Obama’s pick to lead FERC fends off critics, piques more questions

Source: Hannah Northey, E&E reporter • Posted: Friday, June 6, 2014

President Obama’s pick to lead the Federal Energy Regulatory Commission shot back at critics — and tried to soothe Republican skeptics — in documents submitted this week to the Senate Energy and Natural Resources Committee defending his handling of mergers and enforcement cases.

But while Norman Bay appears to have found allies on the panel of 12 Democrats and 10 Republicans, at least one top GOP member said his answers raise more questions.At issue are responses from Bay, who as head of FERC’s enforcement division has been seen as a tough cop in overseeing Wall Street giants, to questions that members of the Senate committee raised during his confirmation hearing last month.Indicating continuing concern was the Senate panel’s top Republican, Lisa Murkowski of Alaska, who has repeatedly questioned the former prosecutor’s energy chops and Obama’s decision to select Bay over Cheryl LaFleur, the agency’s current acting chairwoman and a Democrat.

“We’re still reviewing,” said Robert Dillon, a spokesman for Murkowski. “At the moment, Bay’s responses raise more questions than they answer.”

Murkowski in her questions probed Bay’s work in March 2012, when he signed a consent agreement with a subsidiary of Constellation Energy Group — an entity that was also participating in merger proceedings before FERC at the time. The senator asked Bay about the settlement agreement he signed on March 8 and its relation to the merger, which was approved the next day. Murkowski asked if Bay is concerned about the appearance of a “quid pro quo” in connection with the two documents.

Bay responded, “I would be concerned about the appearance of a quid pro quo in a connection between merger reviews and enforcement.” But he went on to explain that the merger review and investigation into Constellation’s trading activities were conducted by staff members in separate parts of FERC and that he had not encouraged the company to settle to advance the merger.

“I do not know whether anyone else at FERC did so,” Bay wrote.

Another major point of contention among Republicans was criticism aired by FERC’s former general counsel in an article in the Energy Law Journal and an op-ed in The Wall Street Journal that FERC handed out excessive fines and lacked transparency about its process. Bay, notably, is known for overseeing recent multibillion-dollar settlements with Wall Street giants like JPMorgan Chase & Co.

In response to questions from Sen. John Barrasso (R-Wyo.), Bay rejected accusations that FERC’s enforcement under his direction was not transparent, noting that he had issued a formal policy for disclosing evidence throughout investigations when he stepped into his current role in 2009. That policy, he said, ensures that defendants are not denied access to “exculpatory evidence” — information that usually proves innocence. The Energy Law Journal article, he said, was “fundamentally flawed” and contained legal and factual errors.

“I reject the assertion made by the authors of the Energy Law Journal article that ‘enforcement staff routinely fails to produce exculpatory materials,’ and I am not aware of any instance in which staff has violated the policy,” Bay wrote.

Barrasso also asked about off-the-record communications outlined in The Wall Street Journal op-ed, which the senator said “call into question FERC’s commitment to the principles of due process.”

Bay has said he may need to recuse himself from a total of 43 pending investigations before FERC. Bay vowed to Barrasso that, should he be confirmed, he would follow all appropriate ethics procedures and codes.

The tough GOP questions could indicate a turbulent confirmation for Bay. But he has secured some backing on the panel, and even one Republican last month said he’ll likely get confirmed.

“I assume you’re going to be confirmed,” Sen. Rob Portman (R-Ohio) said at Bay’s confirmation hearing.

EPA, grid

Bay and LaFleur, who is up for another five-year term at the agency, also fielded questions about challenges facing baseload coal and nuclear plants — a top concern for the critical Democratic vote of Sen. Joe Manchin of West Virginia.

Manchin at the confirmation hearing asked Bay how he would assess the effects of U.S. EPA’s implementation of new carbon-curbing federal rules and ensure grid reliability is maintained — a hot topic in Manchin’s coal-rich home state.

Bay in his written response to the Senate committee said EPA’s regulations, including the agency’s Mercury and Air Toxics Standards, “will be manageable.”

He pointed out that the MATS rule grants extensions in some cases, and EPA’s new carbon-capping rule released this week for existing power plants “offers broad flexibilities that will empower states to design” plants that ensure resource adequacy and reliability.

“The proposal does not impose any plant-specific requirements, so any generating units needed to ensure reserve margins can remain in service to meet peak loads even if they are dispatched less intensively in order to reach state-wide emissions targets,” Bay wrote. “In addition, the proposal does not require any compliance until 2020, and it gives states flexibility over a ten-year period through 2029 to reach their overall emission rate targets.”

But Bay also vowed to monitor the issues if confirmed and said “FERC must continue to work closely with the EPA throughout this process.”

At another point, Bay said he does not believe the commission has a role in capping greenhouse gas emissions but that the agency is there to evaluate its market rules to ensure they can accommodate changes in policy from Congress and other agencies.

LaFleur also commented on the EPA’s new carbon-capping rule for existing plants, saying it “gives significant flexibility to states and permits regional approaches to compliance.”

She also touched on enforcement matters.

In response to senators’ questions, LaFleur said she was not aware of any specific agency rules or practices that should be changed to align with investigative guidelines of other agencies but said she was keeping an open mind.

“I am always looking for ways to improve our procedures to make them more efficient and fair, and that is true of enforcement matters and matters throughout the commission,” she said.