FERC and the U.S. Environmental Protection Agency (EPA) are tasked with implementing federal climate policies, not establishing them, and as such the two agencies should act with "self-restraint" in their work on the Obama-era Clean Power Plan (CPP), according to Federal Energy Regulatory Commission Chairman Neil Chatterjee.
In August, EPA proposed a rule that would shift to states much of the responsibility for regulating carbon dioxide (CO2) emissions from power plants, potentially opening a door to increased burning of coal, in the Trump administration's latest maneuver to kill the CPP.
Like CPP, the Affordable Clean Energy (ACE) Rule, EPA said, would continue lowering CO2 emission levels. But unlike the "overly prescriptive and burdensome" CPP, ACE "empowers states, promotes energy independence, and facilitates economic growth and job creation."
FERC staff has not conducted a full analysis of how adoption of ACE would affect the reliability of the bulk-power system, but "it appears upon initial review that [it would] cure some of the potential deficiencies in the Clean Power Plan," Chatterjee said in an Oct. 31 letter to EPA acting administrator Andrew Wheeler.
The Obama administration unveiled the final version of the CPP in August 2015. The plan, which embraces renewables, solar and wind power, but not so much natural gas, calls for states to reduce emissions by 32% below 2005 levels by 2030.
The CPP has been on hold pending legal challenges working their way through the courts. Twenty-seven states have sued over the CPP, arguing that it is an overreach by EPA. In February 2016, the U.S. Supreme Court temporarily blocked implementation of the rule until all legal challenges were resolved.
"I am concerned that significant changes in the power sector have occurred since 2015 that would make the reliability of the nation's bulk-power system even more susceptible to unintended consequences should the Clean Power Plan ultimately be implemented," Chatterjee wrote.
There have been "significant retirements of baseload coal and nuclear units since 2010, due to low natural gas prices, wholesale competition, low customer demand growth, regulation-driven cost increases, and the growth of renewable resources, and...this trend of retirements is expected to continue."
Those changes occurred even without implementation of the CPP, "which could only increase the scale and pace of plant retirements." State-sponsored subsidies for renewable resources and economically challenged baseload generation capacity have exerted downward pressure on generation capacity prices, Chatterjee said.
A controversial proposal by the Department of Energy last year to subsidize the coal and nuclear industries was rejected by FERC, which instead issued a separate order to examine the resilience of the national bulk power grid, and has since issued orders addressing the effect of state subsidies on the long-term viability of generation capacity markets.
"The issues raised in these proceedings are complex, and require difficult judgements by the Commission to ensure reliability while keeping prices at just and reasonable levels," Chatterjee said. "I am very concerned that additional generation capacity retirements brought about by the implementation of the Clean Power Plan could compound the challenges raised in these and similar proceedings."
The chairman said he is also concerned that the proposed CPP would have allowed EPA to impose sweeping changes "without a clear statutory directive or limiting principle." Congress, he said, has made it clear that FERC's role is to implement federal climate policies, not to establish them.
EPA "should act with similar self-restraint here," Chatterjee said. "Working together, we would expect to be able to devise methods of addressing climate change in ways that respect our respective statutory limits.
"To the extent the resolution of these issues presents an impassable 'regulatory gap' that neither agency can overcome while remaining within its bounds as a 'creature of statute,' then it may be necessary to request specific guidance from Congress through appropriate legislation."
Chatterjee recently retook the reigns at FERC, which currently has two Republican and two Democratic commissioners. FERC won't be putting any issues aside to wait for the Senate to confirm President Trump's nomination of Bernard McNamee, Chatterjee has said. The Senate Committee on Energy and Natural Resources has scheduled a Nov. 15 hearing, in the after-election lame duck time frame, to review the nomination.