Attorney Kevin McIntyre took the gavel as FERC Chairman after being sworn in December 7. One of his first actions was to seek more time from Energy Secretary Rick Perry on the grid resilience notice of proposed rulemaking (NOPR) on coal and nuclear generation units.
That proceeding (RM18-1) has attracted thousands of pages of comments, with a majority of them opposed to the notion of financial compensation for coal and nuclear generation units as suggested by Perry and Department of Energy (DOE) officials. In his proposal to FERC under Section 403 of the DOE Organization Act, Perry sought action within 60 days of publication in the Federal Register, which was October 10.McIntyre’s views on providing additional financial support for coal and nuclear generation, FERC’s Office of Enforcement activities, and other issues remain to be seen, but few may garner as much initial scrutiny as the outcome on the NOPR pending at the Commission.
“I write today to propose a 30-day extension,” McIntyre said in a December 7 letter to Perry. He noted that he and Commissioner Richard Glick joined FERC in the last two weeks and that FERC has received more than 1,500 filings of comments on the NOPR. “The proposed extension is critical to afford adequate time for the new Commissioners to consider the voluminous record and engage fully in deliberations,” McIntyre said.
A 30-day extension would push a response from FERC to 1/10/18.
McIntyre asked Perry to grant the extension and publish a decision in the Federal Register “at the earliest opportunity.”
Commissioner Neil Chatterjee, who was chairman from August 10 to December 7, has been trying to convince colleagues to support some type of interim measure to compensate generation units with 90 days of fuel on site while a long-term solution is addressed later.
Whether he has the votes needed is an open question and the source of much speculation in Washington energy circles. That speculation intensified amid a rather long interval following the November 2 Senate confirmation of McIntyre, a Republican, and Glick, a Democrat, and their swearing in at the Commission. Glick was sworn in on November 29, with rumors floating around about how commissioners may vote on the NOPR, and Chatterjee possibly naming Trump administration supporters to career staff positions at FERC following a 120-day period as chairman.
Chatterjee has told members of the media that the delayed swearing in of McIntyre is not tied to any “Machiavellian games” or intentional delay to some nefarious end, but many sources questioned the reasons for the delay nonetheless. Among the speculation was that attorney John Estes III, a partner at Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates and head of the firm’s Energy Regulation and Litigation Group, would be named head of FERC’s Office of Enforcement or Office of Energy Market Regulation.
The swearing in of McIntyre gives President Donald Trump four appointees at the Commission. McIntyre and Glick, who arrived after serving as general counsel for Democrats on the Senate Energy and Natural Resources Committee, joined Republicans Chatterjee, who also came from Capitol Hill, and Robert Powelson, a former state regulator from Pennsylvania. Commissioner Cheryl LaFleur, a Democrat, has been at FERC since 2010 after being nominated by former President Barack Obama, and she has served as chairman or acting chairman at different periods during her tenure.
FERC’s role as an independent agency has been mentioned after Chatterjee expressed support for Perry’s proposal – assumed to come from the Trump administration at the behest of coal and nuclear interests –to provide full cost recovery for power plants with 90 days of fuel on site in regions with independent system operators (ISOs) that have energy and capacity markets. The proposal essentially asked FERC to put in place market rules to provide full cost recovery and a return on investment for coal and nuclear power plants in regions with capacity markets to prevent such facilities from retiring because they have been priced out of the market by lower-cost generation resources.
Coal and nuclear plant owners and trade groups representing such resources support the NOPR, while a large majority of those who commented on the plan oppose it for a variety of reasons, including the costs that would be imposed on electricity consumers and the disruptive impact it would have.
In the past few weeks, Chatterjee expressed his preference for FERC to adopt some type of interim measure to improve compensation for coal and nuclear plants at risk of retirement and tie that step with a longer-term solution to be worked out later. He has been trying to come up with an interim step that would ameliorate concerns about market disruptions.
He has been outspoken about his desire for an interim measure, and he is the only commissioner who has “showed his cards” on how he hopes the Commission would respond to the NOPR, with minimal comments from other commissioners. Powelson told a meeting of stakeholders in the PJM Interconnection shortly after the NOPR was sent to FERC that he would not support a proposal that would have such a negative effect on power markets. LaFleur has appeared skeptical of a market design that starts with a resource and then tries to save it by coming up with an attribute only applicable for that resource, noting that power markets have been tailored to compensate resources based on their attributes.
