The Federal Energy Regulatory Commission is ready to implement new authority outlined in Sen. Joe Manchin’s permitting bill, but it would be “foolish” for the agency to do so without state input, FERC Chair Richard Glick said yesterday.
The “Energy Independence and Security Act” — which was introduced Wednesday by the West Virginia Democrat and backed by the White House — would allow FERC to issue permits for long-distance transmission lines determined to be in the national interest, something the commission has never done before. It would also give authority to FERC over pipelines that transport hydrogen gas, according to the bill text.
The agency might need additional resources to carry out the new authority if Manchin’s permitting package is signed into law, Glick said, adding that he has not had a chance to read the legislation in detail. When it comes to transmission projects, however, state input will always be critical, he said.
“We can’t move forward from a progress perspective on policy related to transmission just at FERC, and the states can’t do it alone. It needs to be done together,” said Glick, a Democrat.
Glick’s remarks came immediately following FERC’s monthly meeting, where the five-person commission also proposed new incentives for utilities to address cybersecurity and rejected a bid from New York natural gas generators to overhaul the state’s capacity market. The commissioners also discussed energy challenges in New England and directed the grid operator in the region to change a winter reliability program that critics have called a giveaway to fossil fuel, nuclear and hydroelectric generators.
Whether the permitting package will be enacted remains an open question, as some progressive Democrats and Republicans in the Senate have said they would not support it (E&E Daily, Sept. 22). But if it does become law, it would represent a significant step forward to spur the development of high-voltage power lines considered critical for the transition to cleaner energy, experts say.
While the commission has long had permitting authority over interstate natural gas pipelines, it hasn’t had jurisdiction over multistate power lines, which generally need to be approved by every state through which they pass.
The existing process can open up opportunities for the lines to be challenged in court or rejected by state regulators, observers say. In addition, regional transmission projects have sometimes failed to move forward because of state conflicts over who should pay for them.
The permitting bill could address all of those issues, including by giving FERC eminent domain authority if necessary to advance projects on state lands.
“This is not authority FERC has held in the past, and it would appear to establish the same public comment and hearing requirements associated with FERC authority to site pipelines,” ClearView Energy Partners LLC said in a research note last month.
In addition, FERC would be able to “promote and encourage” the development of power lines that connect two or more grid regions, and to allocate the costs of transmission projects so that they’re paid for by consumers who benefit from them, according to the legislation.
“The transmission planning, cost allocation and permitting steps are all potential roadblocks or barriers that could slow down the expansion of transmission, and therefore slow down the expansion of wind and solar power,” Jesse Jenkins, an assistant professor of energy systems engineering at Princeton University, said in an interview. “So steps that start to remedy those roadblocks are critical to meet the emissions outcomes and realize the full potential of the Inflation Reduction Act.”
The transmission provisions in the permitting package are not without controversy. The National Association of Regulatory Utility Commissioners (NARUC) earlier this month objected to giving FERC siting authority over certain power lines, calling the proposal an “overreach and infringement on state authority.”
“The Manchin proposal will serve only to centralize and consolidate federal authority, limiting or eliminating state and local input into siting decisions, without achieving the streamlining goals of alleviating delay in electric transmission siting process,” NARUC said in a Sept. 14 letter to Senate Majority Leader Chuck Schumer (D-N.Y.) and Senate Minority Leader Mitch McConnell (R-Ky.).
Glick said he had seen NARUC’s letter and would continue to work on transmission policies in partnership with the organization, which represents state utility regulators. Asserting FERC’s jurisdiction over hydrogen pipelines, meanwhile, could be helpful for clarifying how those projects are regulated and permitted, Glick added.
“Without knowing exactly what Congress is proposing, it would be welcome to have clarification from Congress on those issues,” he said.
For his part, Manchin said this week that the legislation is “extremely balanced” and would go a long way toward fixing problems with transmission and other energy infrastructure. “I think it’ll prove itself in time,” he said.
Natural gas, New England and a ‘dire’ situation
FERC’s meeting came weeks after the commissioners met at a Vermont conference on electric reliability challenges facing New England. The all-day forum focused on what is needed to keep the power on during cold winter days when the region’s gas pipeline capacity is strained (Energywire, Sept. 9).
Yesterday, commissioners indicated the work needed to address New England’s winter energy challenges is only beginning. For now, one thing is clear, according to Commissioner Allison Clements: The “root” of New England’s reliability challenges is its dependence on natural gas, as well as its gas supply constraints, she said.
She encouraged the regional grid operator, ISO New England Inc., to move forward with a proposed comprehensive study on reliability challenges while taking a “resource-neutral” approach. Clements, a Democrat, also said she was open to other solutions to address the near-term reliability risks this winter and beyond.
“I believe the commission can lead in addressing these challenges in a manner that will not only advance the effort toward reducing the winter reliability risk that motivated the forum, but will also provide greater clarity as to what, if any, nonmarket solutions should be considered,” Clements said. “But ultimately, we must move toward a sustainable, resource-neutral solution, and there is no time like the present to begin that work in earnest.”
Commissioner James Danly suggested that ISO New England’s capacity market might no longer be working well enough to remain in place. One option to address that would be to give oversight of “resource adequacy” — or assurance that electricity supply consistently meets demand — to the states instead of the grid operator, said Danly, a Republican.
“I renew my request to my colleagues that we continue trying to figure out what to do about ISO New England, because I think the situation is dire,” he said.
