With FERC lacking a quorum and delegating authority to staff to meet certain statutory obligations, the legal implications of any FERC order on pipeline rates under the Natural Gas Act or wholesale electricity rates under the Federal Power Act is an area of concern in Washington.
Two former FERC commissioners, James Hoecker and Philip Moeller, addressed FERC quorum concerns and a host of other issues facing the Commission at a February 28 discussion on Capitol Hill held by the American Council for Capital Formation’s (ACCF) Center for Policy Research.
Both Moeller, senior vice president of energy delivery and chief customer solutions officer at the Edison Electric Institute, and Hoecker commented on the February 3 order (AD17-10) from FERC delegating authority to staff to meet certain statutory obligations for the period it is without a quorum. That order provides authority to FERC staff to accept and suspend natural gas and electric power rate filings under the Natural Gas Act (NGA) and the Federal Power Act (FPA), to make them effective subject to refund and set them for hearing.
“I think that probably isn’t lawful, but I can understand why the Commission made that delegation,” Hoecker said, noting that under the FPA and NGA, rates would take effect by operation of law unless they are suspended and reviewed subject to a hearing. Without an order from staff on such filings while FERC is without a quorum, rates could take effect that could be unjust and unreasonable, with an increased workload and burden on the Commission once it regains a quorum to address those rates, Hoecker said.
Moeller referred to a previous ruling delegating authority to FERC staff when it looked like it would not have a quorum in 1993. At that time, just before Hoecker and three other commissioners were confirmed by the Senate in relatively prompt fashion, it was looking like a lack of quorum would be only for a short period until the Senate voted.
“This situation is different” in that the lack of a quorum could be much longer, and there is a litigation risk associated with certain decisions from FERC under the authority delegated to staff, Moeller said.
Congressional Letters. Lawmakers addressed the issue as well. Two different letters to President Donald Trump from more than 100 U.S. House of Representatives members urged Trump to nominate at least one person to serve as a commissioner and be considered by the Senate.
Both letters – one of which was led by Rep. Tim Walberg (R-Mich.) that contains signatures of 95 members, and the other led by Rep. Joe Kennedy (D-Mass.) with signatures from 14 members – are dated February 22. The letter from Kennedy and others is signed by all Democrats, while the letter from Walberg and others is signed by both Republicans and Democrats.
The letter from Democrats mentions the FERC order delegating additional authority to staff in the absence of a quorum and the “uncharted territory” the Commission finds itself in.
“We have significant concerns with the legal basis on which this order stands. A nomination and subsequent confirmation by the Senate would avoid protracted legal proceedings,” the House members said.
The other letter points out that since the resignation of former FERC Chairman Norman Bay, the Commission has been unable to serve its essential function, and important energy infrastructure investment has been halted.
“We urge you to swiftly nominate commissioners to FERC and restore important progress on energy infrastructure development,” the House members told Trump.
Industry Requests. Those letters followed similar requests for prompt action from Senators and correspondence from a collection of 14 energy trade groups that pleaded with Trump to nominate someone to restore a quorum at FERC.
White House Energy Appointees. With no news coming from the White House on any nominees for FERC, energy interests could take solace in staff additions within the Trump administration that include at least two individuals with energy and environmental policy experience. In a February 27 announcement, the White House named additions to the National Economic Council that included George David Banks and Michael Catanzaro.
Banks, who will serve as special assistant to the president for international energy and environment, was previously executive vice president at ACCF, with prior roles at the Senate Environment and Public Works Committee, the White House Council on Environmental Quality (CEQ), the State Department and the Central Intelligence Agency.
Catanzaro, who will serve as special assistant to the president for domestic energy and environmental policy, also served on the Senate Environment and Public Works Committee and the CEQ, along with roles at the Environmental Protection Agency and as senior adviser on energy and environment for former Speaker of the House John Boehner (R-Ohio). Most recently, he was a partner at CGCN Group, the White House said.
FERC Nominees. The process of waiting for the White House to nominate commissioners can be stressful for potential nominees, and even after they are nominated it can take months to get through background checks and vetting, courtesy visits to senators and other hoops, Hoecker and Moeller said at the ACCF event. “Presumably they’re in a hurry” Moeller said in reference to the Trump administration.
