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DOE NOPR Conversation Starter, But Not Much More, Say Former FERC Commissioners

The Department of Energy's (DOE) proposed rulemaking to implement reforms on the reliability and resiliency of the electricity grid opened an overdue debate, but the proposal itself isn't of much value, according to a quintet of former FERC commissioners, including three former chairmen.

The notice of proposed rulemaking, or NOPR, isn't likely to achieve its goals, and represents a step backward in time and away from the success of competitive markets, according to former Chairmen Betsy Moler, James Hoecker and Pat Wood III, and former Commissioners Nora Brownell and Colette Honorable, who spoke Tuesday at a panel discussion hosted by the Bipartisan Policy Center (BPC) in Washington, DC.

Their reaction to the "scud missile of a NOPR" was that it wouldn't pass muster at the Federal Energy Regulatory Commission, Hoecker said.

"If the goal of the NOPR is to stimulate the conversation, to promote greater reliability and a more resilient electric system, then I think that's laudable, [but] I think it's not going to accomplish that. If the goal of the NOPR is to save uneconomic coal and nuclear plants, then I think that's probably starting off on the wrong foot.

“But let's seize this opportunity to talk more about how markets can make electric service and the electric system in this country more reliable and more resilient.

"If we're serious about markets, if FERC is going to continue its two-and-a-half decade-long campaign to ensure that we have a competitive wholesale market, it's going to have to take a longer look at this, it's going to have to marshal evidence....and it's going to have to engage in some analysis above and beyond what is represented in this NOPR.”

That basically means, he said, “that a final action in this docket -- as we would understand it, a final rule -- is not going to happen this year. I don't see how it can.” He suggested that there could be “a policy statement, maybe, or an order convening technical conferences. The options are many."

The panel member's comments mirrored those included in a filing they and three other former  commissioners filed for DOE's proposed Grid Resiliency Pricing Rule [RM18-1]. In the filing, they said FERC should "use this opportunity created by the Secretary [of Energy] to identify attributes of the current competitive market system that need to be improved, to crisply define them and either modify the current published proposal or initiate regional proceedings to examine resilience issues and consider the need for market rule changes."

The dialogue prompted by the NOPR could produce some positive results, the former FERC commissioners said Tuesday, but their criticism of the proposal hasn't mellowed.

"There's a lot more thoughtful way to do this," Wood said Tuesday. "Obviously, we have to define the problem...basically, decline to adopt the NOPR, issue a technical conference hearing tomorrow -- you don't have to wait 60 days for that."

"Moving forward, favoring specific generation resources is not the way to go," Moler said. "To me, the key to addressing reliability issues and resiliency concerns is finding a solution that works with and is compatible with competitive wholesale markets, not to favor one source of generation or one type over another. We need to build upon success, not abandon competitive markets."

Speaking on a second panel at the same event, Sean Cunningham, executive director of DOE's Office of Energy Policy and Systems Analysis, defended the NOPR and said it has received strong support.

"I'd say it has revived conversation and has focused the conversation on timely action...In the FERC docket we are seeing quite a bit of support. I counted 180 individual comments that are in support of the proposal from the energy industry, grid security experts, states, manufacturers, labor groups, professional societies and on and on. Even among those who disagree with the proposal, there's wide agreement that the problem is real and it requires prompt action.

"FERC-approved markets are not adequately valuing the resiliency attributes that are contributed by coal and nuclear generation," Cunningham said. "The NOPR is not meant to be an all-encompassing resiliency proposal. I think there's been some confusion about that."

He said it was a first step that came about because coal and nuclear generation units are being driven out of business, "not because of a so-called free market, but because existing market rules aren't compensated them for the essential services they are providing."

Under DOE's NOPR, FERC would impose rules on independent system operators and regional transmission organizations "to ensure that certain reliability and resilience attributes of electric generation resources are fully valued." The rule would allow "for the recovery of costs of fuel-secure generation units that make our grid reliable and resilient," according to DOE Secretary Rick Perry. Eligible units would have to "be able to provide essential energy and ancillary reliability service and have a 90-day fuel supply on site in the event of supply disruptions caused by emergencies, extreme weather, or natural or man-made disasters."

Coal and some electricity organizations have shown support for the NOPR, while natural gas industry groups have vehemently opposed it.

One recent analysis concluded that subsidies included in the NOPR would cost as much as $10.6 billion a year, with the vast majority of the money going to a handful of coal and nuclear companies.

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