Former FERC chairs praise US grid regionalization, but lament headwinds

Four former chairs of the Federal Energy Regulatory Commission praised the agency's 20-year-old Order 2000 encouraging utilities to form regional transmission organizations but said a lack of consensus on climate change policy poses challenges to the markets run by those organizations.

The former FERC officials said more direction from the US Congress on how to address climate change and transmission siting could help FERC and regional grid operators better handle the rapid shift underway in the bulk power sector as coal-fired capacity closes in favor of expanded reliance on natural gas-fired and renewable generation.

"I think that the regional planning and the regional markets are going to be even more relevant [in the future] than they are now," Cheryl LaFleur — who chaired the agency off and on from November 2013 to August 2017 — said during a January 21 webinar hosted by Americans for a Clean Energy Grid.

The webinar marked the recent 20th anniversary of Order 2000, which required all utilities that own, operate or control interstate transmission facilities to either file a proposal to join or establish an RTO or independent system operator or notify FERC of any obstacles to participation or reasons for nonparticipation.

Efforts by states and utilities to reduce their carbon dioxide emissions have increased the need to connect more generation from renewable resources across larger geographic areas and promoted the adoption of behind-the-meter technologies, such as energy storage and distributed generation from rooftop solar panels. Those trends "are really going to continue to highlight the need for the kind of regional planning that Order 2000 started," LaFleur said. She pointed to the order's success in facilitating transmission investment in ISO New England, the Midcontinent ISO and Southwest Power Pool and in helping the PJM Interconnection "seamlessly adapt" to new federal air toxics standards.

Pat Wood, who headed the agency from September 2001 to July 2005, echoed LaFleur's comments, saying the establishment of organized markets is "a damn good way to get transparency on future investment."

TRANSMISSION

But unless Congress gives FERC more authority over transmission routing to resolve state and local resistance to some projects, "I think FERC is still going to continue to be moving around the edges of things [on climate change]," said Jon Wellinghoff, who chaired the commission from January 2009 to November 2013. "We really need to get beyond [that] if we're going to address the climate crisis that we've got before us."

Wellinghoff noted that pending climate legislation from Democrats in the US House of Representatives will include a national clean electricity standard but "is actually pretty void with respect to transmission policy."

Clearer authority over transmission siting will give FERC "the hammer to get parties to the table to talk about interregional [projects]," Wood said. He and other former FERC chairs also said Congress could provide more guidance on cost allocation for big transmission projects, an issue that has plagued some efforts to expand and modernize the power grid.

The commission's Order 1000 finalized in 2011 included certain cost allocation principles, including that transmission costs must be allocated in a manner "roughly commensurate" with estimated benefits. The mandate also required that federal rights of first refusal to build new transmission facilities be removed from FERC-approved tariffs and agreements.

But the order "has not met its promise" on interregional transmission planning and development, according to Wellinghoff.

Achieving a more efficient and lower-carbon grid will require Congress and FERC to go further, the former FERC officials said. "I would personally love to have the commission sit down and think about how we can take all these wonderful precedents a major step further in terms of promoting a truly national electric transmission policy and a robust grid," stated Jim Hoecker, who headed the commission from June 1997 to January 2001.

The webinar, however, excluded mention of a recent FERC decision that could disrupt some states' efforts to support and expand generation from clean energy sources. In December 2019, FERC issued an order that will require most new capacity in PJM that receives state subsidies, including future generation built under state renewable portfolio standards, to be subject to the region's minimum offer price rule.

Critics say the policy change, which also applies to existing nuclear plants receiving state zero-emissions credits, will make many carbon-free resources in the region less competitive with older, merchant power plants that largely run on coal and natural gas. As a result, the order could prompt some states to enact new policies enabling utilities to withdraw from the PJM market.