FERC chairman seeks collaboration with state utility regulators

Source: By Paul Ciampoli, American Public Power Association • Posted: Thursday, February 15, 2018

In remarks that covered a range of topics including possible reform of the Public Utility Regulatory Policies Act of 1978, a new Federal Energy Regulatory Commission resilience proceeding and infrastructure and reliability issues, FERC Chairman Kevin McIntyre made it clear that he wants the federal agency to work in a collaborative fashion with state utility regulators.

He made his remarks on Feb. 13 at the National Association of Regulatory Utility Commissioners’ winter policy summit in Washington, D.C.

At the start of his remarks, McIntyre noted “how important it is to me and to FERC institutionally that we at the federal level continue and indeed strengthen our collaboration with all of you at the state level.”

He said that “we of course have certain areas of jurisdiction where there’s really no overlap whatsoever. But as to the policies, there is substantial and growing overlap between our federal role and your role” in the respective states. “That is a good thing. A challenging thing from time to time, to be sure, but that’s something we can all manage, I think, by just rolling up our sleeves and sitting down and working together.”

PURPA reform

With respect to possible reform of the Public Utility Regulatory Policies Act of 1978, the FERC chairman said that “there are a number of issues that have been raised as potentially ripe for reform, or streamlining or revision or updating. We are looking at all of that.”

NARUC in December sent a letter to FERC urging the commission to pursue reform of the Public Utility Regulatory Policies Act of 1978.

McIntyre pointed out that any major changes to PURPA would have to originate in Congress. The question is whether there are steps FERC can take “that will improve the overall playing field of PURPA today, even in the absence of congressional action. The answer is probably yes.”

McIntyre said that “We will continue to push forward in this area” and said he looks forward to the “continued collaboration and exchange of ideas” on the topic.

In remarks made in October 2017, FERC Commissioner Neil Chatterjee said that he believes FERC should continue to examine the record developed in a 2016 technical conference to determine whether changes in existing regulations and policies could better align PURPA implementation with modern realities.

Reliability

Turning to the topic of reliability, and cybersecurity in particular, McIntyre said “this issue is not going to get any smaller during our respective lifetimes. It’s demanding increasing attention and certainly getting it from us at the FERC with regard to our role in overseeing the NERC [North American Electric Reliability Corporation] standards and we are working internally and with other entities at the federal and state level and that is an area of growing activity on our part.”

He added, “I believe it’s an area of growing activity on the part of the various states and it should be and so here too I invite thoughts on ways that we can collaborate more effectively.”

FERC’s Office of Energy Infrastructure Security “is working very hard on this now with federal and state entities – many of the federal entities being entities you would think of more in the national security sector,” the FERC chairman said.

Infrastructure

Meanwhile, McIntyre said that “there’s really no argument about whether we need additional energy infrastructure at some level and in some areas, so this is something where I think we can and should make progress.”

He said that adequate infrastructure is needed not just for “our grid, for our pipeline system – it’s needed for consumers. It’s needed to ensure that consumers get what they need and what they deserve out of our energy system in this country.” McIntyre said the need for infrastructure “does vary from region to region.”

On the electric transmission side, FERC’s landmark Orders 890 and 1000 “require this open transmission planning and cost allocation process,” he noted.  He said there are varying views on whether “it’s working to the full extent that it was envisioned” as doing. “We do not shrink from that analysis. We embrace it. We’re working on it now. We had a technical conference in 2016. There is something of a record there now to be reviewed. There may well need to be some bolstering of that record in order to identify some appropriate steps that we can advance.”

On the natural gas pipeline side, FERC recently announced that it will be taking a fresh look at its existing gas certification policy statement, which was last updated in 1999.

“Time for us to dust that off and have a fresh look at it,” he said. The purpose will be to see what changes, if any, “are appropriate to that, so that if indeed there are opportunities to better or more efficiently identify where and what type of gas pipeline infrastructure projects should be going forward, and we make that happen in a way that avoids undue delay and enhances transparency” and appropriate stakeholder input, McIntyre told the gathering of state utility regulators.