While chairman, Chatterjee expressed a desire to respond to DOE by December 11. The arrival of McIntyre as chairman, and Glick, makes it less clear what the Commission may do in the coming days and weeks.
“From our perspective, it may matter little who holds the gavel when FERC’s response to the resiliency NOPR is released, as any action on the resiliency NOPR will need three votes, now that the Commission is back to its full strength,” said Christine Tezak, managing director at Clear View Energy Partners LLC. The firm maintains that some form of refinement or directive for ISOs and RTOs to define resilience, such as an Advanced NOPR, is more likely to gain support among commissioners. Such a step would have FERC moving forward to address DOE and Trump administration concerns, but on the Commission’s terms, Tezak said.
There is no statutory requirement for FERC to act by December 11, though some type of response to Perry would be considered timely if it comes by the end of 2017, she added.
Tyson Slocum, energy program director at Public Citizen, also said that December 11 is a goal set by Chatterjee that may come and go without action from the Commission. Slocum, Tezak and others have said that any steps will take months or years before they are implemented, depending on the type of measures adopted.
With few comments coming from the commissioners themselves, “we have no idea what FERC will do” in response to DOE’s proposal, Slocum said. He viewed some type of directive for RTOs and ISOs to come up with a market design to address resilience issues as a likely scenario.
In recent weeks, PJM has crafted price formation measures that have not gained support from stakeholders or the Independent Market Monitor for PJM. Several sources reached for this story view Powelson as a swing vote among the commissioners in terms of responding to the NOPR, and pointed to his Pennsylvania background perhaps leaning toward adoption of PJM’s price formation plan.
Consumer groups such as Public Citizen do not view that as a favorable outcome, Slocum said. Just because it is deemed a market-based solution, it should still be viewed as a bailout for coal and nuclear generation units with billions of dollars in costs passed on to consumers, he said.
While the NOPR was panned by a broad array of interests, “my concern is that PJM’s equally offensive ‘remedy’ will be hailed as a more moderate solution, when it is just as harmful to consumers,” he said.
Shortly after Perry sent the proposal to FERC, Chatterjee mentioned several steps FERC could take as a response, including an Advanced NOPR, a Notice of Inquiry, a NOPR to supersede the DOE proposal, or a plan to seek more comments.
The views of McIntyre and Glick are not clear at this point, though their comments during their September 7 Senate confirmation hearing are being parsed for insights, since DOE had issued a staff report on grid resilience but not the NOPR itself. They faced questions about the DOE staff report on baseload generation trends and the early retirement of coal and nuclear power plants.
Both Glick and McIntyre said FERC has no authority on generation choices or resource decisions that are under the authority of state regulators, and that some of the issues in the DOE staff report overlap with work the Commission has underway following a two-day technical conference on state generation policies and their impact on wholesale power markets.
“The Commission does not have the authority to, nor should it, prop up failing technologies or technologies that are not economically competitive,” Glick said in response to a question from Sen. Martin Heinrich (D-N.M.). They both noted that state laws adding renewable resources to the nation’s power generation mix at increasing levels are being carried out with no reliability impact on the grid.
In his prepared testimony, McIntyre told lawmakers that “any consideration of potential action by FERC, or by any governmental body, must begin with a firm understanding of the applicable legal requirements – and that any action taken must satisfy those requirements in full.
Once they were confirmed by the Senate, FERC said McIntyre will serve out the remainder of a term that ends June 2018 and a full term that ends in June 2023. Glick will serve out the remainder of a term that ends in June 2022.
LaFleur’s current term expires in June 2019, with Powelson’s term expiring in June 2020 and Chatterjee’s term expiring in June 2021.
With McIntyre being sworn in, the Commission has five commissioners for the first time since October of 2015, before the departure of former Commissioner Philip Moeller.
By Tom Tiernan TTiernan@fosterreport.com
This article appears as published in The Foster Report No. 3177, issued December 8, 2017
Copyright © 2017 by Concentric Energy Publications, Inc. All rights reserved.