Electricity Markets

In Q&A, Glick weighs in on mandatory capacity markets, other issues

In response to questions submitted by the American Public Power Association, Federal Energy Regulatory Commissioner Richard Glick recently offered his thoughts on a wide range of key issues facing the power industry including mandatory capacity markets, transmission incentives and regional transmission organization governance.


APPA: When FERC issued its notice of inquiry on transmission incentives in March, you said it was not clear to you that the incentives being handed out are actually incenting anything.  You said, “We shouldn’t be handing out what some people refer to as FERC candy, without actually achieving something beneficial in return.”

Do you think transmission incentives are needed in today’s energy landscape?  How can FERC ensure that transmission incentives are working as intended?

Commissioner Glick: Transmission plays a number of critical roles in the bulk power system.  Ensuring reliability is always first and foremost, but transmission facilities can also help to access low‐cost generation resources and incorporate remotely located renewable resources.  I believe that the Commission’s transmission incentive policy under section 219 of the Federal Power Act can play an important role in encouraging companies to develop needed transmission facilities and in making sure that those facilities are used in the most efficient and reliable manner.  

But section 219 also requires that transmission rates, including any incentives, be just and reasonable.  To meet that standard, we need to make sure that our incentives policy is targeting the right types of investments and that the incentives we authorize—which ultimately come out of customers’ pockets— are actually incentivizing those investments.  I don’t see how those incentives can be just and reasonable if that’s not the case.  I hope that the open notice of inquiry will provide a forum for taking a hard look at our incentives policy and ensuring that the incentives we authorize are money well‐spent.   

Capacity markets

APPA: While recognizing the many open dockets on capacity markets, broadly speaking, what are the primary concerns you have about these constructs, and what capacity market reforms would you like to see implemented over the next few years? Are there features of these constructs that are providing benefits?

Commissioner Glick: Any capacity construct must ensure resource adequacy at just and reasonable rates.  I am, for a number of reasons, increasingly questioning whether mandatory, centralized capacity markets are a wise approach to achieving that end.  One trend we’re seeing increasingly is that these markets do not reflect the factors that are actually driving resource decisionmaking.  In a number of eastern states, for example, the development of new resources is being driven by state and federal policy, not the price in the capacity market.  To be clear, that’s the way the FPA is intended to work—states and self‐regulated utilities have authority over resource decisionmaking—but it does raise questions about whether a mandatory, centralized capacity market remains an appropriate resource adequacy construct. 

In addition, over the last several years, there has been a near‐constant barrage of proposals to change capacity market rules in order to increase prices, partly as a way of offsetting decreasing prices in the energy markets caused by low‐cost natural gas and renewables.  I question whether customers are getting much value in exchange for these higher prices.  Instead, the main effect seems to be higher reserve margins, which, in turn, dull the price signals in the energy and ancillary services markets, creating a vicious cycle that produces even more pressure to raise prices in the capacity market.  

I’d like to see us get out of these capacity market wars and focus instead on ensuring that markets are procuring the services needed to operate the electricity grid of the future.  For example, I am interested in exploring new ancillary service products that could incentivize the development and operation of resources that could provide grid operators with the tools they need to run the grid safely and reliably, both today and as generation resources change in the future.  I think a serious conversation about how to go about procuring those services would be a much better use of everyone’s time than continuing to debate how prices are set in mandatory, centralized capacity markets.  

You’re right to observe the large number of pending proceedings we have at the moment, which means that I cannot provide further detail.  But I think that the number of pending proceedings underscores my concerns about the stability of mandatory, centralized capacity markets.  At times it seems like almost every aspect of these markets is subject to a proposed change or in some stage of litigation, whether before the Commission or the courts.  That dynamic creates considerable uncertainty, which undermines the very role that these markets are supposed play and, in my view, raises serious questions about whether they are providing benefits sufficient to offset their costs.   

Western EIS formation

APPA: As you know, the Southwest Power Pool is moving forward with plans to form a Western Energy Imbalance Services Market, which would compete with the California ISO’s EIM.

As these market changes shake out in the West, with their potential impacts on reliability, is there anything that you and your fellow commissioners are keeping an eye on in particular?

Commissioner Glick: We’re always keeping a keen eye on developments in the West.  One area that I have been watching especially closely is the reliability coordinator role and the transition of responsibilities from Peak to the California ISO and the Southwest Power Pool.  Happily everything seems to be going smoothly so far.  

A slightly longer‐term area of interest is the rapid growth of state policies and utility commitments to decarbonize the electricity mix.  The electricity sector remains one of the largest sources of greenhouse gas emissions and many states, including several western states, have targeted the electricity sector for rapid cuts in greenhouse gas emissions.  In addition, a number of utilities — including some, such as Idaho Power, in states that don’t have greenhouse gas reduction goals — have announced a goal of getting all their electricity from emissions‐free sources in the coming decades.  Meeting those goals will require changes in how the bulk power system is planned, operated, and paid for.  The Commission won’t be the driver behind those changes, but there may be a supporting role for us to play in some respects.

I am mindful that the best thing for the Commission to do when it comes to the West is often to stay out of the way.  One of the things that has made the California ISO’s EIM so successful is that it grew organically in the West and not under direction from the federal government.  That’s important for us to remember as we monitor developments in the West, particularly when it comes to resource decisionmaking.  

