By Rory D. Sweeney

HERSHEY, Pa. — FERC Commissioner Robert Powelson had to hit the ground running after being appointed to the commission in August. He and his colleagues are working to clear the backlog of decisions that accrued during the six months the commission lacked a quorum.

But part of the job also includes dealing with issues he doesn’t want to touch.

“The FERC is trying to stay out of the fuel wars, and that’s what’s going on right now. Coal against gas; nuclear trying to stay above the fray. It’s becoming unnecessarily all about ‘my fuel’s more resilient that your fuel,’” Powelson said last week during an industry conference. “If the [2014] polar vortex is the example of that, there’s a lot of people with sins they need to confess, and I think we know that.”

He pointed to the 24% forced outage rate stemming from that epic cold snap, and noted that he once “called out” the companies that failed to meet their capacity obligations.

“We know who they are. Some of them are in the room today. We have a 12-step program in the back,” he said.

Powelson was speaking at “Decade of Disruption: Marcellus Shale and Regional Energy Markets,” the second annual electricity conference organized by John Hanger, a former Pennsylvania state utility regulator and environmental secretary. Before Powelson spoke, Hanger presented him with a 2017 Energy Leadership Award.

Vortex Fatigue

Powelson’s comments were part of a discussion touching on many industry topics, but that repeatedly returned to the U.S. Department of Energy’s recently proposed grid resiliency pricing rule. The department’s Notice of Proposed Rulemaking used the 2014 extreme weather event as a pretext to endorse — and financially compensate — the reliability of units with 90-day onsite fuel supplies.

“I’m a little fatigued by the use of the polar vortex as this screaming cry for why we have to do something. … I think we did a lot in PJM with Capacity Performance. I’d like to honestly see CP kick in at 100%, make a metric call there and then get into this question,” he said.

Powelson also explained his views on state subsidies in the form of renewable energy credits (RECs) to build preferred wind and solar resources or new zero-emissions credits (ZECs) to support existing nuclear plants. Critics say RTOs must limit the ability of those units to bid into competitive auctions to prevent them suppressing markets by offering at prices below their true operating costs.

“If a state has a [renewable portfolio standard] and wants to value carbon goals, they should be allowed to do that. The problem is when you create a market bastardization of the thing known as the minimum price offer rule … we’ve got to address that issue,” Powelson said. “Those state mechanisms have to be able to pass the minimum offer price rule smell test, so that’s where it gets a little prickly for us as an agency that just allowing a state to go amend its RPS without, in my view, having a strong MOPR screen gives me a little bit of heartburn, because you do know we’re causing a lot of havoc now in the markets to gas units that are dispatching and not being able to cover their marginal costs.”

He provided the example of CAISO, where some gas-fired generators are declining to engage in the market and, in some cases, seeking early retirement. He pointed to PJM as a market doing a good job significantly reducing emissions in the past decade.

“In lieu of a carbon tax, that is market-based decarbonization at its best,” he said.

To incentivize transmission development, he said the industry must focus on tweaking financial mechanisms.

“The big conversation at the FERC is [return on equity] policy and how under FERC Order 1000 we get these projects cited and we get them commercialized,” he said.

Getting Gas to Market

The issue of gas-electric coordination “cries out for a broader conversation,” Powelson said.

“I personally don’t think we’re out of the woods there yet,” he said. “The conversation about gas and electric folks not being able to coordinate efforts, being able to sit them in a room together to have a conversation… Market synchronization would be helpful.”

Powelson said the “tectonic shifts taking place in our bulk power system” and the days of large plant construction appear to have been superseded by interest in unique and localized solutions, like combined heat and power facilities, islanding, microgrids and oxidized fuel cells.

“If you look at the grid right now, 1,000-MW cathedrals, we’re just not there anymore,” he said. “The consumers are demanding these changes.”

As a former Pennsylvania regulator during a period of explosive growth in shale gas production, it wasn’t surprising that Powelson also defended natural gas and promoted its expanded use.

“There will be some in Washington who come into my office and say, ‘Gas is not a baseload resource.’ Well, if you’re in Pennsylvania and Texas and Louisiana and West Virginia and Ohio, you take exception to that,” he said.

However, the gas can’t stay in those areas, he said.

“We need to get it to load centers,” he said, and indirectly criticized New York state’s reluctance to approve pipeline construction permits.

“If anybody here can help, there’s a state capitol — I think it’s called Albany — we would greatly appreciate your advocacy work in there,” he said. “We’re inching our way ahead.”

New York’s reticence has been a major hurdle for getting Pennsylvania gas to New England markets, where there are often supply constraints. Earlier in the conference, ISO-NE CEO Gordon van Welie said he didn’t expect to see another pipeline ever connected into his RTO. Powelson appears to have other plans.

“I would take a little bit of exception to Gordon’s assessment that we’re never going to see a pipeline built,” he said. “I think there’s a steadfast commitment to getting pipeline infrastructure built.”

Or perhaps it will be a case of moving gas into the region by whatever means necessary. Powelson said he shares a half-joking agreement with fellow Commissioner Cheryl LaFleur that “if we can get one thing done in our careers, it’s repeal the Jones Act.”

The Merchant Marine Act of 1920 — commonly known as the Jones Act for its sponsor, Sen. Wesley Jones — forbids foreign-flagged ships from carrying cargo between the U.S. mainland and certain noncontiguous parts of the country, including Hawaii, Puerto Rico, Alaska and Guam. Enacted in the aftermath of World War I — and in case of World War II — it was intended to ensure the country had a large enough supply of merchant ships to survive attacks by German subs.

Powelson called the law an “antiquated document that doesn’t reflect where we are in our energy landscape.” He said it limits the ability to ship LNG around the country from the growing number of export terminals to demand areas, such as New England.

“It’s alarming to me the storage crisis that they face,” he said. “When they hit that constraint, it’s ‘OK, let’s see what we need to do to get something into one of the storage facilities.’ That’s not the way I want to run an RTO.”