FERC Addresses Industry Change in House Hearing

“No industry stays static over time. Change is inevitable,” said the Federal Energy Regulatory Commission’s (FERC) John Norris in a house subcommittee hearing today. For the electric sector, he said in prepared remarks, “The time of incremental change is clearly over.”

The Dec. 5 hearing before the House Energy & Commerce Committee, Subcommittee on Energy and Power was titled “Evaluating the Role of FERC in a Changing Energy Landscape.” Due to former Chairman Jon Wellinghoff’s recent departure, the hearing featured only four FERC commissioners: Acting Chairman Cheryl A. LaFleur and Commissioners Philip D. Moeller, John Norris, and Tony Clark. The hearing was the first for newly appointed Acting FERC Chair LaFleur.

In his opening remarks, subcommittee Chairman Ed Whitfield (R-Ky.) noted that “the vast amounts of natural gas that are being developed” are driving much of the change in the energy landscape, but he also had questions about how Environmental Protection Agency (EPA) regulations “aimed at prohibiting the use of coal to produce electricity” would affect reliability and consumer costs.

Energy and Commerce Committee Chairman Fred Upton’s (R-Mich.) opening remarks called out the difficulty of timely infrastructure approvals—a casualty of what he called “an archaic federal regulatory process that can be manipulated to cause years of delays for pipeline, power line, and [liquefied natural gas (LNG)] export projects, and in some cases can block them outright.”

In her prepared testimony, LaFleur focused on grid reliability and security. She said that in contrast to day-to-day reliability issues (where FERC has, over the past three years “issued orders on new or modified reliability standards for tree trimming, under-frequency load shedding, and reliability planning criteria, among other areas”), the issues of cybersecurity and geomagnetic disturbances are newer challenges. Lacking decades of experience with these issues, FERC, she said, is “in the position of developing meaningful, cost-effective regulation in an environment of rapid change and imperfect knowledge.” To that end, FERC recently approved Version 5 of the Critical Infrastructure Protection Standards and directed the North American Electric Reliability Corp. (NERC) “to establish standards to address the threat posed by a geomagnetic disturbance.”

However, she also noted that “Because cyber threats can emerge and change rapidly, they cannot be met with reliability standards alone.” FERC is working with industry, government agencies, and the National Institute of Standards and Technology (NIST) on these issues.

Commissioner Moeller focused on FERC Order 1000 and gas-electric market coordination concerns. While arguing for the benefits of Order 1000—better regional planning and transparency—he noted that litigation over the “right-of-first-refusal” issue could cause “investment uncertainty until it is resolved.”

Moeller also acknowledged uncertainties concerning the Mercury and Air Toxics Standards, especially for the Midwest.

Norris spoke of energy sector change driven by new natural gas supplies, grid technology innovations, more renewable energy and energy efficiency, as well as policy and environmental regulations. Both in his opening remarks and in answers to subcommittee questions, Norris noted that major restructuring of the power sector “is happening now” for all of those reasons.

One result of all these drivers: “With the exception of building new nuclear in a vertically integrated state where state regulation of generation provides a reasonable assurance of cost recovery, it seems unlikely that new coal or nuclear facilities will be constructed in the foreseeable future. While the political debate around climate change and the need for carbon constraints continues to go back and forth, the scientific indicators around carbon emissions and climate change have remained relatively constant,” Norris said.

Both he and other commissioners noted that they do not have jurisdiction over generation or policy decisions affecting generation. However, Norris and LaFleur in particular noted that FERC recently held a capacity market technical conference to examine how market rules are affecting the ability of generating resources to ensure reliability.

Commissioner Clark gave special emphasis to how new gas supplies and the pipeline and potential liquefied natural gas export issues raised by those supplies have increased FERC staff work. Clark, whose home state of North Dakota is a major player in the shale gas boom, noted that the new natural gas supplies are also upending “utility planning models and market fundamentals.” He noted that FERC has been involved in addressing new challenges posed by the heightened levels of gas and electric industry interdependence.

—Gail Reitenbach, PhD, Editor (@GailReit, @POWERmagazine)