RTO governance

APPA: You said at a recent House hearing that you see merit in FERC examining how the RTO governance process works and how various stakeholders get to participate in that process.

Could you elaborate on these comments and do you expect FERC to take a look at RTO governance issues and possible rule changes this year?

Commissioner Glick: The one thing stakeholders seem to agree upon these days is that there are problems with the stakeholder processes.  The level of disagreement varies in the different RTOs and ISOs.  

Some level of tension is inevitable in any stakeholder process.  After all, these processes provide a forum for entities with differing interests to get together and discuss policy—often with real money at stake.   But it is critical that any stakeholder process provide a venue for stakeholders to be heard and discuss their priorities.  Similarly, those discussions must play a role in the RTO’s or ISO’s decisionmaking process.  If those decisions are entirely disconnected from the stakeholder process, then that process is a waste of time and money.  I believe that it’s our responsibility at the Commission to make sure that that isn’t happening in any of the RTOs or ISOs.  It’s been more than a decade since the Commission issued Order No. 719 and a lot has changed in the RTOs and ISOs.  At some point, we’re going to have to take a look at our rules and make sure that they have kept pace with that change.  

The timing of any action that the Commission might take is a matter for the Chairman to decide. 

PURPA reform

APPA: With respect to possible reform of the Public Utility Regulatory Policies Act of 1978, are there specific parts of PURPA that you think are ripe for FERC action and, if so, what are they? Do you expect the Commission to take action on PURPA reform this year?

Commissioner Glick: I think that there are elements of the Commission’s current PURPA regulations that we need to update.  The best example is the one‐mile rule.  The record assembled following the Commission’s 2016 technical conference certainly suggests that some developers are exploiting that rule. 

I am also open to considering other reforms that would help to realize the goals that Congress had in mind when it enacted PURPA.  For example, the National Association of Regulatory Utility Commissioners—and Travis Kavulla in particular—has suggested ways for introducing more of what it describes as real competition into the Commission’s approach to PURPA.  That is an intriguing approach and one that I would like to see the Commission seriously consider.  

That being said, we need to remember that Congress considered fundamental reforms to PURPA when it was drafting the Energy Policy Act of 2005, but settled on a more modest approach.  We at the Commission need to remain humble and take our cues from Congress.  Fundamental reforms to the current PURPA regime—as some have called for—should come from Capitol Hill, not the Commission.  

Again, the timing of any action is a matter for the Chairman to decide.  

Climate change

APPA: You have joined with Commissioner LaFleur in arguing for FERC to take into account greenhouse gas emissions and climate change as part of its permitting responsibilities.

Do you see climate change becoming a more important consideration in future Commission decisions, and in what contexts do you envision the issue arising?

Commissioner Glick: Climate change represents an existential threat and several of the Commission’s regulatory responsibilities have consequences for greenhouse gas emissions, whether directly or indirectly.  The Commission’s permitting responsibility for new interstate natural gas pipelines is probably the best example.  The D.C. Circuit has held unambiguously that climate change is something that the Commission must consider when evaluating whether a proposed natural gas pipeline is in the public interest.  I don’t believe that the Commission is doing that today.  I expect that, at some point in the future, the courts will force the Commission to give climate change the serious consideration that it deserves and that the law demands. 

A number of the Commission’s other responsibilities can have indirect effects on climate change.  For example, some of the Commission’s major Federal Power Act rulemakings, such as those involving demand response [Order Nos. 719 and 745], energy storage [Order No. 841] and the integration of variable energy resources [Order No. 764], are aimed at breaking down barriers to new technologies, which will ultimately have environmental benefits for consumers.  In each case, the Commission applied a traditional interpretation of its responsibilities under the Federal Power Act and did not act for the purpose of addressing climate change.  But that doesn’t mean that we need to be blind to the consequences of the Commission’s actions.  By eliminating barriers to new technologies, the aforementioned rules are helping to facilitate the deployment of these technologies, which are likely to play an important role as we transition to the electricity grid of the future.  

Stakeholders are increasingly recognizing this dynamic and, as a result, I suspect that climate change will continue to become a higher profile issue at the Commission.  

Personal and professional

APPA: Where did you grow up and how did you wind up working in Washington, D.C.?  Is it difficult to balance family and work life as a FERC Commissioner and how do your personal values spill over into your work?

Commissioner Glick: I grew up in Connecticut but went to college (George Washington University) and law school (Georgetown University Law Center) in Washington, D.C.  I enjoyed the city very much and the fact that so many people here are involved in policy and political jobs so I decided to make it home.

I think almost everyone that works in government or similar jobs in this area struggles with achieving an appropriate work‐life balance.  However, I appreciate the flexibility that comes along with being a FERC commissioner that enables me to leave the office in time to coach my son’s Little League team, which is an important part of my life.

I try to do what I can to be a better citizen including protecting the environment.  For instance, I drive a plug‐in electric hybrid and our family purchases a renewable energy product from our electricity provider.

[Glick was nominated to FERC by President Donald Trump in August 2017 and confirmed by the U.S. Senate on November 2, 2017. Before joining the Commission, he was general counsel for the Democrats on the Senate Energy and Natural Resources Committee, serving as a senior policy advisor on numerous issues including electricity and renewable energy. His full biography is available on FERC’s website.]