By Rich Heidorn Jr.
Consumer advocates on Thursday urged Congress to pressure FERC to improve the RTO stakeholder process and reject Energy Secretary Rick Perry’s directive to rescue at-risk coal and nuclear generation in competitive markets.
The House Energy and Commerce Committee hearing was called to consider consumers’ ability to participate in RTO/ISO decision-making. But the witnesses — and some Democratic committee members — also used the opportunity to tee off on Perry’s Sept. 29 Notice of Proposed Rulemaking, which would require RTOs to provide “full recovery of costs” for generators with a 90-day on-site fuel supply that are not subject to state or local cost-of-service rate regulation. (See FERC’s Independence to be Tested by DOE NOPR.)
No one at the Energy Subcommittee hearing spoke in favor of Perry’s proposal, which called on FERC to develop a final rule providing RTOs with direction within 60 days. (Perry will be testifying before the committee next week.)
Consumer advocates from New Jersey and Massachusetts and representatives for Public Citizen and industrial consumers testified along with PJM’s Independent Market Monitor.
Tyson Slocum, director of Public Citizen’s Energy Program, was the most critical witness, citing a “triple threat” to consumers posed by “political efforts by owners of mismanaged and uneconomic generation seeking subsidies; regional transmission organizations constructed to serve transmission and generator interests at the expense of the public interest; and a FERC that fails to uphold just and reasonable rate design, oversight and enforcement.”
No to Coal, Nuclear Subsidies
Slocum said Perry’s proposal “reads more like a President Trump tweet than a reasoned, serious policy proposal,” joining other witnesses in rejecting Perry’s claim of a resiliency “crisis.”
“Even more shocking than the Department of Energy’s proposal is FERC’s response to fast-track its consideration, with its order giving the public only 21 days to provide initial comments on the DOE rulemaking,” Slocum said.
PJM Monitor Joe Bowring said the RTO’s market “has resulted in a reliable system despite significant changes in underlying market forces … [working] flexibly to address both market exit and entry without preferences for any technologies.”
He dismissed concerns over fuel diversity, saying PJM’s is higher than ever.
“There is no reason to intervene in the markets in order to provide reliability and resilience,” he said. Concerns over natural gas supply interruptions would be better addressed through “a careful evaluation [of] the reliability of gas pipelines, the compatibility of the gas pipeline regulated business model with the merchant generator market business model, the degree to which electric generators have truly firm gas service and the need for a gas RTO to help ensure reliability,” he said.
John P. Hughes, CEO of the Electricity Consumers Resource Council, which represents industrial consumers, said the NOPR would result in “the destruction of the competitive wholesale electric markets.”
By proposing out-of-market payments to prevent plant retirements, he said, “DOE is saying manufacturing jobs are not as important as the jobs at economically obsolete coal-fired and nuclear power plants — plants for which the market has already provided much more economic alternatives.
“We know that coal-fired and nuclear plants are not immune from so-called Black Swan events such as hurricanes, tornadoes, earthquakes and tsunamis,” he added.
Hughes said grid operators can ensure sufficient supplies of “essential reliability services” such as frequency response through markets and without subsidies.
He criticized FERC, saying it “backtracked from its policy to favor market-based solutions over command-and-control” when it issued a proposed rulemaking in November 2016 requiring all new generators to provide primary frequency response. (See FERC: Renewables Must Provide Frequency Response.)
A FERC spokeswoman said the commission had no response to the criticism at the hearing.
Mark Vanderhelm, Walmart vice president of energy, also made a plug for markets. “When we compare our cost per kilowatt-hour in 2016 to our cost per kilowatt-hour in 2007, we find that our cost in customer-choice jurisdictions decreased by almost 7% on average. In contrast, our cost in jurisdictions without customer choice increased by 14%,” he said.
‘Arbitrary’ Fuel Requirement
Slocum said DOE’s call for 90 days of on-site fuel was “arbitrary.” He noted that during Hurricane Harvey, the coal piles at NRG Energy’s W.A. Parish plant in Texas were so soaked with water that the plant switched two units to natural gas for the first time since 2009, and that Florida lost much of its nuclear generation during Hurricane Irma because of precautionary shutdowns and mechanical problems.
Rep. Gene Green (D-Texas) noted that NRG’s San Jacinto natural gas plant kept operating despite receiving 47 inches of rain. “Natural gas was by far the largest [electric] provider during the storm, although I can also say our nuclear power plant in Southeast Texas continued to function very well,” Green said. “It’s frankly just not the case that increasing natural gas-fired plants is threatening reliability of the grid.”
