By Amanda Durish Cook

LEXINGTON, Ky. — FERC Chairman Norman Bay headlined the Organization of MISO States’ annual meeting Thursday, where panelists discussed the grid of the future, the growing role of natural gas and the continuing uncertainty over state and federal regulators’ jurisdictions.

The Grid of the Future

Lorenzo Kristov, principal of market and infrastructure policy at CAISO, said a “one-way power flow with passive customers on the end is on its way out.” In 15 years, he envisions a future in which utilities deliver just 50% of load and the rest is served by local resources.

He imagined buildings with smart technology and microgrids that can detach themselves from the grid when service is interrupted. “It can ‘island’ if it has to, but most of the time it doesn’t want to because it wants to interact with the market,” he said. “This is where bottom-up meets top-down.”

Kristov said a more decentralized system is also more secure against increasingly severe weather and cyberattacks.

Jim Gardner, former chair of the Kentucky Public Service Commission, highlighted income disparity and email hacking, two trends tied to the presidential election, that he said would play a future role in power consumption.

Income disparity in the U.S., Gardner said, will manifest itself in the power industry, with one class wanting “concierge electrical service” while the other class “will barely be able to afford their electricity bills.”

“You’re going to have great disparity in the customers,” he said.

Gardner also predicted more cybersecurity scares, which he said will result in more top-down control of RTOs from the federal government.

Bay, who presided over a question-and-answer session at the annual meeting, hesitated to describe what an RTO would look like 20 years out. “The times I’ve been asked to be a talking head, I’ve been totally wrong,” he joked. However, he said the need for RTOs would persist. “I think there’s always going to be the need for the efficiencies of a large-scale grid. There is always going to be a need for transmission, so the wholesale market will continue to exist,” he said.

Devin Hartman of the public policy research organization R Street Institute said new, high-voltage lines can unlock constrained resources. “It’s important to know that sometimes so-called breakthroughs take years to develop,” he said.

Bill Booth of the Mississippi Public Service Commission asked if it was wise to continue to construct new high-voltage lines if distributed resources continue to grow.

Kristov said a careful, “least regrets” planning process will have to be used when building new transmission. “I suspect we will need a lot less than we would under a central utility structure,” he said.

Hartman said there are “huge question marks” in designing rates for distributed resources such as rooftop solar.

Gardner said the uncertainty around creating a model for distributed resources will likely continue. “The states are going to go in fits and starts. There’s not going to be a uniform movement,” he said. “The West doesn’t even have RTOs.”

Kristov said a rate structure could charge distributed resources based on how much volatility they introduce in the market. Standalone rooftop solar could be charged a higher rate than that with battery storage.

David Carr, counsel for the Mississippi Public Service Commission, said the addition of distributed resources could leave low-income populations behind. Kristov said local governments could pick up the slack through community programs.

Joe Paladino, a senior advisor at the U.S. Department of Energy, said integrated, regional planning processes are needed to manage the convergence of natural gas infrastructure with the power industry.

“This industry is very fragmented. Jurisdictions are going to have to start considering each other,” he said.

The panelists agreed that price disparities across locations will continue with the growth of microgrids. “Unless we had one huge central nuclear reactor transmitting power from the same distance,” Paladino said.

“You do,” Kristov injected playfully. “It’s the sun.”

Growth of Natural Gas

MISO strategy advisor Scott Wright said natural gas’s share of MISO electric generation could climb to 40% by 2025, up from 23% in 2015.

“The short version is we have a lot of gas, it’s going to be around for a long time and even the [U.S. Energy Information Administration] agrees,” said panelist Amy Farrell of the American Petroleum Institute.

Richard Levitan of Levitan & Associates said there are 39 GW of gas-capable generation, 21 pipelines and more than 3 million horsepower of compression in MISO North alone. “This region is blessed with massive storage infrastructure,” he added. “These serve as bellows to operating supply.”

Wright added there are about 140 storage fields in the MISO footprint.

Levitan also said MISO North has comparatively very few hours of non-deliverability attributed to line breaks or other issues. “I think you can say there’s barely a scintilla of vulnerability,” he said.

However, DTE Energy’s Don Stanczak did not agree with the rosy talk about the windfall of supply. He said the existing natural gas system was designed for predictable retail heating loads, but the increase in gas-fired power generation will require hourly withdrawals and injections.

