Winter Weather and Grid Attacks Occupy FERC’s Attention

Washington, D.C., February 20, 2014 – The wicked winter of 2014 and what may have been a terrorist attack on a California electric substation last year were on the minds of the Federal Energy Regulatory Commission today, although not on the formal FERC agenda.

First, a weather report. After experiencing two mild winters, this year has seen just how nasty the season can be, with polar vortices invading most of the U.S., storms battering the bulk of the country with repeated assaults of snow and ice, and warnings that another “big one” is on the way for the end of the month. As FERC Chairman Cheryl LaFleur noted at today’s meeting, the weather challenged both the commission and the industries it regulates: wholesale electricity, including the transmission grid, and oil, gas, and propane pipelines. “The weather tested the electric grid and our markets,” she said.

The fierce February forced FERC into emergency action. Facing propane shortages in the Midwest and Northeast, the commission on February 7, for the first time, exercised its authority under the venerable Interstate Commerce Act to direct a large propane pipeline to prioritize its deliveries from Texas to those regions (with the pipeline cooperating). The commission extended its emergency order five days later.

On the electric side, FERC gave the PJM Interconnection and the New York ISO authority to exceed its price caps on bids into the organized markets until March so that generators, facing spiking natural gas prices, could fully recover their costs to supply electricity. While public power and the Maryland Public Service Commission, in the name of consumers, protested, FERC insisted, “Generators with marginal costs greater than $1,000/MWh and that clear the market are, in fact, economic—not uneconomic, as some parties allege. The market clearing price under these conditions—even if it is higher than before—is a just and reasonable price that does not reflect the exercise of market power.”

LaFleur this morning said the winter has tested the commission and there may be lessons to be learned, so the commission should take a closer look at how the agency and its regulatory partners (and sometimes victims) performed. To that end, she said the commission would hold a technical conference, led by the commissioners themselves, on operational and market conditions the weather brought up. That meeting is set for April 1.

Physical assaults on the grid were also on the commission’s mind today, although also not on the agenda. In this case, it appeared that former FERC Chairman Jon Wellinghoff, who has been leading the charge on raising the profile of the physical protection of the grid, had irritated at least two FERC commissioners.

Commissioner Philip Moeller issued a written statement quarreling with Wellinghoff’s apparent crusade to raise the profile of the issue following an assault on a PG&E substation in California last April that caused a lot of damage and showed considerable sophistication. Moeller noted that “we still have the world’s most advanced and robust electric transmission system that can respond instantly to planned and unplanned outages and even attacks. However, highlighting any real or perceived vulnerabilities and sharing specific security information or responsive actions may inadvertently promote the prospect of additional copycat attacks.”

At the meeting, a clearly-irritated Commissioner John Norris made a verbal statement. He said that “many people have jumped on this reaction train.” He said that “the incident in California was isolated and no conclusions have been drawn by law enforcement agencies. Yet a number of elected officials and a former colleague [i.e. – Wellinghoff] have called for measures” such as physical barriers “that may be a 20th century reaction to 21st century problems.” Norris decried the prospect of spending billions of dollars on “concrete barriers and fences,” draining resources away from making the grid more resilient while serving new, intermittent technologies, microgrids, and the smart grid.