New territory for FERC: 3 members, all Democrats

By Rod Kuckro, Hannah Northey | 08/09/2016 07:37 AM EDT

Soon after the Sept. 22 monthly meeting of the Federal Energy Regulatory Commission, Tony Clark will leave the agency to return to his home in North Dakota. His departure will leave the five-member agency in a situation it’s never experienced before — having just three commissioners, all from the same political party, in this case Democrats.

Soon after the Sept. 22 monthly meeting of the Federal Energy Regulatory Commission, Tony Clark will leave the agency to return to his home in North Dakota.

His departure will leave the five-member agency in a situation it’s never experienced before — having just three commissioners, all from the same political party, in this case Democrats.

And that circumstance — especially if it were to drag on well into 2017 — could affect whether the commission acts on certain matters and color perceptions about decisions made by a three-member body.


Clark, a Republican and former chairman of the North Dakota Public Service Commission, saw his term expire at the end of June and did not seek a second five-year term (E&ENews PM, Aug. 4).

His departure follows that of Philip Moeller, the commission’s other Republican member, who left in October to take a senior position at the Edison Electric Institute.

FERC commissioners don’t approach their job as a Democrat or Republican, Clark said in an interview Thursday.

"I’m not oblivious to the fact that folks outside the agency, maybe on Capitol Hill or wherever, might say, ‘Well, wait a second, there weren’t any Republican voices in on that,’" he said.

"So I do think from the standpoint of public perception it is helpful to have more than one party represented on the commission. There may be things that come up that wouldn’t necessarily be controversial at all and may have gotten a unanimous vote anyway. To the degree that you have bipartisan representation on the commission, I think it helps insulate commission decisions from that sort of criticism," he said.

A little history

By law, FERC has five members, not more than three of whom can be from the same political party. Each serves a five-year term. The president designates the chairman.

There have been just a handful of instances when FERC had only three sitting members. Most were fairly short — a few days to a few weeks. A likely explanation is that these were instances where a new commissioner had been, or was about to be, confirmed but not yet sworn in when one of four sitting members left.

In the most recent occurrence, Suedeen Kelly left on Dec. 24, 2009, as Congress adjourned. That left Chairman Jon Wellinghoff and Commissioners Moeller and Marc Spitzer until John Norris was sworn in Jan. 11, 2010.

The longest stretch ever with just three members, according to FERC’s website, was from July 2005 to July 2006, when the commission was made up of Chairman Joe Kelliher and Commissioners Kelly and Nora Brownell.

In both of the aforementioned instances, the commission had bipartisan representation.

"The commission can fully function with three commissioners, and it has done so in the past," FERC spokesman Craig Cano said.

Maybe so, but Sen. Lisa Murkowski (R-Alaska), chairwoman of the Senate Energy and Natural Resources Committee, believes "it is important that we have a full complement of members on the commission," a spokeswoman said.

Quorum concerns

FERC rules require a minimum of three members as a quorum to conduct business, so it would get a little "tricky" should a commissioner have to recuse himself or herself, Clark said.

"The commission is intended to work with five members. I think it works best with five members, I think that each member brings his or her own perspective, it would be good to get the commission back up to a full boat," he said.

Ken Irvin, co-leader of Sidley Austin LLP’s global energy practice, shares the concerns about the effects of a recusal on commission business. For example, "if there’s something coming up" that involves an issue that Commissioner Colette Honorable may have been involved in when she was chairwoman of the Arkansas Public Service Commission, Irvin said.

"Or there could be enforcement stuff for which [FERC Chairman Norman] Bay was responsible in the Office of Enforcement when he was director" before being named a commissioner by President Obama, Irvin said. "I think he’s been recusing himself" on such matters, he said.

"So there could be situations where the commission can’t act because of a recusal and they don’t have a quorum. So I think that’ll be interesting," he said.

Yesterday, Capital Alpha Partners LLC issued a research note warning that Clark’s departure may impact the timing of FERC action of orders related to the return on equity for projects in the Midcontinent Independent System Operator. The note said the absence of Clark and Moeller "may be cause for some concern that the agency could be more receptive to environmentalist and ratepayer advocacy constituencies."