“We do have a lot of natural gas storage in Michigan, but I don’t think it’s properly configured,” he said. “In the polar vortex, we were days away from having to decide if our customers wouldn’t have electricity or they wouldn’t have heat. And you can’t have heat without electricity.”

Wright said future developments in rapid injection and withdrawal could allow gas scheduling for power to become more natural, “like breathing,” and eliminate the panic of “did I schedule?” He said, however, that getting natural gas from the wellhead is often fraught with obstacles. “There’s a lot of rate pancaking and nominations across several pipelines.”

“I think we need to remind ourselves of the environmental opposition to pipelines,” Levitan said. “Just expanding existing pipelines has become a daunting task. The Northeast is littered with failed projects.”

Farrell suggested that FERC could encourage pipelines to offer an expanded set of market products.

“The gas-electric process that took place over the last four years was painful, but we have to open up that dialogue again,” said attorney Kelly Daly of Stinson Leonard Street in D.C.

When Jurisdictions Collide

Ted Thomas, chair of the Arkansas Public Service Commission, who moderated a panel on the increasing entanglement of RTO, state and FERC jurisdiction, said “the bright line appears to be getting fuzzy.”

Ohio Public Utilities Commissioner Howard Petricoff said the Federal Power Act’s “just and reasonable” standard is vague when compared to the legislation such as the Clean Air Act.

“There’s virtually no change in the language in the last 70 years in either the Federal Power Act or the Federal Gas Act,” Petricoff said. “It’s a much different industry than in 1935. … Today, we have independent power producers; we have interstate lines; we have a fairly complex industry. … The transmission, the grid and the resale are much more active.”

Jeff Dennis, of Akin Gump Strauss Hauer & Feld, said behind-the-meter generation and merchant generators’ competition with vertically integrated utilities has complicated jurisdictional questions. “Power [used to] flow one way. Consumers consumed and generators generated.”

Petricoff said the Supreme Court’s Electric Power Supply Association ruling affirming FERC’s right to regulate demand response has not answered the question of whether “1 MWh saved is 1 MWh generated.” (See Court’s Reticence Frustrates Energy Bar.)

Dennis said the FPA lacks the “cooperative federalism” that can be found in other federal laws.

“I think unfortunately the courts are going to continue to have to pick sides. That means we’re going to muddle through on a case-by-case basis.

“I think it’s important for the Supreme Court to know what aim regulators have in mind. That aim is critically important,” Dennis added.

“‘Cooperative federalism’ has different dimensions,” Bay said. “If we share the same objective, we can get so much more done rather than if we’re suing each other.”

Bay suggested state regulators make use of pre-filing meetings with FERC to minimize the “chance of friction.”

“I think my priorities are similar to every other [state] regulator here,” Bay continued. “From my perspective, what we should be doing at FERC is adapting to the change while maintaining reliability and just and reasonable rates.”

American Electric Power’s John Crespo said RTOs are dependent on states and local governments, whose regulation of land use, granting of easements and implementation of environmental rules determine if transmission actually gets built.

Bay said states need jurisdictional wiggle room. “States deserve a lot of latitude in pursuing policies that they think are helpful for their citizens. … The states are great for experimentation. At the federal level, you can observe that state experimentation and make decisions.”

Crespo pointed to MISO’s plan to add a forward capacity auction to serve retail choice loads in Illinois and Michigan. “It’s an interesting potential for cooperation between the states and RTOs.”

Distributed resources and DR have created “prosumers,” consumers who can become producers, Crespo continued. “What you could see is a blending of the wholesale and retail markets, and what will that look like from the FERC standpoint? It could be where you have a deeper encroachment of federal regulation on states’ rights,” he said.  “I’m not so sure if states knew what they were giving up when they joined RTOs.”

Bay said utilities are voluntarily joining RTOs in what he called the “march of markets.”

“Utilities are making the decisions for themselves; FERC isn’t forcing them to. Obviously there are benefits to joining an organized market,” he said.

“The RTOs have been very good at producing the lowest cost megawatt-hour, but there are other valid policy goals,” Dennis said. “My belief is that there should be a way for different models to coexist among states, the RTOs and FERC. There needs to be some cooperation with FERC, but that needs to be a two-way street.”

Bay added that states and FERC will have to work together on cybersecurity efforts, quipping, “Hackers don’t care that FERC has jurisdiction over the Bulk Electric System and states have jurisdiction over distribution.”

Petricoff said energy officials are going to get much more creative in the coming years as “even the fundamentals of power” will be altered. “We’re in a decade of change,” he said.