The acting chairman of the Federal Energy Regulatory Commission laid out his priorities for the agency on Tuesday in his first public speech since taking the gavel in August.
Chairman Neil Chatterjee said the commission will focus on pipeline approvals, transmission siting and responding to the Department of Energy’s cost recovery proposal for coal and nuclear plants, among other issues, in a speech at the Energy Bar Association’s Mid-Year Energy Forum.
“Streamlining project review processes to improve review timelines, better aligning electric transmission investment incentives with need, maintaining grid reliability and resilience in a period of rapid change, bolstering defenses involving ever-evolving cyber threats and evaluating de novo review of enforcement actions and PURPA reform,” Chatterjee listed. “These are some of the key areas … where I believe FERC can build upon successes of the past to grow stronger.”
Chatterjee said he does not view his priorities to be a “drastic change” from past work done by the commission, but the change in leadership presents an opportunity “to bring a fresh perspective to that work.” In particular, he reiterated calls for FERC to maintain its independence as it considers the DOE cost recovery rule, and to resist efforts to alter and expand its criteria for assessing pipeline needs.
Chatterjee is only expected to remain chairman until the confirmation of energy lawyer Kevin McIntyre, now pending in the Senate. But with that body gridlocked over health care and tax policy, Chatterjee could remain in his leadership position for some time, giving him an unexpected opportunity to influence the path of the commission.
For weeks now, Chatterjee’s had a foot in both camps when it comes to the DOE’s proposal to provide cost recovery for power plants with 90 days of fuel onsite. Last Friday, he told reporters he was “sympathetic” to the aims of the proposal — namely, propping up coal plants for grid resilience — but also stressed that FERC would maintain its independence and not “blow up the market” with reforms.
The acting chairman attempted to thread that needle again in his Tuesday speech.
It’s no coincidence that the U.S. power system has stayed reliable as thousands of megawatts of dispatchable baseload retire and are replaced by renewables and gas, Chatterjee said. “It’s the result of constant vigilance on the part of operators, industry and state regulators … and industry making investment decisions based on system reliability needs and not just short-term profits.”
The DOE’s Notice of Proposed Rulemaking (NOPR) “fits comfortably” within those efforts, Chatterjee said.
“There’s real value in [Secretary of Energy Rick Perry] initiating a conversation on whether FERC-jurisdictional organized markets adequately compensate certain generators for their contribution to the reliability and resilience of the nation’s grid,” he said. “This is entirely consistent with FERC’s historic efforts to ensure organized markets provide necessary compensation for reliability related services.”
But while Chatterjee commended Perry for starting the conversation, he stressed that FERC is under no obligation to follow DOE’s specific policy directives in the NOPR.
“I remain committed to uphold the commission’s independence on this and many other issues that may come before us,” Chatterjee said. “Over the last four decades, my predecessors and fellow commissioners have zealously guarded that independence. That’s not going to change so long as I and my colleagues sit on the commission.”
Maintaining independence could mean making major changes to the NOPR. Last week, Chatterjee laid out a series of options that FERC could choose from after the proposal’s comment period closes on Nov. 7, including overruling the plan or rejecting it outright.
“We could do an advanced notice of proposed rulemaking, we could do a notice of proposed rulemaking superseding the DOE NOPR, we could issue a final rule or an extension of the comment period and a solicitation of further comments,” Chatterjee said. “We could convene technical conferences, we could do a notice of inquiry … so there are many tools available to the commission to act within 60 days.”
Increasingly, it appears FERC will end up extending its consideration of grid resilience beyond the 60-day timeframe DOE requested for NOPR review. The proposal is too vague to form a final rule, Commissioner Cheryl LaFleur told Utility Dive after Chatterjee’s speech, and anything outside an outright rejection of the plan will likely require more scrutiny.
“Anything other than ‘let’s end the discussion entirely’ would require more work, because if you look at how we operate, we usually take comment on things and think things through,” she said.
While LaFleur and Chatterjee sang from the same sheet on FERC’s independence, they diverged from one another on pipeline reviews.
Last week, LaFleur issued dissents in two 2-1 votes that approved the Atlantic Coast and Mountain Valley pipelines. She remained unconvinced that both pipelines were necessary, and pushed the commission to adopt a wider set of criteria for evaluating pipeline need, including the “evidence of the specific end use of the delivered gas,” rather than relying on precedent agreements from the utilities pledging that the pipelines will be fully prescribed.
Chatterjee roundly rejected that notion in his Tuesday speech, saying that weighing a “broad range of economic and social and aesthetic values” could distort market signals for pipelines.
“The commission has historically prioritized precedent agreements in its analysis because those are clear, unequivocal statements of economic need by the market itself,” he said. “The companies that are willing to enter into contracts to pay for transportation service on a pipeline have a much clearer understanding of the market need for the gas than we could develop with studies in Washington, DC.”
Chatterjee said he expects arguments over pipeline need to be a “flashpoint” in legal challenges against approved pipelines, likely lengthening FERC’s review process. Shortening that timeline, he said, will be a central priority for the commission.
“The regulatory uncertainty created by burdensome delays are problematic for numerous reasons for those on both sides of the issue,” Chatterjee said. “FERC owes both sides an opportunity to articulate their position, to have it reviewed thoughtfully by the commission and ultimately to receive an up or down decision.”
In addition to responding to the NOPR and permitting more pipelines, Chatterjee said speeding up FERC’s transmission approval process and better aligning incentives will enhance the reliability and resiliency of the grid.
“The most critical piece of the near-term transmission investment puzzle is ensuring the right financial incentives are in place to attract the investment capital for new infrastructure,” Chatterjee said. “In concrete terms, this means that the commission must address the question of what represents a just and reasonable return on equity for transmission projects in wake of the D.C. Circuit’s Emera Maine decision.”
In that case, the judges vacated FERC’s established return on equity for transmission projects established in 2014 by FERC Opinion No. 531.
But enhancing transmission will also mean “casting a wider net” than just a single D.C. Circuit decision, Chatterjee said.
“FERC should take a hard look at Order 679 and our transmission incentives policy statement to consider innovative ways that we can apply those principles animating those documents,” he said.
FERC is also actively engaged on cybersecurity matters and will “consider a revised CIP standard on cybersecurity management controls” at its open meeting on Thursday. The Critical Infrastructure Protection standards aim to protect the bulk power system from cyber and physical attacks, and Chatterjee said the commission staff continues to work with industry to develop new best practices and apply lessons learned.
Additionally, FERC should prioritize evaluating changes to the Public Utilities Regulatory Policies Act (PURPA), a 1978 law which he said: “often feels like it is out of sync with our modern energy landscape.”
As part of that review, the commission should pay special attention to the “one-mile rule” separating generating facilities under the law, Chatterjee said. That provision is the subject of criticism from utilities and some state regulators, who told a House Committee last month that developers are using it to game the regulatory law.
Finally, FERC staff is also in the process of evaluating President Trump’s Executive Order 13783, which promoted energy independence and “dominance,” Chatterjee said. While FERC was not compelled to respond to the order as an independent commission, FERC “chose to do so because the goals of the EO are consistent with the high premium we place on the improvement of the commission’s work.”
That analysis is still under review, Chatterjee said, but the commission will “make public its actions related to the EO as appropriate, based on the EO and internal processes.”