Op-Ed: Ex-Maryland Gov O’Malley: States must reassert authority on clean energy policy

Source: By Martin O’Malley, Utility Dive • Posted: Friday, March 29, 2019

As a former governor who passed one of the most ambitious state renewable energy requirements, and as the first candidate for national office to call for 100% renewable energy nationally, I am acutely aware of the important role that states need to play on clean energy policy.  Unfortunately, federal authorities are proactively attempting to block state progress.

With the lack of leadership from Washington, D.C., on climate and clean air, many states are filling the void by re-assuming their traditional role over electricity generation. Thirty-seven states have renewable energy requirements or goals, 11 of the 13 in the mid-Atlantic region operated by PJM Interconnection have such policies, and six states are now considering going to 100% clean energy.

However, governors and state energy officials around the country may be surprised to learn that there is a federal agency in Washington that can stymie their clean energy policies.

The Federal Energy Regulatory Commission (FERC) has recently taken up the call from fossil fueled generators to put in place price supports for their power in response to state policies. The price supports, if implemented by the Regional Transmission Organizations (RTOs) FERC regulates, would force customers to pay not only for the new clean energy called for in state policy but also the old dirty energy it is intended to replace.

Now that renewable energy is less expensive than fossil fuels, PJM is actually penalizing renewable energy by saddling it with an additional fee. Not only does this prevent consumers from realizing the cost benefit of renewable energy, but the proceeds from this “renewable energy penalty” actually goes to subsidize the continued use of fossil fuels.

I know these regional and federal entities all too well.

When I was Governor, PJM and FERC stepped in to block generation procurement we pursued because we didn’t like the options they offered. We took the case all the way to the U.S. Supreme Court, which put some restraints on state actions, but also said “nothing in this opinion should be read to foreclose Maryland and other States from encouraging production of new or clean generation.”  That decision, in Hughes v. Talen Energy Marketing LLC, was serving well as the nationwide boundary between state versus federal roles on energy procurement until this recent intervention.

But now, regional operators like PJM want to extend their reach into state business by imposing ever-expanding price supports. FERC may act any day on this proposal as PJM and many stakeholders press for a decision. Recent estimates indicate it would cost a couple of billion dollars each year for consumers in the Mid-Atlantic region.

This payment to fossil generation will dramatically and needlessly raise the cost of Maryland’s offshore wind development goals which I have championed. New York and New England consumers are facing similar actions. If other states in the rest of the country aren’t careful, it could happen to them too.

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These regional entities — which were supposed to serve a reliability function and handle voluntary exchanges of power — have now somehow decided to insert themselves in states’ business. They operate like a cartel, with suppliers on committees voting on rules.

OPEC could learn a lot from the PJM stakeholder process. PJM avoids anti-trust enforcement only because the discussions concern rules that become federal policy, and anti-trust law allows competitors to discuss policy.

Wittingly or not, FERC created legal cartels. Changing their governance would help, but the real solution is taking this regional energy policy role away from them altogether and re-directing them back to their reliability and voluntary market facilitation functions.

States should petition RTOs, FERC and the courts to limit these interventions into state affairs. Congressional Oversight Committees should direct FERC to focus on reliability and stop penalizing renewable energy. If fossil fuels can no longer compete with solar and wind on price, why should renewable energy have to prop up polluters with subsidies?

True cooperative federalism should require the federal government to respect states’ energy choices. Until we can restore federal climate and clean air policies that will enable the clean energy that states are demanding, it’s up to Governors and other state leaders to fight on behalf of their constituents. And it’s time for them to assert their authority on this important issue.

Martin O’Malley was Governor of Maryland between 2007 and 2015.