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Democrat-controlled Senate sets stage for new FERC majority, policy direction

A pair of U.S. Senate wins by Democrats in Georgia means that current Majority Leader Mitch McConnell will no longer have the ability to unilaterally prevent the Federal Energy Regulatory Commission from having a Democrat majority this year.

The development means that the federal agency could play a more expansive role in advancing President-elect Joe Biden's energy and climate policy agenda during his first term, especially given that the Democrats' slim control of the U.S. House of Representatives and Senate may thwart the passage of more progressive legislation.

The agency currently has a 3-2 Republican majority, but one of the Republican seats will expire in June. If McConnell had retained his majority leader status for the 117th Congress, the Kentucky Republican would have dictated the confirmation timeline for Biden's pick to fill that seat and could have held up the confirmation altogether.

But the declared victories of Democratic Senate candidates Raphael Warnock and Jon Ossoff in Georgia's runoff elections will now give the Democrats control over the nomination process and the ability to approve nominees over Republican objections. The victories gave Democrats a 50-50 share of the Senate with Republicans, which will provide Vice President-elect Kamala Harris with the tie-breaking vote in the chamber, allowing Democrats to advance Biden's first FERC pick without delay.

Effective Democratic control of both houses of Congress and the White House also means that agency actions undertaken without new legislation will likely face less congressional scrutiny than if Republican lawmakers were in power, according to several experts who spoke with S&P Global Market Intelligence.

The new dynamics may allow Democrats at FERC to take more aggressive action to address climate change and protect the environment, such as by issuing carbon-cutting regulations and revising FERC's pipeline permitting policy statement to give more consideration to the climate impacts of new infrastructure and less weight to precedent agreements with affiliates, according to Katie Bays, managing director at FiscalNote Markets.

FERC has a Republican chairman leading the five-member agency that has all its seats filled. As an independent agency, no single party can hold more than three seats, but the U.S. president gets to choose who will lead the commission. However, FERC members are allowed to serve out their five-year terms regardless of who is president.

Past FERC chairs have offered to step down when presidents of the opposing party take office, but Republican Chairman James Danly, who displaced fellow Republican Neil Chatterjee in November 2020, has not indicated whether he plans to do so. If he does not and Biden replaces him, he would revert to the role of commissioner.

As for the other existing members, Chatterjee's term is next to expire, in June. However, a commissioner is allowed to serve past the end of their term until Congress adjourns at the end of that year unless the Senate confirms a replacement before then. If Democrats had not won the Senate, McConnell could have had a path to delay a Democratic majority at FERC until 2022.

"Normally what happens is the chairman steps down, which accomplishes the purpose of letting the new incoming president pick a new chairman and also shift the balance of power towards the Democrats," Bays said in an interview. "The outside chance is that instead of that happening, Biden has to wait five months for Chatterjee's term to expire and then he replaces Chatterjee. But one way or another, by the Fourth of July Democrats are going to control FERC, and the Democrats that are in charge of FERC are going to be more liberal than they would have been if one of the two Republicans had won the Georgia runoff."

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Committee chairmanships have yet to be decided for the 117th Congress, but Sen. Joe Manchin, W.Va., is the Democrat leader on the U.S. Senate Committee on Energy and Natural Resources, which is responsible for advancing FERC nominations. The Democrats' thin effective control of the Senate will require the Biden administration's energy and climate team to court the coal-state senator.

Until Democrats attain a majority and the chairmanship at FERC, only measures with bipartisan support are likely to get through the commission, according to David Hill, former deputy counsel for energy policy at the U.S. Energy Department.

"It forces them to actually think about what it is that can be done on a bipartisan basis, and truthfully, probably a lot of the American public would say that's exactly what they would like to have happen," Hill said in an interview. He is now a senior research scholar at Columbia University's Center on Global Energy Policy.

The last time the Senate's ranks were divided at 50-50, in 2001, party leaders cut a deal to evenly split committee membership. Even if that happens in the 117th Congress, which some experts considered to be unlikely given partisan tensions in 2020, moderate Republicans are likely to support Biden's next FERC pick, according to David Wochner, a partner at K&L Gates who runs the firm's federal policy practice. Wochner added that he did not anticipate a particularly controversial nominee.

"I would expect, certainly, it will be someone who has good credentials in the renewable energy sector," Wochner said. "But I also expect there will be some degree of balance there, and I think part of that is going to be driven by the fact that they still have to get through committee."

Agenda still subject to disruption

While FERC controls its own agenda, it also has to respond to filings made by regulated parties like utilities and other key players such as environmental organizations, said Ari Peskoe, director of the Electricity Law Initiative at Harvard Law School.

"So it could be that whatever agenda FERC might have in mind could be, in part, overtaken by whatever is put before it," Peskoe said in an interview.

Peskoe noted that this occurred early in the Trump administration when the Energy Department in September 2017 pursued a proposal to prop up ailing coal- and nuclear-fired generators with subsidies, an effort that ultimately failed. "I'd be surprised if the Biden DOE did something like that, but it just illustrates the fact that things can be out of the control of commissioners sometimes," Peskoe said.

Parallel examples in a Biden administration could include a carbon pricing proposal from the New York ISO or a complaint filed by clean energy advocates concerning wholesale capacity market rules, Peskoe said.

In the intervening months, FERC could find bipartisan compromise in a final rule revising the commission's incentives for power transmission projects, said R. Scott Everngam of Blue Horseshoe Energy LLC, who previously served as a senior energy industry analyst at FERC.

FERC action on Natural Gas Act certificates that authorize gas pipeline construction is less certain given that the commission chair controls the agenda, Everngam said. "It will be interesting to see what happens on pipeline certificates in the next few months knowing [Republicans] have a 3-2 majority," he said.