By Rich Heidorn Jr.

WASHINGTON — FERC told Congress last week it is ready to act on distributed energy resources following a technical conference earlier this month, assuring House members they will not encroach on state jurisdiction.

During a hearing before the House Energy Subcommittee on April 17, commissioners said the April 10-11 technical conference on DERs had helped them answer the questions that had led them to delay action on distributed resources when they issued Order 841 on energy storage in February. (See FERC Rules to Boost Storage Role in Markets.)

Commissioner Richard Glick cited questions about DERs’ reliability and how the commission interacts with states on aggregation. “I think we got enough information [at the technical conference], in my opinion, to address the issue,” he said in response to a question from Rep. Kathy Castor (D-Fla.). (See Gatekeeper or Facilitator? FERC Panels Debate EDCs’ DER Role.)

FERC Chairman Kevin McIntyre agreed, saying “the record we are assembling in that process will enable us to take steps comparable [to the commission’s action on storage]. I’m not saying that to forecast a particular outcome. I’m just saying that we’ve got enough now to go on to make a determination about what the appropriate steps are.”

Commissioner Cheryl LaFleur said there are two “macro issues” to be determined: one financial, the other operational.

She said ensuring that DERs do not receive duplicate payments at the wholesale and retail levels “will require some very specific rules.”

LaFleur said the commission got valuable testimony on the second issue: “how the different control centers talk to each other.”

“I think one of the big issues we’re going to have to think about as a body now is how uniform we make the rules as we put them out as opposed to allowing regional variations,” she continued. “Some of the people testified about wanting different regions to go in different directions here. I’m somewhat of the belief that the technology is marching so quickly that we should try to figure out what best practices are now. That’s what we’ll be debating.”

Rep. Gregg Harper (R-Miss.) questioned whether FERC was intruding on state and local regulators. “With the issuance of Order No. 841 and its proposal for the aggregation of DERs for the purpose of participating in wholesale electric markets, FERC could expand its authority at the expense of states and localities,” he said.

“Honestly, I’m not particularly troubled by any sort of jurisdictional creep because that power would make its way onto our grid in a way that we could regulate it only after it had been aggregated and put forth to a market that we regulate — a wholesale electric market,” McIntyre responded. “And there certainly is no attempt on the part of this commission to in any way thwart the ability of the state, for example, to determine in a retail-level transaction what the owner of the generating resources — what level that owner would be compensated. Honestly, I don’t see that as being a particularly grave concern.”

The commission will likely be inviting post-technical conference comments after transcripts of the technical conference are posted.

The three-hour hearing was the first with the full commission since 2015, according to Energy and Commerce Committee Chairman Greg Walden (R-Ore.). Also discussed were the commission’s grid resilience inquiry, the financial struggles of coal and nuclear generation, the Public Utility Regulatory Policies Act and the commission’s review of its 1999 policy statement on gas pipeline licensing. (See related stories, FERC Whipsawed Over Pipeline Policy in House Hearing and FERC Outlines Gas Pipeline Rule Review.)

Coal and Nuke Woes

The commission’s decision to open an inquiry on grid resilience after rejecting Energy Secretary Rick Perry’s call for price supports for coal and nuclear plants came up repeatedly in questions from committee members.

Rep. Joe Barton (R-Texas) called for “regulatory relief” for struggling coal and nuclear generators, saying market changes could result in unsustainable subsidies. “The regulatory burden obviously on nuclear is very high and you can argue that it’s also very high on coal plants. If we look for solutions to keep our distressed nuclear plants and coal plants in service, we should first look at regulatory relief and only then look at market relief,” he said. He did not elaborate on what regulations should be reduced.

Rep. David McKinley (R-W.Va.) brought up the “domino effect” he said will result if the 1,300-MW Pleasants County coal-fired plant is forced to retire after FERC rejected FirstEnergy’s proposal to move it from its merchant unit to a regulated utility. FirstEnergy announced in February it would close the plant in early 2019 if no buyer is found. (See FirstEnergy Shutting down Unsold Coal Plant.)

“This is a small county. Thirty percent of the tax revenue comes from that power plant. … That’s going to affect their school system. What about their [emergency medical service]? What about their hospital? If this power plant closes down, there’s a very high likelihood that the coal producer that supplies that power plant [Murray Energy] will similarly declare bankruptcy. If [CEO Robert Murray] declares bankruptcy, his relief will be to get away from his [United Mine Workers of America] pension responsibility, which currently funds 120,000 retirees. If that’s reduced, they would be shifted over likely to the federal Pension [Benefit] Guarantee Fund. I’ve got a letter from the Pension Guarantee Fund that says, ‘Don’t put those 120,000 on us because then we’ll go under.’ So, you see the domino effect of this,” he said.

McKinley asked the commission whether it had calculated the cost to consumers of subsidizing the plant.

“I do not have that figure,” responded McIntyre.

“We have reason to believe it’s less than $50 a year per customer. The consumer currently is paying $50 a year for tree trimming,” McKinley said. “I think we have a moral responsibility to look at this thing holistically, rather than just an ideological fight [over] what we think … is a free market.”

“Would you agree? Do we have a free market system in energy?” he continued.

“We do not have a perfect market system in energy, that is certain,” McIntyre responded.

