As the regulator for much of our nation’s wholesale electric and natural gas markets, actions by the Federal Energy Regulatory Commission (FERC) directly impact the U.S. economy. The agency’s response to events this past year, such as the near-collapse of the Texas electric grid in mid-February, and the brazen ransomware attack on Colonial Pipeline in June, highlights this point. Those events sent price shocks across the country and laid bare the country’s vulnerabilities regarding energy reliability.
FERC in June announced it would form a task force with the National Association of Regulatory Utility Commissioners to explore electric transmission-related issues. No doubt the agency needs to make essential changes to ensure energy reliability and safeguard against cyberattack—but how? In November, FERC took a key step to address those concerns, publishing a report on findings and recommendations in response to February’s intense winter weather.
The Electric Reliability Council of Texas (ERCOT), the state’s power grid operator, came perilously close to seeing a collapse of its system during winter storm Uri. Critical black-start resources—the standby generators essential to recovering from blackouts—were either inoperable or lacked fuel due to the severe weather. The gravity of this issue, coupled with the need to harden energy grids against weather and malevolent actors, underscores the dire need for FERC to act.
FERC lacks rate jurisdiction in Texas but does maintain authority with respect to transmission interconnection, reliability oversight, and manipulation. Richard Glick, the agency’s chairman, has affirmed FERC will support the imposition of mandatory standards to ensure electric generators are better prepared when severe weather strikes. With a variety of steps, FERC can play a meaningful role nationwide in helping our country enjoy reliable energy services at cost-effective prices.
Identifying and Correcting Deficiencies
To realize this goal, FERC should conduct a comprehensive audit of the nation’s state of energy reliability. The power grid is mission-critical to national security, and with this top of mind, FERC and the North American Electric Reliability Corp. have been digging into events surrounding Uri, looking at key concerns, and providing recommendations, including revising mandatory reliability standards to better prevent freeze-related outages.
A FERC report released in November presses Texas state agencies and lawmakers to explore how they could enforce these recommendations, which include weatherization measures, and exploring how the state could connect to other neighboring power grids. The report also said if generators were properly weatherized, 67% of the February 2021 outages could have been prevented.
Glick has said the Texas situation “is a wake-up call for all of us. There was a similar inquiry after Texas experienced extreme cold weather in 2011, but those recommendations were not acted on. We can’t allow this to happen again.” He added, “I cannot, and will not, allow this to become yet another report that serves no purpose other than to gather dust on the shelf.”
Beyond acting on its own recommendations, FERC should fully harness its opportunity to provide leadership—through orders, technical conferences, and rulemakings—to expand existing transmission infrastructure and deploy technologies to optimize it. New and better interconnection of high-supply areas to regions of concentrated load is critical to reliable service, and vital to President Biden’s goal of a 100% carbon-free U.S. power grid by 2035. As an example, New York Gov. Kathy Hochul recently announced support for two major transmission lines, including one from Canada, to bring clean energy into New York City.
A positive development is FERC’s advanced notice of proposed rulemaking proceeding, which asks whether reforms are needed to improve regional transmission planning, cost allocation, and generator interconnection procedures. Glick and FERC Commissioner Allison Clements have made clear the importance of transmission planning, saying the same old approach is failing us and threatens to lead “to an inefficient, piecemeal expansion of the transmission grid that would ultimately be far more expensive for customers than a more forward-looking, holistic approach that proactively plans for the transmission needs of the changing resource mix.”
To facilitate that approach, FERC should intensify its focus on transmission incentives, and redouble efforts to speed permitting and eliminate siting roadblocks. Stakeholders are keenly interested in building infrastructure that facilitates decarbonized electricity generation, and protects against issues caused by weather and cyberattacks. Ensuring such investments have a likelihood of success is key, and FERC should take all steps to facilitate investment and promote regulatory certainty.
FERC’s focus on cybersecurity is equally critical, given our aging power grid and elements sourced from adversaries that pose serious threats to national security. FERC is not alone in this pursuit; bipartisan legislative efforts are also underway to protect America’s electric grid, increase industry investments, and establish grants to protect utilities not regulated by FERC.
Extreme weather and cyberattacks make clear these are essential efforts for FERC, which has the statutory authority to be responsible for the reliability of our bulk power system. It must fully embrace that responsibility.
—Ken Irvin is a partner and co-leader of Sidley’s Energy practice group, based in the firm’s Washington, D.C., office. Terence Healey is a partner in Sidley’s Energy practice group, and is based in the firm’s Boston office.