clear that “this is a bipartisan issue” with several members of Congress expressing interest in mandatory security standards for pipelines, Glick said after the hearing.

The Energy Subcommittee announced it will hold a hearing June 19 to discuss pipeline safety and legislative proposals. Among the measures to be examined are the Safer Pipelines Act of 2019, with a discussion draft available, and the Leonel Rondon Pipeline Safety Act (H.R. 2139) to address pipeline pressure issues and correct flaws that led to a series of explosions in Massachusetts and the death of Leonel Rondon.

Pallone also told the commissioners that would like to see more information on how FERC considers greenhouse gas emissions when reviewing natural gas pipeline applications, referring to court directives that the Commission cannot ignore emission impacts. “I know FERC has great analysts who are up to the task of accounting for greenhouse gas emissions, but they need to be empowered to ensure these impacts are considered fully,” he said.

Like Griffith, who mentioned that Mountain Valley Pipeline and Atlantic Coast Pipeline are designed to travel a similar route and that FERC should not consider each application in a vacuum, Pallone said pipeline development and FERC’s review should be improved to address landowner needs. “The bottom line is that this whole process needs a more thoughtful strategy of planning and broad-ranging analysis,” he said.

Rep. Bill Flores (R-Texas) posed several questions to Glick about his dissents on FERC approvals of pipeline and LNG export projects based on GHG emission issues. Glick has indicated that project developers and FERC could pursue mitigation measures to offset GHG emission impacts, and “I want to know more” about how such measures would affect the cost of projects and possible delay development and economic benefits for the regions where they are proposed, said Flores.

“We are required to rule on what is in the public interest,” and GHG emissions are part of that determination, Glick said.

Flores pressed him to provide cost figures for mitigation measures, the emission effect of fuel switching when coal-fired generation is backed out by gas-fired power plants and other steps enabled by pipeline and LNG export projects. Flores said he would provide supplemental questions to Glick for answers in the coming days.

By Tom Tiernan ttiernan@fosterreport.com

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