In a unanimous order, FERC directed ISO New England to refile a program that aims to incentivize generators to keep at least three days’ worth of fuel on-site to help maintain a reliable electricity supply during cold winter weather.
The order was in response to a June decision from the U.S. Court of Appeals for the District of Columbia Circuit that found the program was not working as intended because nuclear, hydroelectric, coal and biomass generators in New England already kept inventoried energy supplies on-site (Energywire, June 21).
The court decision means that only oil, natural gas and refuse-burning resources, as well as wind and solar that are co-located with batteries, can participate in the program. It will be in place for winters 2023-2024 and 2024-2025, and it was not intended to be in place this year, said ISO New England spokesperson Matt Kakley.
“We’ve been expecting this order, and look forward to reviewing it and making the appropriate filing. I don’t have any comment on the court’s decision,” Kakley said in an email.
State regulators in New England, environmental groups and Glick have previously criticized the program as needlessly expensive and potentially ineffective. It was expected to cost up to $148 million per year, but with some generators like coal and nuclear now ineligible to participate, customers in New England could save about $80 million over two years, said Casey Roberts, a senior attorney at the Sierra Club.
Overall, the court ruling represents a positive step for saving New England consumers money, Roberts said. With the commission’s order yesterday, other solutions to improve the region’s reliability problems should now be explored, including seriously considering a proposal from clean energy groups to compensate renewable energy and other generation types more fairly, she said (Energywire, March 18).
The commission also rejected a 2-year-old complaint from natural gas generators in New York who had argued that subsidies for renewable energy were distorting the state’s power market.
Filed in October 2020 by Cricket Valley Energy Center LLC and Empire Generating Co. LLC, the complaint called for new rules to give fossil fuel generators an economic boost over renewable energy projects and nuclear power plants that receive zero-emissions credits or other subsidies. The companies’ proposal was similar to policies established in other regional power markets broadly known as expanded minimum offer price rules (MOPRs).
The two gas generators filing the complaint said it would improve the New York capacity market and ensure that fossil fuel generators do not retire prematurely. But critics — including the New York Public Service Commission, the city of New York and New York’s grid operator — said the changes weren’t needed and would needlessly burden the state’s clean energy objectives.
FERC’s decision comes as expanded MOPR policies have been on the decline. In June, the commission approved plans to phase out ISO New England’s MOPR, which had been in effect across the six-state grid region (Energywire, June 1). Last year, a proposal in PJM Interconnection LLC — which spans 13 states and the District of Columbia — to eliminate its expanded MOPR went into effect by law after the commission deadlocked on the plan. The issue in PJM, however, is currently being challenged in court (Energywire, Nov. 9, 2021).
Nonetheless, Danly dissented on the latest order, saying that the New York generators’ proposal could have helped ensure that state subsidies do not undermine “price formation or price signals” in capacity markets.
Cyber rule
FERC also voted in support of a notice of proposed rulemaking to provide incentives for certain utilities to harden their digital defenses against hackers. The plan has not yet been published in the Federal Register.
The proposal fulfills a congressional directive in the Infrastructure Investment and Jobs Act calling for a final rule on cybersecurity investments by May 2023. The plan also terminates a previous FERC proposed rule that outlined cybersecurity investments for utilities (Energywire, Feb. 8, 2021).
According to FERC staff, the proposal would “provide incentive-based rate treatments for the transmission of electric energy in interstate commerce and the sale of electric energy at wholesale in interstate commerce by utilities.”
The cyber incentives would either take the form of a return of equity adder, or deferred cost recovery.
While the commissioners backed the plan, they expressed doubts about its effectiveness
“If we incentivize an activity, some utilities might engage in that investment or participate in certain programs and other utilities might not,” Glick said. “As we know, it just takes one weak link in the whole system to potentially cause major catastrophic damage from a reliability perspective.”
Commissioner Mark Christie (R) likened the proposal to giving out “FERC candy.”
“They’re really sweet for those who get it, but not the consumers who have to pay for it,” Christie said.
Danly also questioned whether the North American Electric Reliability Corp. (NERC), which develops federal standards for the electric sector, is the right entity to set cybersecurity standards considering the fast-paced nature of cyberthreats.
“Is the provision of FERC candy the proper way to incentivize the rapid immediate response that I think is the policy that is being driven out here?” Danly said. “And the fact of the matter is, I do not know.”
All of the commissioners agreed that updating cybersecurity standards takes far too long. Echoing Glick, Clements said the investments should be mandatory, but noted that an incentives approach could be a way to circumvent the lengthy process for setting standards.
FERC issued a white paper in December 2020 on cybersecurity incentives that noted rapidly changing threats can outpace the length of time from proposal to enforcement.
Patrick Miller, CEO of Ampere Industrial Security and a former NERC auditor, said that the proposal is an important step, but noted it applies to a subset of utilities that are under FERC’s authority.
“It’s not some sweeping industrywide incentive where this would work for anyone out there and get some additional [return of investment] on security,” Miller said.
Additionally, Miller said the message from FERC appears to be that current standards simply aren’t good enough to match the threats from malicious hackers.
“The underlying message is the [NERC] standards aren’t good enough, we don’t think [utilities] are doing enough, clearly [utilities] need some strong incentive to go above and beyond,” Miller said.
Miller said that instead of incentivizing technology investment or utilities joining an information-sharing program, FERC should instead support cybersecurity training and workforce development.
“Typically, there’s not some new security widget that is just so awesomely disruptive that no threat actor can now do their job,” Miller said. “What’s changing is the threat actors, not their technologies. So what we need to respond is people.”
