By Tom Kleckner
HOUSTON — The FERC that Richard Glick joined as a commissioner in November 2017 was nothing like the “sleepy agency” he came to know during his many years as a D.C. insider.
“For the most part, it’s been a nonpartisan agency. The vast majority of orders have gone out on non-party-line votes,” Glick said in keynoting the 18th Annual Gas and Power Institute last week near the heart of the nation’s energy industry.
“That’s starting to change, for a variety of reasons,” he said. “With technology changes, these issues are becoming much more contentious. The more traditional technologies are clearly fighting to protect their turf, and the newer technologies are fighting to get a part of that. That’s posed some issues for us.”
But the greater issue is the political divide, said Glick, the lone Democrat among the three men sitting on the commission.
“Some of atmosphere at FERC is a little more tense than it has been, in large part because of what’s going on in Washington, D.C., in general,” he said. “It’s a different atmosphere than before, and FERC is reflective of that.”
Glick said he has dissented a “lot more” than he thought he would have when he joined FERC. Most recently, he argued that the commission’s recent move to adopt proposed revisions to how it administers the Public Utility Regulatory Policies Act of 1978 would essentially “gut” a law that has spurred renewable energy growth. (See FERC to Reshape PURPA Rules.)
Glick has often been the only commissioner taking a stand against approving gas pipelines and LNG projects. He has repeatedly expressed concerns about the lack of greenhouse gas considerations in commission rulings and now has begun charges that FERC is “scrubbing” references to climate change from its orders. He noted that boilerplate language encouraging developers to take GHG emissions into consideration has been removed from recent orders.
“All of a sudden, that’s been taken out of the orders,” he said. “The commission is choosing to stick its head in the sand and not consider greenhouse gas emissions, and that’s problematic.”
“Glick is the lone voice in the wilderness,” Tom Hirsch, a D.C.-based lawyer with Norton Rose Fulbright, told attendees.
“My beef with the majority, and what FERC has been doing for a number of years, is relying on precedent agreement, and not even arguing it,” Glick said. “We’ve been called a ‘rubber stamp’ for the pipelines. That’s not always true … but I don’t think we’ve done our job [in determining a project’s need] as we should.”
Compounding Glick’s frustration is the turmoil surrounding FERC itself. The commission, which struggled to reach a quorum in 2017 following the change in administrations, is now back to three members following Cheryl LaFleur’s departure in August. (See FERC Heaps Praise on Departing LaFleur.)
Normally, the administration would nominate a candidate from each party to fill the two vacant seats, maintaining a 3-2 split favoring the party holding the White House. “That’s been the tradition,” Glick said.
However, the talk in D.C. is that FERC General Counsel James Danly will be nominated for the Republican position and the Democratic seat would be left open. Asked if he was familiar with the rumor, Glick said, “I hear the same things you do. I will guarantee you the White House did not call me up and ask my opinion.
“Even if you change one commissioner for another, it takes a while to get used to each other’s rhythms,” Glick said. “There’s a lack of stability. I’m very hopeful that we will get another commissioner [soon].”
FERC Chairman Neil Chatterjee declined to comment on Danly during an earlier September visit to Houston.
Compounding matters is a recent determination by FERC’s designated agency ethics official (DAEO) that Glick should continue to recuse himself from proceedings related to his former employer Iberdrola USA (now Avangrid), again making quorum an issue, particularly in a key proceeding related to PJM’s capacity market. (See Glick Recusal May Mean No MOPR Ruling Before December.) Glick said he initially understood the two-year recusal would have expired two years after he left Avangrid in February 2016. In reality, he was later told, the clock started ticking when his term began in November 2017.
“I think he made an honest mistake,” Glick said of the DAEO’s first ruling.
The same ethics office has advised Commissioner Bernard McNamee that he doesn’t have to recuse himself from the commission’s grid resilience proceeding, unless it “closely resembles” the debate over the coal and nuclear subsidies he helped write at the Department of Energy.
Still, Glick soldiers on. While appearing reserved at first glance, he seems comfortable speaking out while manifesting a wry sense of humor.
When he mentioned he disagreed with a fellow commissioner, a reporter tried to pry Glick into naming names. “I think I disagree with both of my colleagues. I like them, but we disagree on policy.”
ERCOT Monitor: August ‘High Excitement’ for RT ‘Geeks’
Also speaking at the conference, Potomac Economics’ Beth Garza, executive director of ERCOT’s Independent Market Monitor, described the Texas grid operator’s ability to meet customer demand during scarcity conditions this August as “high excitement for those of us who are real-time energy market geeks.”
ERCOT called its first energy emergency alerts (EEAs) in five years this summer and relied on emergency response service and DC tie imports to meet record-breaking demand. However, the two EEAs weren’t called on days when load reached record levels, but during days when West Texas winds died down before the late afternoon peak. (See “ERCOT CEO Briefs Commission on Summer Performance,” Texas PUC Briefs: Aug. 29, 2019.)
“In ERCOT, high loads used to be driven by high temperatures, but it’s no longer that,” Garza said. “Now, it’s, ‘Is it going to be hot? Is it going to be still? Now, the third piece is, ‘Is it going to be cloudy?’ Those are the drivers for pricing and price outcomes.”
Prices briefly hit $9,000/MWh during both EEAs. “Prices should be reflective of the conditions you are in,” Garza said. “If you are in scarce conditions where you may have to curtail load, the price should be high.”
Geek that she may be, Garza noted that ERCOT’s real-time energy prices averaged $50.70/MWh through August, a 40% increase year-to-date over 2018 ($36.20/MWh). This despite a 15% decrease in natural gas prices so far in 2019.
But, Garza asked, is that enough for people to “plunk their money down and build a power plant” to take advantage of scarcity prices? She would only point to the 2020 summer’s forward on-peak prices, which spiked to more than $400/MWh in August but have since dropped to $250/MWh, and let her audience decide.
Glick offered his own positive outlook on the ERCOT market.
“Texas has a very unique market,” he said. “It’s an energy-only market, yeah, and prices spike during certain hours in the summer, but contrary to predictions, the lights didn’t go out.”
Questions over Capacity, Traditional Markets
Glick also shared his insight on capacity markets, which he said are one of the biggest policy issues before FERC. He suggested participants are losing faith in the markets as they attempt to integrate renewable generation.
“Capacity markets procure a lot of reserves that aren’t needed, and that costs a lot of money,” he said. “Generators are asking us to intervene. … To me, we’re spending a lot of time arguing about whether we need to subsidize nuclear or coal. To me, that’s an argument from a long time ago. What we need, with intermittent resources, is a lot of flexibility on the gird. We should incentivize and reward flexibility.”
Tim Wang, a director with Filsinger Energy Partners, questioned whether energy markets will even remain viable in the future.
“Energy markets are based on 1990s technology and fuel costs. That is all changing,” he said.
Wang said energy storage costs are dropping as dramatically as wind and solar costs, further reducing marginal costs.
“In the future, with 100% renewable energy markets, the marginal costs could be zero. There are no coal or gas heat rates. All that is gone … so what does the future look like? Will the markets still be there?”
