Commissioners at the Federal Energy Regulatory Commission addressed concerns voiced by House lawmakers about regional transmission organization (RTO) governance and, in particular, whether it was time for the Commission to revisit Order 719, which addressed improvements to RTO governance.
Other topics raised at the June 12 hearing included, among other things, capacity markets, transmission, and reform of the Public Utility Regulatory Policies Act of 1978 (PURPA).
The hearing, “Oversight of FERC: Ensuring Its Actions Benefit Consumers and the Environment,” was held by the House Energy and Commerce Committee’s Subcommittee on Energy and attended by FERC Chairman Neil Chatterjee and Commissioners Cheryl LaFleur, Richard Glick and Bernard McNamee.
In his opening remarks, Subcommittee Chairman Bobby Rush, D-Ill., reiterated both his opposition to any FERC actions to support coal or nuclear plants, and his support for the states’ ability to choose a portfolio of resources that benefit their constituents.
He said that Illinois is promoting nuclear and renewable power as reliable carbon-free resources and does not “want to see FERC standing in the way of that progress.”
Rush also expressed support for FERC’s Order 841 and stated that it is time for FERC to issue a final rule on distributed energy resource participation. FERC in May issued an order on rehearing and clarification in which it largely upheld determinations it made in Order No. 841, which established rules for the participation of electric storage resources in markets overseen by regional transmission organizations and independent system operators.
Rush said that the states should be able to integrate more renewables through transmission and that consumers’ voices should be heard within Regional Transmission Organization (RTO) governance.
Meanwhile, Ranking Member Fred Upton, R-Mich., in his opening remarks noted the increasing challenges to building new natural gas pipelines and transmission facilities, stating that “we have started to see this process strained by states that are not performing their federally-delegated responsibilities in timely fashion.”
Upton also emphasized physical and cyber security for both the electric grid and the pipeline network, noting that the “regulatory framework for pipelines may have gaps that should be examined.”
House Energy and Commerce Committee Chairman Frank Pallone, D-N.J., recommended a review of FERC Order 1000 implementation, particularly consideration of non-transmission alternatives, noting his concern with the RTO assessment of transmission needs, which has resulted in unnecessary projects in New Jersey.
In Order 1000, which was issued in 2011, FERC reformed its transmission planning and cost allocation requirements.
Pallone also recommended greater scrutiny of capacity markets, stating that the “whole state of affairs is a mess.”
RTO governance
During the Q&A portion of the hearing, Rush, Pallone, and Rep. Joe Kennedy, D-Mass., all raised concerns about governance in the RTOs.
Pallone asked if it was time to revisit Order 719, which among numerous other issues, addressed improvements to RTO governance, while Kennedy noted that the RTOs are governed by industry stakeholders, many of whom have incentives to earn greater revenues through higher prices in the markets.
Rush noted that one of his concerns is that “consumer voices are often overlooked, ignored or cut out of the RTO process entirely” and asked commissioners to address the question of how to ensure that consumer voices are always being heard and that their interests are consistently being protected.
LaFleur said that all RTOs under FERC jurisdiction have stakeholder processes “and they all include a consumer segment.”
FERC has a role, she noted. “When we see tariff proposals come before us, our obligation is to make sure they’re just and reasonable to the end consumer that’s going to be paying the bills at the end of the day,” she said.
“We’ve heard a lot recently about potential ways to relook at Order 719 and improve stakeholder processes and I think we should be alert to ways to do that,” LaFleur said.
Chatterjee told Rush that transparency and ensuring that consumers’ voices are heard is critical. “I think it’s so important that stakeholders and consumers have their voices heard on these issues because these issues have implications for consumers,” he said.
While FERC can consider possible rule changes, it is also important for FERC to address consumer concerns as they arise, Chatterjee said.
“One of the things that’s been very enlightening since I’ve been at the Commission for a little over a year now is just the amount of frustration there has been with RTO governance around the country – and it’s not just consumer groups – it’s other stakeholders as well who have been very frustrated with it,” Glick said.
He sees merit in FERC taking a look at how the governance process works and how the various stakeholders get to participate.
Transmission
In response to a question from Rep. Bob Latta, R-Ohio, about transmission, Chatterjee said that “as we move towards the grid of the future, I fundamentally believe that transmission will be the key” and that FERC has to “get transmission policy right to ensure that that grid of the future is in place.”
FERC in March issued two notices of inquiry (NOI) in which the Commission seeks comments on possible improvements to its electric transmission incentives policy and opens an examination of whether, and if so how, to revise its policies on determining the return on equity used in setting rates charged by utilities it regulates.
“Our current approach is to put out incentives based on the risks of a particular project,” Chatterjee said. “I don’t know if that’s the smartest approach to ensuring that the grid of the future that we need is built and so we’re going to look to see what are the smart investments that need to be made to ensure that that transmission system is in place so we can maintain the reliability and resilience of the grid,” he added.
Association members earlier this year approved several new policy resolutions that highlight, among other things, the Association’s concerns about rising transmission costs.
The Association urged FERC to implement and enforce transmission planning, cost recovery, and incentive policies to contain rising transmission costs.
PURPA
Rep. Tim Representative Tim Walberg, R-Mich., focused on reform of PURPA at the hearing.
Walberg has introduced legislation (H.R. 1502, the PURPA Modernization Act), but stated that there are issues that can be addressed without statutory changes, including addressing the gaming of the one-mile rule and lowering the threshold for non-competitive entry. Chatterjee agreed that FERC could take action in these areas.
Legislation was introduced on June 10 in the U.S. Senate that would modernize PURPA. The bill was introduced by U.S. Senator John Barrasso, R-Wyoming, who was joined by Sens. James Risch, R-Idaho, Kevin Cramer, R-N.D. and Steve Daines, R-Mont., in introducing the legislation.
Capacity markets
At the House hearing, Rep. Mike Doyle, D-Pa., asked about FERC action in the PJM capacity market docket.
Chatterjee stated that he could not provide details, while LaFleur stated that she is deeply troubled by the delay and that she is “using powers of nagging” to try to get the Commission to act.
Glick said that it is incumbent upon FERC to make a decision, adding that he is not sure how the next capacity auction can go forward unless there is some action from FERC.
