Chatterjee on climate, FERC fights and his ‘cooling off’ period

Source: By Miranda Willson, E&E News • Posted: Thursday, October 21, 2021

Former Republican FERC Commissioner Neil Chatterjee is pictured on Capitol Hill in July. Francis Chung/E&E News / Francis Chung/E&E News

This spring, carbon dioxide levels in the atmosphere hit an all-time high. As of this week, the fate of major federal climate change legislation seems to be in limbo.

But Neil Chatterjee, a former member and chair of the Federal Energy Regulatory Commission, says there’s plenty to be hopeful about despite rising temperatures.

Here’s one reason why: If Chatterjee, a Republican, had tried to pitch a carbon tax to a group of Republicans five or 10 years ago, he might have been “thrown out of the room,” he said in a recent interview with E&E News. That’s no longer the case today, as more and more lawmakers, including conservatives, accept the science behind and understand the need to do something about climate change, he said.

When he first came to FERC in 2017 after being appointed by then-President Trump, Chatterjee was referred to by some as “McConnell’s coal guy,” since he was previously an energy policy adviser to Sen. Mitch McConnell (R-Ky.). During his four-year term on the commission, he embraced some initiatives seen as antithetical to climate action, including a controversial bid to subsidize coal and nuclear power plants. Chatterjee ultimately voted against the proposal, but he now wishes he had handled it differently (Energywire, Aug. 12).

Yet as FERC chair, he also championed Order 2222, which opened wholesale power markets to distributed energy resources. Earlier this year, he supported a policy statement clarifying that FERC would consider proposals to establish carbon pricing in wholesale electricity markets.

Chatterjee served as FERC chair twice: first from August to December 2017 and again from October 2018 to November 2020. On Nov. 5, 2020, Trump demoted him from the role, allegedly over Chatterjee’s support for carbon pricing and for refusing to comply with the administration’s policy against diversity training.

Earlier this year, the commission issued a policy statement clarifying that it would consider proposals to establish carbon pricing in wholesale electricity markets. Chatterjee, a Republican, joined his Democratic colleagues, Chair Richard Glick and Commissioner Allison Clements, in supporting the order.

Since leaving FERC at the end of August, Chatterjee has been working as a senior policy adviser at the Climate Leadership Council, a coalition that advocates for a carbon dividends policy to address climate change. That’s in addition to his other new role as a senior adviser on energy regulatory issues at the law firm Hogan Lovells, which he does while also staying on top of what’s going on at FERC, now as an observer.

Chatterjee says he’s not alone in his support for market-based solutions to temper greenhouse gas emissions.

“There’s a lot of thoughtful, pragmatic, conservative leaders out there who feel that we need to tackle climate change, but they don’t believe in regulations or subsidies or mandates to do it, and are focused on smart, market-driven solutions to do it,” said Chatterjee, who seems to count himself among those ranks. “I remain hopeful that that constituency is only going to continue to grow.”

At the same time, as FERC weighs potentially sweeping reforms to the transmission planning process that could ramp up clean energy, he said he hopes the agency remains attentive to reliability challenges — the agency’s “bread and butter.” And while he continues to engage with political and regulatory issues, he’s also been enjoying spending time with his two sons and daughter, who he says are still young enough to still enjoy “hanging out” with their dad.

Via phone, Chatterjee spoke about what’s ahead at FERC, his biggest policy regrets, the state of the Republican Party and congressional plans to address clean electricity.

You seem to be keeping a close eye on what’s happening at FERC since you left. What are the top things you’d like to see the commission do over the next year?

From my vantage point, obviously transmission is going to be huge focus. I hope that once [Biden nominee] Willie Phillips gets there, and I do believe he’ll be confirmed, the five of them will dig in, make the hard calls and get a negotiated outcome. I hope it’s something they can get consensus on. I don’t think transmission should be political; it’s too complicated to be political.

The second is probably around reliability and picking up on where we left off with some of the challenges we saw in different markets around the country. As the energy transition continues, as we continue to see greater risks and threats from extreme weather events and cybersecurity challenges, ensuring the lights stay on and that we have a balanced energy transition is going to be critical.