Rep. Frank Pallone (D-N.J.) criticized what he called Perry’s “ill-conceived and wholly unjustified effort to commandeer” the FERC rulemaking process.
“Subsidizing noncompetitive generation for a small, if any, grid benefit at massive expense to consumers is wrong,” Rep. Paul Tonko (D- N.Y.) said. “And it definitely should not be done through a rushed process.”
Energy Subcommittee Vice Chairman Pete Olson (R-Texas) also indicated concern over the proposal, citing FERC Commissioner Robert Powelson’s speech to the Organization of PJM States Inc. (OPSI) annual meeting Wednesday, at which he stressed FERC’s independence and sought to reassure those who fear the rule would destroy competitive markets.
“[Powelson] said regarding concerns if the rule does undo competitive markets, quote, ‘When that happens, we’re done. I’m done,’” Olson recounted.
“Wow!” Olson added. “That is pretty strong.”
Commissioner Cheryl LaFleur seconded Powelson’s vow “not to destroy” the markets, tweeting, “Great message!”
Consumers’ Voice in Stakeholder Process
The witnesses were also critical of FERC’s and RTOs’ efforts on behalf of consumers.
Stefanie Brand, director of the New Jersey Division of Rate Counsel, and Rebecca Tepper, chairman of ISO-NE’s Consumer Liaison Group, said RTOs should explicitly consider consumer costs in their policymaking and transmission planning, noting that generation and transmission costs account for 60% of customers’ bills in their states.
They said RTOs should provide dedicated funding to ensure consumer advocates can attend stakeholder meetings — as enjoyed by the Consumer Advocates of PJM States and the New England States Committee on Electricity.
Tepper, chief of the Massachusetts attorney general’s energy and telecommunications division, said RTOs should provide cost impact analyses on all major proposals and require that at least one RTO board member has “experience in consumer issues” or serves as a consumer liaison.
Slocum, who criticized RTOs as “political entities designed to serve entrenched economic interests,” called for increased transparency, saying stakeholder meetings should be recorded and transcribed and that RTOs be subject to the Freedom of Information Act.
He also called for splitting RTO functions to limit management’s role in stakeholder meetings; establishing a two-year “revolving door” prohibition on state regulators and utility executives going to work for an RTO; and barring entities under RTO jurisdiction from serving as financial sponsors of RTO special events.
He had specific criticism for PJM’s sector-weighted voting process, which he said appears “to be designed for the primary purpose of expanding the voting power of transmission owners and generators, and diminishing the voting power of end users.”
“End users actually represent half of the energy system, and should therefore represent half of the weighted sector voting rights,” he said. PJM’s consumers are grouped in the End Users sector, and receive a 20% weighting like the four other sectors: Transmission Owners, Generation Owners, Other Suppliers and Electric Distributors.
Asked to respond to the criticism, PJM spokesman Ray Dotter said the RTO saves consumers $3 billion annually and runs an “open and inclusive” stakeholder process.
“PJM’s governance is designed to ensure that no membership sectors have undue influence and has been approved by the FERC. At the same time, our independent board is empowered to act without the consent of members when it determines that market rule changes are necessary – and it has done so,” Dotter said in a statement. “Nevertheless, such rule changes must be considered and approved by the FERC.”
Transmission Spending
Rep. Pallone asked Brand about a report released Sept. 29 by American Municipal Power that found more than half of the $24.3 billion in transmission projects in PJM since 2012 were supplemental projects initiated by TOs and not required to comply with RTO or federal reliability requirements. (See Report Decries Rising PJM Tx Costs; Seeks Project Transparency.)
Brand said the TOs propose supplemental projects “because they’re incredibly lucrative.”
“Returns on transmission are huge, so everyone wants to build whatever they can,” she said. “The need for the projects is not adequately reviewed at PJM. … The returns that are granted by FERC for transmission are completely off the charts. Some utilities are getting close to a 12% return on these projects, which in this economy is a bit crazy.”
FERC
Brand, speaking on behalf of the National Association of State Utility Consumer Advocates, said FERC also needs to do more to create “consumer friendly” proceedings. “Nearly all proceedings are conducted on paper, with limited opportunity for public input. Evidentiary and public hearings are rare. … There is no opportunity for cross-examination if factual certifications are submitted, and there is no oral argument on the legal or policy issues.”
Slocum repeated his call for FERC to provide funding for intervenors representing the public before the commission so that they can afford attorneys and expert witnesses.
