“It existed before me. It’ll frankly probably always exist,” said Kelliher, a Republican who led FERC from 2005 to 2009. “So, it really is a question [of] how do you try to minimize the extent of that tension as much as possible.”

Kelliher served as moderator of a panel that featured FERC Commissioner Neil Chatterjee, Massachusetts Secretary of Energy and Environmental Affairs Kathleen Theoharides and ISO-NE CEO Gordon van Welie. Kelliher ultimately did not have to referee a tense exchange of ideas. Instead, an “interesting and substantive” discussion unfolded from a “polite group,” according to Kelliher.

“I thought maybe you’d mix it up a little bit just for the entertainment value of the audience,” Kelliher said.

Vision of the Future

Van Welie said that as ISO-NE did its strategic planning over the past 15 months, it was “very clear to us that there was significant change coming, and we wanted to make sure that we had appropriately positioned ourselves for those changes.”

“We have a mission statement, which is a fairly detailed statement, hardcoded in our Tariff documents … [and] essentially says that we have responsibility for designing and operating the wholesale markets, for upgrading the power system and doing transmission planning for the New England region, but it doesn’t really say anything about future intent,” van Welie said.

ISO-NE presented a vision statement at the NEPOOL Participants Committee meeting last month: “to harness the power of competition and advanced technologies to reliably plan and operate the grid as the region transitions to clean energy.” (See “ISO-NE Shares’ Vision for the Future,’” NEPOOL Participants Committee Briefs: Nov. 5, 2020.)

According to van Welie, the vision statement “is a clear leaning in by the ISO into the broad policy objectives in the region to drive towards decarbonization of the grid and the economy as a whole.”

Theoharides said one approach to meeting the decarbonization goal is the Transportation and Climate Initiative (TCI), a collaboration of 12 Northeast and Mid-Atlantic states and D.C. TCI would set a limit on carbon dioxide emissions from diesel and gasoline vehicles and allow states to invest proceeds from the sale of carbon allowances to support the goals of the program, such as electric vehicle chargers and electric buses.

The initiative estimates a cap that cuts emissions 25% from 2022 levels by 2032 while covering almost three times the Regional Greenhouse Gas Initiative (RGGI) cap, which includes the New England states, New York and more recently New Jersey and Virginia. Transportation represents 43% of emissions in the TCI region, which includes 72 million people, 52 million registered vehicles and $5.3 trillion in GDP.

“Through this initiative, we can ensure a sustained investment in transportation to give people better, more affordable transportation options, while cutting the pollution that contributes to global warming and makes people more vulnerable to disease,” Theoharides said.

Whether through TCI or RGGI, Theoharides said, it is important that states are “able to work regionally to ensure residents have cost-effective and reliable energy.” She added that a decarbonized future cannot happen without a strong partnership between federal and state governments.

“We need a federal government that will be a committed partner, investing in climate solutions [and] setting minimum standards for climate action,” Theoharides said. She said that vehicle fuel efficiency standards are “a great example of this type of minimum federal standard that has been so important.”

“Federal climate policy should inherently include policy flexibility for states to design solutions that work for their unique circumstances,” Theoharides said. “But at the same time, our ability to take meaningful action on climate change depends on that federal baseline of standards.”

Chatterjee Touts Carbon Pricing

Chatterjee, who chaired FERC until President Trump demoted him shortly after the election in November, said FERC will be pivotal in the Biden administration’s efforts to “shape energy and climate policy” with an important caveat.

“The fundamental fact is that FERC is not an environmental regulator,” Chatterjee said. “We have neither the expertise nor the statutory authority to be in the driver’s seat. When it comes to emissions policies, we are a market regulator. Our statutory mandate is to ensure the wholesale rates we oversee are just and reasonable, and that means that we have the responsibility to ensure that the markets we regulate remain competitive.”

Chatterjee said he has seen state policies negatively affect the competitiveness and functioning of wholesale markets, which required “tough, but in my view, necessary decisions” at FERC. He added that he was “truly excited” about the intersection of state carbon pricing policies and organized wholesale markets, which culminated with a technical conference on carbon pricing in September. (See FERC Urged to Embrace Carbon Pricing.)

“We learned at the technical conference that there was broad agreement that wholesale market rules, incorporating a state-determined carbon price could offer a number of benefits like increased efficiency improvements on price formation and better support for the types of long-term price signals that our energy future requires,” Chatterjee said. “It all boils down to this: Carbon pricing is a fuel-neutral, transparent and market-based approach that can be harmonized with the markets we oversee. This stands in stark contrast to policy tools like subsidies, which can amount to hidden costs that can degrade market efficiency and skew price signals, ultimately hurting the consumer.”

Chatterjee said that as a conservative Republican, he believes “fundamentally” in states’ rights and the “ability to make decisions about their local energy futures.” He also admitted that it was a “mistake … an oversight” to not have state policymakers at the technical conference.

“I thought state interests were well represented in that conversation, but we should have had more direct state participation,” Chatterjee said.

He also wanted to make clear that the proposed policy statement inviting states to introduce carbon pricing in wholesale electricity markets was not “in any way shape or form an effort by FERC to set a carbon price or require any action” under the Federal Power Act. “It was a way for us to carry this important conversation forward and provide the industry with our current thinking.” (See FERC: Send Us Your Carbon Pricing Plans.)

Transmission, Governance and Transparency

Van Welie said that without “a substantive price on carbon, there’s no choice but to engage in transmission planning out of market, per se.” He mentioned Texas’ Competitive Renewable Energy Zones as an example for developing the infrastructure needed to deliver remote wind to load centers.

“If you come from a policy point of view, you can’t get there,” van Welie said. “Then the only pathway from a transmission point of view is to do it along the lines of what the states have suggested, which is sort of like the Texas model in some ways that is going to end up deciding where we want to build the transmission in order to enable renewables. I don’t think there’s a market, per se, that will drive that outcome.”

When it comes to the governance and transparency at ISO-NE, van Welie said that he and the Board of Directors will listen to the states to “understand what’s driving the concerns” with the RTO. States have called for governance reforms at ISO-NE, including issuing a vision statement of their own. (See New England Governors Call for RTO Reform and States Demand’ Central Role’ in ISO-NE Market Design.)

“We’ve always felt that we are very transparent, and we feel like we’re goldfish swimming around in the bowl, and everybody can see exactly what we are doing all the time,” van Welie said. “Ultimately, we can’t make decisions without making a finding down at the FERC, so I think we need to understand what’s really driving this concern” about governance and transparency.

Whether it is market designs, progress and innovation or transmission planning, van Welie said he “can guarantee you it’s going to be done in a very transparent way because we’re going to be doing it through the stakeholder process.”

“There’s no way the ISO has the wherewithal to sit there in its ivory tower and come up with the solution,” van Welie said.

He added that the Tariff also “requires us to be transparent,” but if it is a question of whether the RTO is too independent, then he said that is part of a different conversation. He said CAISO’s Board of Governors is appointed by the state, and there are no “preconceived notions at this point.”

“We are listening. We want to understand,” van Welie said. “What we don’t want to do is have a conversation about governance impede our ability to make progress on the market design [and] in the transmission side of things. I think that needs to be full speed ahead, irrespective of what is happening on governance.”