Finally, some clarity on the gas side. Right now, there’s a lot of confusion as to where the commission is going to go with its policies and approach to the evaluation of both natural gas pipelines and natural gas export facilities. I think clarity and certainty is really important there. The sooner the commission can provide some insight into their thinking on how they’re going to handle certificate applications [for natural gas pipelines], the better.

You’ve talked about your regrets from your time at FERC, as well as your biggest accomplishments. What decisions during your chairmanship do you think were the most consequential?

I think Order 2222, when it’s all said and done, will be viewed in the annals as one of the most significant orders that came out of the commission. Obviously, the compliance and implementation process will be key there, but that in conjunction with 841 [a 2018 order directing power markets to eliminate barriers to energy storage] no question is going to have a long-term impact on energy markets. Those are really consequential decisions, and part of the reason they took a lot of time is we wanted to make sure we got the policy right and that they were legally durable.

Some of the reform on PURPA [the Public Utility Regulatory Policies Act of 1978] to kind of modernize [the law] and bring it in better alignment with 21st century market realities was really significant and important.

The reliability work, FERC’s bread and butter, and working in conjunction with NERC [the North American Electric Reliability Corp.] to ensure we had adequate standards in place. And going above and beyond, working with state and federal partners, establishing appropriate challenges to stay ahead of cyberattacks and ensure the reliability of the grid. This was all really consequential stuff, and we got a lot done. I think a lot of it will have staying power.

A lot of the commissioners have weighed in on the clean electricity payment program being discussed in Congress and what it means for electric reliability. Commissioner Danly called it an “H bomb” that would end the markets. Do you agree with that?

I need to see what it looks like, but the version that came out of the House Energy and Commerce Committee didn’t seem like a pro-market approach. I need to see what the final product would look like. In my view, I prefer market-based solutions. I get uncomfortable when people start talking about targets, mandates, subsidies and regulations. I would say I have a high degree of skepticism with the version that came out of Energy and Commerce.

Politically, you seem to be somewhat of a moderate Republican in favor of market-based solutions to address climate change. Do you ever feel like a black sheep?

No. I think I’m optimistic about conversations I have with Republican leaders in Washington and in state capitals. There’s concrete examples. When I first started talking about battery storage, there weren’t a lot of Republicans that were talking about storage as an avenue to the energy transition and decarbonization. Now you’ve got Republicans in Washington and around state capitals who are talking about battery storage and battery storage technologies.

More and more, you’re seeing Republicans gravitate around innovation and strategies to decarbonize in a smart way, and they talk about market-oriented solutions. I think progress is being made there, even on some of the more contentious things I’ve committed to work on, like carbon pricing. Do I think there’s a lot of work for me to do there? Of course. But I’m not getting thrown out of the room, and I might have, as recently as five or seven or 10 years ago.

Do you wear your time serving under Trump as a badge of honor?

I was at an independent agency. Anytime you’re appointed to a position by the president of the United States, regardless of who the president is, that’s a tremendous honor. As I’ve spoken about with my experience at FERC, the initial embarrassment was on my end. I was perhaps more overtly political than is appropriate. That was something I needed to learn as I transitioned into the role.

Did you consider stepping down from the commission when Trump demoted you from chairman? Why did you stay?

I didn’t at all. I was pretty clear from the immediate aftermath that I didn’t want to go anywhere and wanted to fill out my term. That’s why FERC has five members, is bipartisan and is independent. I knew there was a lot I wanted to get accomplished still.

The reality was it was only a 10-week demotion. I was going to have to relinquish the gavel on Jan. 20 or shortly thereafter anyway. I knew that working with my colleagues regardless of who the chair of the commission would ultimately wind up to be, I’d be able to work constructively with them. I’m super proud of a lot of the stuff we did in the nine or 10 [weeks] after I got demoted.

How did you feel when [James] Danly took over as FERC chairman last year?

The commission is like an aircraft. It moves slowly. So one of the things as to why I wasn’t particularly upset about the demotion was that most of the items the commission considered throughout November, December and January, that work had all been done well in advance by my team. Commissioner Danly, in his role as chair, was simply executing on the agenda my team had been working on and put in place. In some instances, he took things in a different direction, and when he did that, I objected and dissented. But in most instances, he was carrying out the agenda we’d been working on.

What’s your relationship like with him now?

