FERC chairman urges caution on Trump carbon rule

Source: Peter Behr and Hannah Northey, E&E News reporters • Posted: Tuesday, November 6, 2018

The nation’s top grid regulator is urging his EPA counterparts to hold up revising the Obama-era Clean Power Plan until they’ve completed a “rigorous, detailed analysis of the possible unintended consequences” of regulating carbon as the power sector grapples with coal and nuclear plant closures.

Neil Chatterjee, speaking as chairman of the Federal Energy Regulatory Commission, in comments to EPA said any rule with far-reaching effects on the bulk power system should be underpinned by deep analysis.

He then pitched for FERC to do the work, saying it has the staff, authority and expertise to compare the effects of the now-stalled Clean Power Plan and the Trump administration’s proposal revisions, the Affordable Clean Energy (ACE) rule.

While Chatterjee in the letter to EPA offered blistering criticism of the Obama-era Clean Power Plan, he also stopped short of offering a full-throated endorsement of the ACE rule. Chatterjee noted FERC had not yet conducted a full analysis of the proposal but that upon initial review it appears to “cure” some of the “potential deficiencies” of the sidetracked Obama EPA plan.

His cautionary comments also said the Obama EPA overstepped its authority to regulate greenhouse gas emissions in its 2015 Clean Power Plan, echoing a common policy complaint by conservative Republicans.

“[A]s originally proposed, the Clean Power Plan would have allowed the Agency to impose sweeping changes in the composition of the nation’s bulk-power system through administrative action without a clear statutory directive or limiting principle,” he wrote, before suggesting a possible requirement for congressional action on the power plant carbon issue — a policy area marked by total political deadlock.

“To the extent the resolution of these issues presents an impassable ‘regulatory gap’ that neither agency can overcome while remaining within its bounds as a ‘creature of statute,’ then it may be necessary to request specific guidance from Congress through appropriate legislation,” he wrote, referring to FERC and EPA.

The letter is likely to be parsed for clues on how Chatterjee will use his role as commission chairman to shape FERC’s response to the stalled push by Trump and the Department of Energy to deliver subsidies to coal and nuclear plants to strengthen grid security.

FERC unanimously rejected a prior Energy Department proposal to help coal and nuclear operators, and then opened a comment docket that drew a large response but has not yet led to any new action by FERC.

DOE has called for a two-year study of how cyber or physical attacks on U.S. gas pipelines and other critical infrastructure could jeopardize electricity supply that increasingly depends on natural gas. The DOE plan would subsidize an undisclosed number of coal and nuclear plants to keep them from closing before the two-year study was completed.

Chatterjee appeared in the letter to also be hitting the “pause” button.

“Any regulatory promulgation that will have profound effects on the bulk-power system should be supported by a detailed engineering-driven analysis of its impact,” Chatterjee wrote. “The Commission has the statutory authority, staff expertise, and resources to provide that analysis.”

‘Independent FERC campaign’

Chatterjee’s comments are dated Oct. 31, the same week the new chairman and former aide to Senate Majority Leader Mitch McConnell (R-Ky.) vowed to keep politics out of the agency.

But some questioned whether the chairman’s comments aligned with that stated intent.

John Moore, director of the Natural Resources Defense Council’s Sustainable FERC Project, said it’s rare but perhaps not unprecedented for a FERC chairman to weigh in with his own views, not those of the commission. An alternative route, Moore added, would have been for FERC to hold a technical conference and go from there.

“I don’t think it helps terribly his independent FERC campaign, mainly because it attacks a plan that’s a few years old now and represents his views and not those of the commission,” said Moore.

Moore also disagreed with Chatterjee’s assertion that the Obama EPA plan would have triggered sweeping changes on the grid, saying the original rule would have had relatively incremental effects on the pace of reductions.

Chatterjee’s comments joined thousands of reactions to EPA’s revised rule, including personal pleas to cut air pollution. In other comments, opponents called for stricter climate action while others faulted EPA for drafting a rule at all (Climatewire, Nov. 1).

The ACE rule would cut carbon emissions by making power plants increase the efficiency of their operation and give states broad discretion to determine how much to regulate. The proposal also includes a parallel measure that would change when plant modifications trigger permitting requirements under the Clean Air Act’s New Source Review program.

If implemented, ACE would be a marked change from the Obama-era Clean Power Plan, which gave states a variety of options for cutting carbon and set an overall nationwide target of reducing power plant emissions by 32 percent below 2005 levels by 2030.

The Trump plan does not propose any target for carbon emissions reductions from power plants.

Walking a fine line

Alison Silverstein, a grid consultant and former senior adviser to FERC Chairman Pat Wood, said in an interview that Chatterjee’s letter appeared to walk a fine line.

“I don’t read the letter as supporting the new plan. He seems to be heaping dirt on the old Clean Power Plan but not saying the new one is wonderful, based on independent analysis of its own merit,” she said.

“Frankly, it’s too late for FERC to perform impact analyses of the CPP,” she said. “Time and circumstances have moved on.” A lot of the power plants that CPP critics said might retire because of the plan have already closed “because of bad economics,” Silverstein said.

She said because of good grid management, “we have exceeded many of the [generator] retirement numbers in the CPP ‘sky is falling’ scenarios without significant or drastic reliability and performance issues.”

But Silverstein said she didn’t see Chatterjee’s comments as overt support of a financial lifeline for coal or nuclear.

“I take him at his word that he recognizes FERC’s independence, and the fact that this letter is so clearly framed as an historical issue and material rather than forward looking supports that,” she said.

Silverstein questioned Chatterjee’s apparent readiness to give FERC a central role in analyzing the impact of coal and nuclear plant retirements on grid operations, noting the FERC chairman’s mention of a “detailed engineering-driven analysis of any regulatory changes” affecting the grid.

Silverstein said there are other entities paid to perform such work, namely the North American Electric Reliability Corp. and grid reliability coordinators.

“They do this every day, and their analysis is telling us that to date, significant changes in the power system are not creating grid reliability issues,” she said. “They have much more practice with these high stakes, engineering analyses than FERC — and with living with the consequences.”

FERC, she said, should be spending more time helping the operators plan, react to and manage the markets rather than trying to gear up for analyzing data that “may not be as well informed and up-to-date” as the operators’ information.

Grid operators’ comments have backed up Silverstein’s point.

Andrew Ott, president and CEO of PJM Interconnection, the nation’s largest grid operator, said during a media briefing last week that grid disruptions are at least five to six years out (Energywire, Nov. 2).

“We think government intervention is unnecessary,” Ott said.

Grid operators must remain alert to new threats to grid reliability from a number of directions, including accelerated plant retirements and vulnerabilities of power plant fuel supplies, Ott advised.

Rather than a top-down national plan as the Trump administration has been drafting, FERC should respond to requests from grid operators like PJM for clearer authority to deal with particular reliability issues that the operators have pinpointed, Ott testified last month before the Senate Energy and Natural Resources Committee.

PJM has formally asked FERC to declare a policy that regional grid organizations like PJM are responsible for determining “resilience” vulnerabilities of their systems to cyberattacks and extreme natural disasters. It should also order gas pipeline operators to provide more operational information about their security issues. That would address the difference in the mandatory cyber rules that FERC issues to grid companies and the voluntary pipeline cyber guidelines overseen by the Transportation Security Administration.

“We’ve put in quite a few suggestions to FERC, realizing they are a busy organization, we really need to move forward with some of these issues,” Ott said.