With McIntyre Waiting, Chatterjee Aims for Interim Step on Grid NOPR

Neil Chatterjee

With additional time at the helm of FERC, Chairman Neil Chatterjee continues to work on an interim step for the power grid resilience notice of proposed rulemaking (NOPR) to address compensation for coal and nuclear power plants, he said in a November 16 interview with The Foster Report.

During the interview, he termed the NOPR (RM18-1) “easily the most significant action that this Commission has had to contend with in probably decades, and will no doubt be the most significant thing that I’ll have to contend with during my tenure here at the Commission.”A video of the interview is posted on The Foster Report website.

That tenure started as chairman and is expected to transition to a commissioner once Kevin McIntyre is sworn in, but when that will be remains a mystery. McIntyre, an attorney and co-leader of the global energy practice at Jones Day, was designated by the White House to serve as chairman once he is sworn in. McIntyre and Richard Glick, general counsel for Sen. Maria Cantwell (D-Wash.), ranking member on the Senate Energy and Natural Resources Committee, were confirmed by the Senate on November 2, but have not been sworn in at FERC.

Theories abound in Washington on why McIntyre and Glick have not been sworn in. Republican sources and FERC officials maintain that it is only because President Donald Trump has not signed the paperwork and that he intends to do so soon.

Other sources assert that the Trump administration wants to keep Chatterjee as chairman at least until December 8, when he could start appointing administration ideologues to key staff positions at FERC, or December 11, which is the deadline for FERC to respond to the NOPR submitted from Energy Secretary Rick Perry. There have been plenty of White House nominees sworn in at other positions in government following Senate confirmation on November 2 or later, making the notion of the administration wanting to keep Chatterjee in place as chairman more plausible with each passing day, said several sources who asked not to be named.

For his part, Chatterjee said he does not know when Glick and McIntyre will join the Commission, but he is taking on pressing issues until he is told to hand over the chairman’s gavel to McIntyre.

As he has previously,[1] Chatterjee noted that his stint as chairman since being sworn in during early August has been unorthodox. The unique aspects include coming to FERC “ice cold” with no prior experience at FERC, while most prior chairmen were commissioners who ascended to the chairman’s role, dealing with a backlog of cases following an extended period without a quorum, and facing the NOPR that came from the Department of Energy in late September.

“I think I’ll be a much more effective commissioner having had this experience on the front end” of his time at FERC, Chatterjee said during the interview. Coming to FERC from Capitol Hill, where he was energy policy advisor to Senate Majority Leader Mitch McConnell (R-Ky.), “I’m no shrinking violet,” he quipped. “I intend to be a force at the Commission throughout my time here,” he said.

The NOPR was sent to FERC to ensure sufficient compensation for power generation facilities with 90 days of fuel on site in organized wholesale market regions with energy and capacity markets. It 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 independent system operators or regional transmission organizations. Doing so would prevent such facilities from retiring because they have been priced out of the market by lower-cost generation resources.

In an avalanche of filings on the NOPR, most of those who filed comments at FERC opposed the plan for a variety of reasons, including the costs that would be imposed on electricity consumers and the disruptive impact it would have. Coal and nuclear plant owners and trade groups representing such resources support the NOPR.

Speaking with reporters after the November 16 open meeting and in other venues, 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.

Options being examined include some form of reliability-must-run contract to keep certain plants from retiring if they have resilience and fuel security attributes, or a “show cause” order that directs ISOs and RTOs to keep certain plants running if they have those attributes but are not being compensated for them. Such steps would be based on the legal principle under the Federal Power Act that current market designs are unjust and unreasonable because they are not providing sufficient compensation for generation facilities with resilience attributes, Chatterjee has said.

During the interview with The Foster Report, he said he has not discussed interim measure options with his fellow commissioners Cheryl LaFleur and Robert Powelson. “I really want to flesh things out” a bit more before presenting a plan with a proposal, he said.

He questioned why the notion of additional compensation has been such a hot-button topic, asserting that even those opposed to the NOPR acknowledge that the questions posed about resilience and the consequences of generation fuel preferences are worth examining. “Honestly, I’m a little bit befuddled as to why this is even controversial,” he said.

He conceded that a short-term plan not linked to coming up with a long-term solution would be “messy and complicated,” but tying any interim step to a long-term fix should address any concerns about the interim measure.

Crafting that measure in such a way that assets receive resilience payments without altering the generation dispatch procedures could minimize market disruptions. Coal and nuclear generation owners would still have to bid in their marginal costs in ISO power supply auctions, and those marginal costs would be reduced if they receive resilience payments, Chatterjee explained. If such steps are adopted, FERC would have to be zealous about enforcing them to ensure that the generation owners bid in their marginal costs, he said.

Addressing the cost impact to consumers, Chatterjee did not shy away from the fact that there will be costs, but because it would be an interim step the impact would not last forever. Furthermore, any cost should be compared with the cost of doing nothing and losing generation facilities – then subsequently finding that those facilities are needed to address some type of grid emergency.

“What happens if we have multiple plants go down” for an extended period of time and a large swath of a regional grid goes without power, he asked. A long-term power outage from a cyber attack, extreme weather or some other incident would be debilitating, and the cost to the U.S. economy would be far more than keeping some generation facilities available, he said.

Addressing other items at the Commission, Chatterjee said he hopes to make progress finalizing a NOPR (RM16-23) on energy storage resources and meet a commitment he made to lawmakers interested in seeing a final rule to have ISOs and RTOs further integrate storage resources in their market rules. It is a complex proceeding and a final rule must be legally defensible. FERC staff is working on the final rule but “it has got to be done well. That is my priority,” he said.

Other priorities include finding appropriate incentives for building electric transmission lines, keeping the power grid reliable in the face of cybersecurity threats, and making rules associated with the Public Utility Regulatory Policies Act of 1978 in line with the power grid of today.

Coming from the Senate where lawmakers juggle so many different priorities in a given day, Chatterjee said he enjoys tackling different items at the Commission. He commended his staff for making that work less challenging.

By Tom Tiernan TTiernan@fosterreport.com

[1]   For past story, see Chatterjee Aiming for Interim Step with NOPR on Path Toward Long-Term Solution, FR No. 3173, pp. 1-3.

 

 

This article appears as published in The Foster Report No. 3175, issued November 24, 2017

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