Media outlets and sources have pointed to various potential nominees, with Neil Chatterjee, energy policy advisor to Senate Majority Leader Mitch McConnell, (R-Ky.), on the top of most lists as someone who could be confirmed by the Senate quickly to restore a quorum at FERC.
“Even under the best of circumstances, this is a slow process,” said Hoecker, senior counsel and energy strategist at the law firm Husch Blackwell. Any senator can place a “hold” on a nominee for any reason and the nominee may not know who is doing that, which “adds a little extra mystery to the process,” he said.
The Trump administration has 549 positions to fill that require Senate confirmation, with about 15 nominees confirmed in their roles and 18 nominees waiting for confirmation, according to Glen Boshart, editor at SNL Energy who moderated the ACCF discussion. Where FERC fits within the priorities of the Trump administration is not well known, Boshart said.
He asked the former commissioners if they believe any particular background is best for potential FERC nominees, and Hoecker noted that commissioners traditionally have come with either state regulatory experience or legislative experience from Capitol Hill. Political affiliation and geographic background will play a role, since power markets have regional interests and geographic diversity is important to some, Moeller added.
FERC has not had commissioners with a lot of technical depth or energy industry experience, said Hoecker, a Democrat who was both a commissioner and a chairman at FERC during his time there, from 1993 to early 2001. Economists from academia or the financial community might make an interesting choice, but FERC “makes a very poor launching pad for a political career,” so anyone with political ambitions should avoid it, he quipped.
Commissioners are in a quasi-judicial role of “calling balls and strikes” and decisions are bound to upset some interests, but the Commission itself has a lot of collegiality and stays above the fray of Washington politics most of the time, Moeller said.
Both commented that the Trump administration’s regulatory reform efforts may be a challenge to implement at FERC, with Hoecker asserting that what constitutes a regulation – is it only a rulemaking, policy statement or other broad initiative – among the questions that would need to be addressed.
Among the challenges for the incoming commissioners will be on the power side, where FERC’s role in the wholesale market is being pushed to address different market designs, generation resource decisions and how to value different resources such as energy storage and distributed resources, they both said. The federal and state relationship is getting more complicated, with state policymakers favoring specific resources such as nuclear generation or more intermittent renewable resources that can have impacts on wholesale markets, they said.
The blurred line between wholesale and retail power markets, with two-way electricity flows on the power grid and a proposed rulemaking from FERC on the participation of storage in power markets will be interesting to follow, Moeller said. “There are some legal uncertainties there,” he said.
Siting of transmission lines and allocating the costs of those lines also is a challenge, with reduced rates of return on equity (ROE) making them more risky investments, said Moeller, a Republican who was a commissioner from 2006 to the fall of 2015. FERC’s use of the discounted cash flow methodology and proxy groups for setting ROEs may need to be revisited to address consolidation in the industry and other factors not prevalent when it was adopted, he said.
Given the value transmission lines bring to the power markets, they should have higher ROEs, agreed Hoecker, who founded the WIRES Group, a trade association supporting transmission development. “You heard bipartisan support on Capitol Hill today” he joked.
With Trump emphasizing infrastructure investment, siting reform for transmission lines should be a major thrust in Washington, according to Moeller.
Under previous chairmen going back several years, FERC held more frequent open meetings and commissioners engaged in debate at the meetings before voting on items, Boshart pointed out. FERC meetings have been interrupted by protesters on a regular basis, but he asked whether more frequent meetings or a different approach to meetings would be more effective.
Current monthly meetings are “well-choreographed” among the commissioners, with decisions known ahead of time and not being made at the meetings, Moeller said, adding that technical conferences can produce some interesting discussions. Hoecker agreed, commenting that the meetings might be efficient but they are less compelling to watch.
The disruptions of the meetings are mainly about FERC’s approval of natural gas pipelines, and perhaps if more workshops or public meetings were held in the siting process it could improve public involvement, Moeller said. The industry and the Commission have engaged in plenty of outreach and route revisions for new pipeline projects, he noted.
The protestors who disrupt the meetings are not civil about it and FERC has adjusted the meetings on occasion when public safety is a concern, Moeller said. “The lack of civility is not something FERC should tolerate,” he said.
By Tom Tiernan TTiernan@fosterreport.com
This article appears as published in The Foster Report No. 3138, issued March 3, 2017
Copyright © 2017 by Concentric Energy Publications, Inc. All rights reserved.