WASHINGTON — FERC’s members opened their monthly meeting Thursday by soliciting feedback on their forum with New England stakeholders on the region’s winter fuel security problems, once again highlighting the philosophical divide along party lines among the commissioners.

All agreed that the situation in New England is urgent, and any extreme weather this winter could result in a loss in electric reliability.

But Republican Commissioners James Danly and Mark Christie were more pessimistic, going so far as to suggest that the role of RTOs in general in ensuring resource adequacy should come to an end.

FERC had the previous day issued a notice in the forum’s docket seeking comment on the issues discussed (AD22-9). Comments are due Nov. 7. (See FERC Comes to Vermont and Leaves with a New England-sized Headache.)

Each of the commissioners urged stakeholders to submit suggestions in the docket on what the commission should do about New England.

Chairman Richard Glick noted that the region is “still heavily reliant on LNG imports, and that’s just not sustainable. In the short term it might be necessary to continue that reliance, but in the long term, it’s just not sustainable.” He noted other “opportunities” to maintain resource adequacy, including more transmission and the coming offshore wind farms.

He also said ISO-NE needs to consider market changes, such as a seasonal capacity construct “to incentivize generators to make arrangements to provide more assurance that there’s going to be fuel supply when it’s needed on the coldest days of the year.”

But Danly reiterated his view, expressed at the forum, that “the situation is bad enough, both in terms of the actual fact of reliability challenges on the one hand and, second, the fact that there is no conceivable way to me that a capacity market can have rates that are J&R [just and reasonable] if the capacity market doesn’t actually deliver the promise of the resources that are to be drawn upon when necessary down the road.”

This sign greeted those visiting FERC for the open meeting Sept. 22, the day after Sen. Joe Manchin unveiled the text of legislation that would, among other things, approve the Mountain Valley natural gas pipeline. The meeting itself was interrupted by four protesters, including one who began singing “More Waters Rising” by Saro Lynch-Thomason. | © RTO Insider LLC

 

He recalled that ISO-NE CEO Gordon van Welie had pushed back on his suggestion that FERC should institute a proceeding under Federal Power Act Section 206 to remove their responsibility over resource adequacy and return it to the states. He said he understood that the RTO would not want “a free-wheeling 206 in which we say, ‘You have a problem; go fix it.’”

But “I think we have an unjust and unreasonable market, probably; obviously that would be what the 206 hearing would be for.”

Danly also lamented a recent ruling by the D.C. Circuit Court of Appeals that found ISO-NE’s Inventoried Energy Program, to go into effect for winter 2023, to be unjust because it would unfairly pay nuclear, coal, biomass and hydroelectric resources for fuel storage (ER19-1428-005). (See Court Strikes a Blow to ISO-NE Winter Plan.) The court left the rest of the IEP in place, allowing the RTO to compensate oil, natural gas and refuse generators.

FERC on Thursday issued an order on remand implementing the D.C. Circuit ruling. (The order had not been published as of press time.) “I’m concurring because the court has spoken, and we will do what the court says,” Danly said. “But that got rid of, effectively, one of the possible solutions to the fuel security problem this winter, and I am quite sorry that we’re in a position where … the strategy to get through this winter is to cross our fingers and hope for mild weather. That is not a good plan. …

“If anybody can come up with a short-term fix that would help with fuel assurance this winter, I for one would solicit a 206 filing,” Danly said.

Speaking about a different ruling involving NYISO, Danly also argued that “when you consider how this experiment in markets began, that we were going to use the markets to deliver the least-cost energy generation for the region in which they operate … it’s becoming harder and harder to believe in the premise upon which these markets were originally developed as we have greater and greater price suppression through state subsidies.

“It is getting to the point where I believe that these markets are so manifestly not J&R, given the price warpings, that it is difficult for me not to consider abandoning the entire experiment as long as it’s being conducted this poorly.”

Gradually, Then Suddenly

“I didn’t hear the perspective that markets cannot work, but I certainly share the perspective that at this moment, the markets may not be delivering just and reasonable rates,” Commissioner Allison Clements said. “To me, exerting commission leadership to move this ball forward does not suggest that we know better than the New England states, or that we have the right to override the states’ perspectives. Nor does it suggest that the entire solution set rests in the commission’s jurisdiction.”

She noted that ISO-NE had proposed undertaking a comprehensive study of the problem and potential solutions, with a number of state officials at the forum concurring.

“I, though, did not come away with a level of specificity around what this study should actually look like,” she said. “We know that the root of New England’s winter electric system reliability challenge is the significant dependence on natural gas in these extreme conditions, along with gas supply constraints. Shoring up or adding more natural gas supply capability is one way to address these constraints, [but] it is only one way. The region can also diversify away from reliance on natural gas for electric generation and can reduce both electric and gas demand.”

“When it comes to RTO markets … whether they’re still providing reliability and, more importantly, whether they’re providing it at just and reasonable rates, I think is a serious question,” Commissioner Christie said.

He quoted “The Sun Also Rises” by Ernest Hemingway, in which a character asks another how he went bankrupt. He answers “gradually, and then suddenly.”

“I think [RTOs are] moving from the ‘gradually’ phase to the ‘suddenly’ phase, and I think we’re going to have to grapple with that as we look at the future.”

“I want to hear from people [about] what more can FERC do, both under our FPA authority” and its ability to facilitate discussions, Commissioner Willie Phillips said. “Will additional meetings help? Could we establish a task force? Is there another forum that FERC could use to help bring people to the table? I’m very interested in that.”

On the other side of the extreme weather spectrum, Chairman Glick also complimented CAISO for getting through a weeklong, record-breaking heat wave earlier this month. (See California Runs on Fumes but Avoids Blackouts.)

“California ISO had a number of challenges and did an amazing job of getting through it without having to engage in rolling blackouts.” He reported that, based on a conversation with the ISO last week, the state’s energy storage resources performed very well and were key to maintaining reliability. He also highlighted demand response and California’s ability to import power.

But Commissioner Danly responded: “It is true that various resources played a part, especially on the margins, in keeping the system operating, but a clear-eyed, accurate assessment — if we actually look at where the power came from, natural gas is the reason those lights stayed on. That is the simple fact of the matter.”