Electricity Markets

Association focused on infrastructure, other legislative issues

With the 116th Congress underway, the American Public Power Association has a full plate of legislative priorities for the year including potential infrastructure legislation that could include an energy title and being ready to fight any further attempts to divest the transmission assets held by the Tennessee Valley Authority (TVA) and Power Marketing Administrations (PMAs), said Delia Patterson, the Association’s Senior Vice President, Advocacy & Communications and General Counsel.

She made her comments at the U.S. Energy Association’s 15th Annual State of the Energy Forum in Washington, D.C., on Jan. 24. In her remarks, Patterson outlined the Association’s legislative and regulatory priorities.


With respect to public power’s priorities in the 116th Congress, Patterson noted the importance of infrastructure for public power.

Speaker of the House Nancy Pelosi has said that moving an infrastructure package is something that Democrats in the House of Representatives would like to do. “We believe that infrastructure legislation could show up on the Senate side as well,” the Association official told the USEA forum.

The Association has been involved in prior efforts to get infrastructure legislation across the finish line in Congress, Patterson said.

The Association has been pushing for hydropower licensing and relicensing reform. “A lot of our members depend on hydro and the processes for licensing or relicensing have been pretty lengthy and duplicative in certain areas,” Patterson said.

Tax-exempt municipal bonds continue to be a top priority for public power. “Tax-exempt financing is how we invest in new infrastructure,” Patterson noted. Public power utilities use tax-exempt financing to invest in generation or transmission and distribution. “We want to preserve that.”

Patterson noted that while the Tax Cuts and Jobs Act of 2017 maintained public power’s ability to use tax-exempt financing, it eliminated the use of tax-exempt advance refunding bonds. The Association would like to see the reinstatement of tax-exempt advance refunding bonds.

Another priority for the Association in the legislative arena relates to the possible divestment of transmission assets held by the Tennessee Valley Authority (TVA) and three of the Power Marketing Administrations (PMAs) and moving from cost-based rates to market-based rates.

“We pushed back on that idea strongly, along with a number of other folks within the industry when this was proposed in the President’s FY 2019 budget. Congress pushed back as well and did not accept the proposal,” Patterson said. “If it comes up in the Fiscal Year 2020 budget, we will be ready to fight again.”

In the area of grid security, Patterson said that Congress has been very active in this area “and we want to be there” to remind lawmakers that the electric utility sector is one of the few critical infrastructure sectors that has mandatory and enforceable reliability standards.

“We’re pushing to increase information sharing and liability protection with respect to grid security,” she went on to say.

The Association has a three-year, cooperative agreement with the Department of Energy under which the DOE has provided the trade group $2.5 million per year “to help our members with cyber security so we’re really appreciative of that.”

Wholesale power markets continue to be an important issue for the Association. The Association supports continued oversight of regional transmission organization-run wholesale electricity markets. The Association’s “main issue is to preserve our members’ self-supply rights within existing mandatory capacity markets,” Patterson told the forum.

Environment and the 116th Congress

On the environment front, Pelosi has reinstated the Select Committee on Climate Change and it has been renamed the Select Committee on the Climate Crisis.

“It’s clear that on the House side we should expect to see hearings on climate change and we plan to be involved in those discussions,” Patterson said, noting that the select committee is required to complete a report addressing next steps on climate change by March 2020.

“It’s not likely that Congress as a whole will move anything across the finish line,” the Association official said, but regardless there is an expectation for a lot of activity in the House.

The House may also move smaller packages to address climate change through legislation on electric vehicles, distributed energy resources and renewables, Patterson said.

Three key electric regulatory issues

Patterson said that there are three key electric regulatory issues for the Association: (1) RTO and ISO organized markets, particularly mandatory capacity markets; (2) federal and state jurisdictional issues and the changing grid; and (3) rising transmission costs in FERC-regulated rates.

In the RTO and ISO markets, Patterson touched about capacity market matters. Among other things, she noted that FERC “any day now” is expected to issue an order involving an ongoing investigation of the PJM Interconnection capacity market (Docket No. EL18-178, et al.). The Association participated in this docket at FERC.

The Association and several other energy-related groups in late December told FERC that competitive wholesale electricity markets do not exist to guarantee a return on merchant investments or to protect merchant plant investors from market risks. The letter was submitted as part of the PJM docket.

The Association also participated in the resiliency docket that FERC instituted after turning aside a DOE Notice of Proposed Rulemaking. At the same time, FERC in its order said that it was launching a new proceeding (Docket No. AD18-7-000) to specifically evaluate the resilience of the bulk power system in the regions operated by RTOs and ISOs.

“We definitely believe in fuel diversity,” Patterson said. “We didn’t feel like the DOE NOPR was the way to go. We said to FERC, on resilience this is a regional issue. Let folks work things out on a regional basis.”

RTOs and ISOs last year responded to FERC by submitting filings that discussed how to define resilience, detailed their efforts to assess and maintain grid resilience and, in some instances, offered proposals for ways in which to enhance resilience.

“Based on the filings that the ISOs and RTOs submitted in the docket, we didn’t see that there was necessarily a resilience emergency,” the Association official said.

Rising transmission costs

During her presentation, Patterson also presented a slide showing that almost half of the transmission projects that were approved between 2013 and 2017 did not go through the full vetting process that happens in the ISOs and RTOs. “That’s a big problem,” she said.

The data was from a Brattle Group report, “Transmission Competition Under FERC Order No. 1000: What We Know Abut Cost Savings to Date.” (Oct. 25, 2018).

“We’re concerned about transparency. We’re concerned about rising transmission costs,” Patterson said. FERC Chairman Neil Chatterjee has said that FERC wants to continue to look at returns on equity and incentives “and that could mean higher ROEs and higher incentives.” Patterson wrote about transmission costs in a recent blog.

Association rate design paper to be issued in 2019

Patterson also noted that the Association is set this year to release a rate design paper.

The paper will include insights from six industry experts that details what they see as the future of rate design.

Patterson noted that the draft version of the paper revealed a common thread. Namely, that “most everybody agreed that time-based pricing” should be incorporated into future rate designs.

The paper is scheduled to be released by the end of the first quarter.