Rep. Adam Kinzinger (R-Ill.), whose district is home to four nuclear plants, said he was concerned that the loss of nuclear generation would harm resilience. McIntyre said the commission’s resilience docket (RM18-1) could result in additional revenue for nuclear plants if FERC determines they provide resilience attributes for which they are not compensated.

Commissioner Robert Powelson reminded Kinzinger of the history of Illinois’ move to retail choice. “Those nuclear plants you referenced, customers paid a competitive transition charge as part of a stranded cost investment. So here we are today in your state and my state [Pennsylvania] … where something that was quote ‘too cheap to meter’ is coming back into the market. … We’re being asked theoretically — your constituents are being asked — to do another stranded cost for those assets. So, if I’m a gas operator or I’m an emerging technology in the market, I’m not getting any type of backstop for my resource.”

Rep. Bill Johnson (R-Ohio) asked Powelson about his response to Murray’s criticism that “FERC didn’t do its job” when it rejected the Perry’s request. Responding on Twitter, Powelson initially challenged Murray to a debate, a tweet he later deleted.

“I take offense to the word ‘feckless’ being used to [describe] colleagues that I serve with here,” responded Powelson. “My colleagues and the 1,320 [FERC] employees who show up to work every day to do their job around safety and economic regulation and making sure our wholesale power markets are functioning. … I refrained from [pursuing a debate]. I thought it was inappropriate and I dialed it back rather quickly.”

Transmission Spending

Several members questioned whether FERC and RTOs were allowing unnecessary transmission spending.

Rep. Frank Pallone (D-N.J.) questioned whether Jersey Central Power & Light’s proposed $111 million Monmouth County Reliability Project is necessary to accomplish the company’s reliability goals. “Recently this view was echoed by New Jersey Administrative Law Judge Gail Cookson, who ruled that JCP&L failed to demonstrate that their transmission line is necessary and noted that JCP&L has not seriously considered alternative corridors and ignored non-transmission solutions entirely,” Pallone said, adding that the utility should have considered distributed generation, storage and new grid technologies.

“Her decision supports my long-held suspicion that often projects like this … are more about the rate of return for shareholders than reliability for consumers.”

Powelson expressed sympathy. “I have a concern when industrial customers come in to the commission as energy users telling us that they’re seeing a 400% increase in transmission costs as wholesale [energy] prices are dropping. That’s alarming. That tells me that the RTOs at the wholesale level of transmission planning are not doing a very good job of cost containment. And we are all paying for that as consumers.”

Rep. Billy Long (R-Mo.) cited complaints by the City Utilities of Springfield that it has seen a substantial increase in its transmission costs in SPP, “most … related to funding transmission projects outside of” the state.

“Some of the projects allow utilities to access renewable energy located outside of the state. However, the benefits [are] far outweighed by the rise in transmission costs,” Long said. “SPP’s own studies have shown the City Utilities’ transmission costs and energy prices are substantially higher than other customers in the Southwest Power Pool. What will FERC do to address the issue of rising transmission costs in” the RTO?

McIntyre said he was unfamiliar with the study Long referenced but agreed to investigate the matter. “Generally speaking, it would be surprising that a particular entity paying those transmission costs is paying significantly higher than other entities served by the same” RTO.

Order 1000

Glick and McIntyre, the newest members of the commission, said they want to take another look at some of FERC’s transmission policies.

McIntyre said the commission’s transmission planning rules are “something that’s ripe for evaluation as to whether it’s working as well … as was hoped for when we issued” Order 1000.

Glick said the commission should reconsider how it awards return-on-equity incentives to transmission developers.

“Are we incenting the right thing? For instance, we incent RTO participation, but a lot of … utilities are participating in RTOs regardless of whether they have an incentive or not,” Glick said. “We really should be incenting, ‘Are we using transmission capacity more efficiently? Are we using new technologies to make transmission capacity more efficient?’ Those are the kinds of things that I think congress gave us the authority to do.”

PURPA

Rep. Tim Walberg (R-Mich.) pressed the commission to revise its enforcement of PURPA, noting it has been nearly two years since the commission’s technical conference on the subject. (See FERC Conference Debates PURPA Costs, Purchase Obligations.)

McIntyre said an overhaul of the law would be up to Congress but said FERC can act to prevent abuses of its 1-mile rule and 20-MW threshold. “I think the record is already there to act on the 1-mile rule,” agreed Commissioner Neil Chatterjee. He added it “could be a challenge” to get a bill through Congress.

‘By Operation of Law’

Rep. Joseph Kennedy (D-Mass.) used his time to urge support for a bill he is sponsoring to address the commission’s 2-2 deadlock in September 2014 over whether it should reject the results of ISO-NE’s eighth Forward Capacity Auction because of unchecked market power. The 2017-18 auction results became “effective by operation of law” (ER14-1409). Under the FPA, rates take effect 60 days after they are filed with FERC, absent a commission order to the contrary.

Sen. Ed Markey (D-Mass.) is sponsoring similar legislation. (See FERC: FPA Change may not Solve Catch-22 on Vote Deadlocks.)

McIntyre said such occurrences arise “very, very rarely, once every dozen years.”

Kennedy interrupted him: “When it does it comes with a fairly big consequence.”