Game Over: FERC 1, WSJ 0

By Kennedy Maize

Washington, D.C., January 11, 2011 — The Federal Energy Regulatory Commission this week engaged in a spitting match with the editorial page of the Wall Street Journal. FERC won.

At issue is the commission’s Dec. 16 order sorting out the incredibly complex issue of how to connect remote renewable generation into the giant regional grid run by the Midwest Independent System Operator. As issues go, this is right up near the top on mind-boggling matters that come before the FERC. the 193-page order is a thicket of competing and conflicting interests; arcane legal, economic, and regulatory concepts; and incomprehensible acronyms. As someone who has followed the agency pretty closely since it was created in the late 1970s, these issues and this order are far from easily digested.

The Wall Street Journal didn’t even try in its Dec. 30 editorial, slamming the decision as some sort of creep socialism that is both unconstitutional and illegal. The journal, no surprise here, is driven by ideological fervor, not facts, in its take on the order. The reach of the editorial conclusion — “in fact, this is the first step in a FERC scheme to socialize transmission costs nationwide” — is entirely over the top. The journal also singles out Jon Wellinghoff, FERC chairman, as personally responsible for this decision, which, the journal claims, tries “to establish by regulatory fiat a national energy policy that Congress has refused to endorse.”

This is all nonsense, as the commission gently noted in a reply to the newspaper, printed on Jan. 10. The letter from Wellinghoff and the other four FERC commissioners (Democrats and Republicans alike) said, “While we approved a recent proposal on who pays for new transmission facilities in the Midwest, that proposal was not developed by FERC. Rather, that proposal was submitted to FERC, based on months of negotiations among diverse stakeholders from 13 states in the Midwest. The proposal’s objective is to promote the development of needed transmission capacity.”

The WSJ’s editorial, in its Michigan-centric rhetoric, betrays what’s really going on with the FERC order and who really objects to it. The order, said the journal, “will force Michigan to pay about 20% of as much as $20 billion in new high-voltage transmission lines — though Michigan businesses and homeowners will get little benefit.” The editorial calls on Rep. Fred Upton, the Michigan Republican who now chairs the House Energy and Commerce Committee, to reign in the regulators.

What’s going on here is that Michigan has boxed itself into a regulatory corner, by adopting a statewide renewable energy portfolio standard that does not count out-of-state renewable power flowing into the state as meeting its renewable requirements. Now that’s unconstitutional, a violation of the Commerce Clause. FERC correctly rejected the state’s request that, because it has put up trade barriers aimed at interfering with interstate commerce, it should be exempted from the MISO’s proposal. Michigan will benefit from additional power resources on the regional grid, whether or not they count against the state’s RPS, and should pay something for that. FERC correctly chose to balance the interests and rejected Michigan’s attempted free ride. Michigan business interests, on the other hand, have managed to snow the scribes on the WSJ’s editorial page into supporting a rent-seeking endeavor.