Bipartisanship needed

Mike McKenna, a Republican strategist and president of energy lobbying firm MWR Strategies, said the situation unfolding at FERC is unprecedented in that there has never been just three commissioners from the same political party.

Aside from practical matters — perhaps a FERC commissioner falls ill for weeks — there is the reality that policies are much sturdier if subjected to bipartisan debate and contrary views are presented, McKenna said.

"You’d like to think something as important as electricity could be sheltered from partisanship," he said. "But the fact that there will be no Republicans on the commission means … everything they do has the potential to be politicized," he said.

"Not having Republican commissioners is a really serious deficiency," he said.

"I really hate to see it just to go down just to three," said Marc Spitzer, a partner in Steptoe & Johnson LLP and a FERC commissioner from July 2006 until December 2011.

Spitzer, a Republican, is especially concerned with potential decisions of 2-1 where there is a strong dissent. "There are cases where dissents become the fodder for an appeals court," he said.

"If FERC is 5-0 and it’s very firm, there is Chevron and then there’s Chevron — how you do Chevron deference," Spitzer said, referring to a landmark 1984 Supreme Court ruling that held that courts should defer to agency interpretations of statutes unless they are unreasonable.

"So if FERC is 2-1 and there’s a really vigorous dissent, the arguments for Chevron deference are a little bit less," he said.

McKenna concurred, saying, "If you’re going to do something big and substantive and scary, you want more than two people to be in favor of it," meaning it’s less likely FERC will take on high-profile, controversial issues.

Issues can have partisan overtones

"Ninety-nine percent of the issues [before FERC] are nonpartisan. It’s just irrelevant," Spitzer said.

But he recalls "a handful of issues that were partisan" during his tenure, such as when Democrats on the commission would use the California energy crisis triggered by Enron Corp. "as a big political wedge."

On mergers, which FERC is called on to pass judgment, "Republicans tend to be less suspicious of the mergers of big companies than Democrats," he said, noting that FERC has its own rules to gauge market power when reviewing a merger.

"The Democrats tended to be more suspicious of the corporate mergers like when Exelon bought Baltimore Gas and Electric. Jon Wellinghoff was the chairman — he was more suspicious. When Duke [Energy] merged with Progress [Energy], Wellinghoff was probably more concerned and applied the [market power] screens in a tighter manner," Spitzer said.

And he recalled when former Commissioner John Norris, a Democrat, "and I crossed swords on [returns on equity] for transmission investments. I tended to be for higher ROEs, he tended to be for lower. I don’t think it was because I’m a Republican and he’s a Democrat. It’s sort of a philosophical issue. I just wanted steel in the ground, and I thought that the customers in the long run got better value with natural gas pipelines, oil pipelines and electric transmission being incented because you reduced the commodity cost," Spitzer said.

For example, if customers in New York get to buy Marcellus Shale gas "for $3 instead of buying at the New York citygate for $15, that’s a much better deal," he said.

"Norris’ heart was with the little guy, but I felt that the little guy was better served by having more robust power and natural gas grids," Spitzer said.

When will there be nominees?

While the issue may weigh heavily on FERC and members of Congress, McKenna said getting the Obama administration’s attention is another issue. McKenna said there’s a possibility the Senate could see FERC nominations in the lame-duck session after the November elections.

Names currently being circulated include Robert Powelson, a member of the Pennsylvania Public Utility Commission; Travis Kavulla, a Montana regulator and president of the National Association of Regulatory Utility Commissioners; and Patrick McCormick, senior counsel for the Senate Energy and Natural Resources Committee (Greenwire, Nov. 10, 2015).

"I put a 1-in-3 chance that we get some paperwork on a single Republican commissioner or two on the next couple months as they act on it in the lame duck," he said. "If not, then not until the middle of next year."

Irvin was less optimistic, saying the chances are "slim and none" in the lame-duck session.

McKenna said nominations wouldn’t surface again until March or April of next year, leading to potential confirmations in June or July.

"It’s certainly not the first 100 days priorities of a Democratic president," Irvin said of filling the GOP seats at FERC.

"I could see it lasting through summer of ’17," he said of the three-person commission.