FERC is not a “rubberstamp”

The FERC chairman said that “one phrase that frankly has kind of bothered me when I hear it directed” toward FERC is the term “rubberstamp,” which he said is factually wrong.

Describing FERC as a rubberstamp “fails to recognize the excellent work done” by the commission and its staff “over many, many years and working hard” and doing “exactly what is required of them under the law and under our existing policies to ensure an adequate and careful review of all of the facts that are presented with regard to a proposed pipeline project.”

Trump infrastructure plan

With respect to the recently unveiled Trump Administration infrastructure plan, “We are not even close to making our way yet through the analysis of that, although that work is commencing as we speak,” McIntyre said.

“There is a lot there. A lot of emphasis on regulatory streamlining and attempts to minimize delays in permitting, certifications, et cetera, all of which is completely valid and as it should be policy wise,” he told the NARUC meeting.

FERC will “of course be looking at it both from the standpoint of the framework of law – what is required of us, what is permitted by us? And then within that framework, working toward an understanding of what opportunities this infrastructure plan presents to us” to improve the country’s overall energy infrastructure picture, he went on to say.

Tax savings

The chairman’s remarks also touched upon the 2017 tax law.  Observing that the legislation implemented “dramatic reductions” in tax rates, he said, “this has, and thank goodness should have, tremendous effects that again make their way to consumers,” he said.

FERC has rate processes that may come into play “and soon in ensuring that that happens to the extent that we can effect it through the rates that we oversee,” McIntyre said. “Here too, though, it’s not simple. There are some challenging issues.”

He noted, for example, that on the natural gas pipeline side, “so many of the rates that are charged by the interstate pipelines that we regulate are subject to what are known as black box settlements. There is no line item you can look up and say, ‘ah, there’s the tax rate. Good, we just need to tweak this number.’ You can’t do it.”

On the electric side, generally speaking it is more transparent, “given the increased prevalence over the last decade or so of the use of formula transmission rates, but even there it’s not a straightforward matter in many cases because of timing differences. There are annual true up processes.” In some cases, there is a stated tax figure you can look up in a formula, while in other cases “it’s more of a placeholder,” he said.

“So we are looking at all of this right now, trying to figure out the most effective and efficient way to advance the ball on it so that we can get some tax relief to consumers,” he said, “and make it effective as soon as we can.”

DOE NOPR proceeding

McIntyre also commented on FERC’s recent response to a Department of Energy directive to FERC last year to consider a final rule that would have required certain organized wholesale power markets to “develop and implement market rules that accurately price generation resources necessary to maintain the reliability and resiliency” of the country’s bulk power system.

Perry said that pursuant to section 403 of the Department of Energy Organization Act, he was sending to FERC a rulemaking proposal for consideration and final action by FERC.

FERC on Jan. 8 said that it was terminating a proceeding it initiated in order to address the DOE proposed rule on grid reliability and resilience pricing.

At the same time, FERC in its order said that it is initiating a new proceeding (Docket No. AD18-7-000) to specifically evaluate the resilience of the bulk power system in the regions operated by regional transmission organizations and independent system operators. FERC asked the grid operators to respond to a series of questions as part of the proceeding.

The FERC chairman said that he thinks the DOE notice of proposed rulemaking “is something that has been widely misunderstood by many in industry. There is no question that it was validly propounded by the Secretary of Energy.”

Referring to Section 403 of the Department of Energy Organization Act, McIntyre said what that section of the statute permitted Perry to do is provide to FERC a notice of proposed rulemaking. “Essentially, a directive that FERC consider a rulemaking that is very unusual in that it wasn’t written by FERC,” he said.

McIntyre emphasized that FERC “truly embraced the challenge presented by that unusual DOE NOPR situation.”

As for the new resilience proceeding, the questions before the RTOs and ISOs “are big, they’re weighty and they’re complicated,” the FERC chairman said.

He asked “those of you involved – whether through RTO and ISO processes or otherwise – to be collaborators with us in fashioning this policy. Specifically, by sharing with us your views, candidly and in detail.”