Very cordial. It’s weird that we’re still in this pandemic environment and unable to engage personally. Since I’ve left the commission, I had a one-year cooling-off period, so I’m not engaged with any of my colleagues on anything substantive. I’m certain that if we were in a phase of the pandemic where we could sit down and grab beers, I would grab beers with all my former colleagues and talk about personal things.

The agency approved a record number of liquefied natural gas (LNG) export facilities permits under your tenure. With global natural gas prices spiking, do you feel any regret that the number of approvals could have impacted domestic natural gas pricing?

Zero. The factors that are driving the price of gas are tied to inflation and some of the distorting elements in the economy right now. There’s plenty of domestic gas to go around. Energy inflation is a serious thing, and it’s only being exacerbated by some of the policies being contemplated. There is definitely a role for U.S. LNG and LNG exports going forward. Of the facilities we certificated, many haven’t even completed construction or moved forward. So I don’t think you can look at those approvals as playing any role whatsoever in the run-up of gas prices.

You come from Kentucky, of course, where coal has a long history and remains an important part of the state’s energy mix. What does the decline of coal nationwide mean for a state like Kentucky?

It’ll be interesting to see. We were talking about surging gas prices, and coal prices are through the roof as well. The reporting around the approach that’s going to be taken in the reconciliation package indicates that even to get the necessary votes to pass reconciliation, there will be some accommodations made for coal plants that have carbon capture.

My concern all along has been about the communities and that people don’t get left behind. I have deep sympathy for these regions of the country where, when the power plants shut down and the mines that feed them shut down, it devastates these communities. That’s a part that gets lost in our zeal for decarbonization.

Do you think carbon pricing will happen in the wholesale markets? What are the barriers?

I’m optimistic that someone will come forward. The key elements of a FERC policy statement are that it provides a road map. In the policy statement we made clear we don’t believe the commission can unilaterally impose a carbon price through Section 206, but if one came up through the stakeholder process, the commission could consider it and make a decision as to whether [it] was just and reasonable. I’m hoping that by putting that road map out there, there will be a consensus in a region in the short term.

NYISO seems to be the furthest along. I’ll be watching very closely to see their process. I, for one, believe that once a region steps in and demonstrates success, it could compel other regions to pursue similar approaches.

What’s something about FERC that happens behind the scenes that people don’t know about?

FERC is a black box in a lot of ways because of the quasi-judicial nature of the agency’s work and the ex parte communication rules. Commissioners don’t divulge internal deliberations. There’s so much that goes on behind the scenes. There’s a lot of work that goes into these FERC orders with the ultimate focus being on legality.

I think it was [former] Commissioner Bernard McNamee who said that certain orders the media and public pay a ton of attention to, but every order is important to somebody. There’s a lot of thought and care and deliberation and process that goes into the work.

When you think about the state of politics and climate change, do you feel hopeful for your children and their future?

I do. If we can take the temperature down and kind of allow the engineers and economists and experts to sort through these complicated policies, if we can make energy policy boring again, then we can achieve solutions. More and more, particularly amongst younger generations and my own generation, I don’t see people questioning the scientific consensus around climate change anymore. I think there’s broad agreement that climate change is happening and we need to take steps to decarbonize.

Where the breakdown comes is over how you go about it and what steps you take. I’m optimistic about the future and our ability to tackle it.

Batteries offer a huge potential opportunity for the future, and we need long-duration storage. But I’m optimistic that it will come about. FERC Order 2222 is one of the elements that I’m hoping drives innovation and efficiency. I’m excited about possibilities around hydrogen and other innovations. There’s a lot to be excited about domestically and globally in our ability to continue to deliver electricity in a reliable and affordable way while also taking care of the planet.

What have you been doing for fun lately?

I’ve got three kids who are at pretty awesome ages right now: About to turn 15, just turned 13 and a 9-year-old. This is a golden time in our lives; they’re still young enough that they want to hang out with me, but they’re old enough that they’ve got their own interests and activities. Their schedules pretty much fill up my days on weekends.

My kids keep me humble, and they did throughout FERC, with both the ups and the downs. When things were going great and I was receiving a lot of accolades, they were the first to bring me down a peg. When I was stressed and things were difficult to manage, they were the first to pump me up. So I’d say my family and my kids are the anchor of my enjoyment in life.

This interview has been edited and condensed for clarity.