Ex-state utility regulators caution FERC against upending voluntary RTO regime

A group of 18 former state utility regulators is pushing back on a recent call for the Federal Energy Regulatory Commission to expand organized wholesale power markets to every region of the country, warning that it could impede state leaders' decision making and progress toward a clean energy transition.

"Rather than working together to ensure that the changing grid meets the needs of consumers, mandatory [regional transmission organizations] would become a flashpoint in the state-federal relationship," the former state regulators -- led by Tony Clark, who helmed the North Dakota Public Service Commission before serving as a FERC commissioner from 2012 to 2016 -- said in a letter sent to FERC June 24.

"Collectively, the public interest will be better served by state and federal regulators seeking common ground, working towards shared goals, and not fighting each other in the courts and in Congress," the letter said. "We hope you will agree and maintain FERC's prudent and well-established stance towards voluntary RTO membership."

Response to call for mandate

The former state regulators' concerns were sparked by a June 2 letter to FERC from nine former FERC members, including four chairmen, urging the current slate of commissioners to use the agency's "broad authorities and tools" to create ubiquitous RTO wholesale markets across the country.

While about two-thirds of US electricity sales occur in competitive markets administered by RTOs and independent system operators overseen by FERC, large areas of the country are still dominated by vertically integrated utilities that control generation, transmission and distribution assets.

The June 2 letter from former FERC members asserts that organized market expansion would aid decarbonization efforts, transmission buildout and overall grid reliability and resilience.

But the state regulators contend that abandoning FERC's long-standing policy of providing for voluntary RTO membership for utilities and states risks greater confrontation between FERC and the states and threatens the momentum toward "grid transformation by unilaterally imposing an unexpected new market construct that may work at cross-purpose with clean energy investment decisions states have already made."

Common belief

The letter from the former state regulators noted that the signatories have decades of energy regulatory experience but hail from different regions, represent different political parties, have different experiences with wholesale market structures and hold different views on the operations of existing RTOs.

"Nonetheless, we share a common belief: FERC should continue to allow states and utilities the flexibility to participate in wholesale market structures that work best for their citizens and electricity customers," they said in the letter.

Further, they pointed to the benefits of the voluntary RTO regime, including that it allows "states the flexibility to make independent assessments about the value proposition of" various market paradigms and gives the RTOs "an incentive to establish a value proposition that encourages membership."

Flexibility urged

The former state regulators recommended that if FERC indeed has an interest in expanding wholesale market structures, its "best method to do so is to focus its attention on fixing and reforming existing markets in collaboration with states, while granting flexibility to those that may seek a different path for their citizens."

They stressed that "top-down initiatives to impose an RTO mandate everywhere may well inhibit the sort of clean energy transition that is already taking place across the country -- including in those states that have chosen to remain outside of RTOs."

The letter was signed by Clark, David Coen of Vermont, Philip Jones of Washington, Jim Sullivan of Alabama, Stan Wise of Georgia, Susan Ackerman of Oregon, Edward Finley of North Carolina, James Atterholt of Indiana, Ron Brisé of Florida, Raymond Gifford of Colorado, John Howard of South Carolina, Mike Huebsch of Wisconsin, Jon McKinney of West Virginia, Ann Pongracz of Nevada, John Quackenbush of Michigan, Brien Sheahan of Illinois, Gregory Sopkin of Colorado and Bob Stump of Arizona.