AIR POLLUTION:

FERC chief insists agency is 'on the job' as EPA's carbon rule takes hold

The country's top electricity regulator today said that the current process for ensuring the U.S. grid remains reliable as newly proposed carbon rules take effect is working and that the Federal Energy Regulatory Commission doesn't need a more active role in advising U.S. EPA.

FERC Chairwoman Cheryl LaFleur also said the commission, a key agency overseeing the grid and energy markets, may issue a white paper outlining its advisory role as EPA implements its proposed Clean Air Act rule.

"We need to give [the public] the confidence that we're on the job and we're focused on what we need to do to ensure reliability," LaFleur said during an interview today at her office in downtown Washington, D.C. "Not meeting the reliability need is not an option."

FERC's role as a grid overseer has come under the microscope on Capitol Hill as Republicans and Democrats debate the effectiveness of EPA's 111(d) rule.

LaFleur, who will helm the agency through April 2015, said FERC is part of the discussion, but she wants to make clear what the agency's job is -- and isn't.

"Where I've been resistant is for us, FERC, an economic energy regulator, to be actually presuming to be an environmental regulator; the EPA clearly has the authority under their enabling statutes to make environmental rules," she said. "We have the authority and the responsibility to make rules about reliability standards, transmission, gas pipelines and all the things that keep the lights on."

LaFleur's Republican colleagues, on the other hand, have said the commission needs a more defined role.

Most vocal has been Commissioner Philip Moeller, who at a House Energy and Commerce subcommittee hearing last month called for a "public and transparent" forum where engineers and "appropriate reliability experts" -- including the North American Electric Reliability Corp., electric wholesale market operators, power generators, electricity consumers and states -- would discuss technical aspects of the proposed Clean Air Act rule (E&ENews PM, July 29).

Moeller argued that while FERC does not have expertise in regulating air emissions, EPA doesn't specialize in the intricacies of electric markets and the reliability implications of transforming the electric generation sector -- and FERC should take a more formal role.

But LaFleur reiterated that the process FERC used in advising EPA on its Mercury and Air Toxics Standards rule, of "having regular discourse both at the commission level and at the staff level," worked well. In that process, LaFleur and Moeller led a Forum on Reliability and the Environment with the National Association of Regulatory Utility Commissioners to review ongoing utility concerns in meeting environmental regulations.

"I haven't really been focused on whether you call that formal or informal; what I said at the hearing is that it's premature to have a big, formal study that says exactly what will happen when this rule goes into effect because of the number of different building blocks, the number of different choices that can be made," she said. "It's difficult yet to see exactly what will happen. That's where some of the back-and-forth was."

The chairwoman said it's too early for FERC to conduct a report or study to project precisely how the country's energy mix could change on a regional basis. While such a precise look was suitable for FERC's review of EPA's Mercury and Air Toxics Standards rule, she said, conducting such a study for the Clean Air Act rule would be more complex with 49 states submitting compliance plans.

"I think there's a desire for FERC to come up with a magic number that would say, 'This is precisely the amount of this type of resource we'll repower or close or change as a result of this rule,'" LaFleur said. "In the case of MATS, the decisions were much more linear because it covered a specific set of resources. ... Here, because you have 49 states coming up with different plans and they have a wide range of choices to meet the targets, it would be difficult to come up with that number despite the desire from some people to come up with that clarity."

FERC may need to take a close look at how competitive markets deploy resources if states change their resource mix after embracing EPA's building blocks, she said. The draft rule relies on four "building blocks" to set state standards, then allows states to satisfy them in any way they choose. Those building blocks consider states' ability to improve heat rates at coal plants, shift base load away from coal and toward existing natural gas combined-cycle units, and boost zero-carbon electricity and energy efficiency.

FERC, for example, would play a role in overseeing expansion of gas infrastructure to ramp up gas use, or oversee parts of transmission planning needed for a state to increase use of renewables should it choose, she added. "I think that's going to potentially be a significant driver of projects that come to FERC," she said.

LaFleur said it's possible FERC could, as it did with MATS, issue a policy statement or white paper outlining the commission's advisory role (Greenwire, May 17, 2012).

"If there were a formal role given to us in the Clean Power Plan in the next phase of it, that might occasion another policy statement," she said. "But in the meantime, as I said, I think we'll have roles already just adapting the energy infrastructure and markets to the new rule."

Twitter: @HMNorthey | Email: hnorthey@eenews.net

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