The Federal Energy Regulatory Commission must revisit mandatory capacity markets and how regions ensure resource adequacy or risk putting in peril the future of regional transmission organizations, FERC Commissioner Richard Glick told state officials in an address that was highly critical of recent agency actions that could undermine state sovereignty over the generation mix.
FERC in December directed sweeping changes to the PJM Interconnection's capacity market and in 2018 approved ISO New England’s move to a two-stage capacity auction process. Both efforts aimed to address states' out-of-market resource procurement actions while preserving competitive market prices and have drawn criticism for purportedly disadvantaging renewable energy resources and frustrating state clean energy policies.
“FERC needs to accommodate state policies, not override them,” Glick said Feb. 5 at the National Association of State Energy Officials’ 2020 Energy Policy Outlook Conference.
“There are certain conflicts and I understand the concerns some of the generators make, but in large part, generators wouldn’t have as many concerns if prices were a little higher, right," Glick sarcastically asked. He suggested that generators face much larger issues, such as reduced energy market revenues brought on by the low cost of natural gas and the rapid growth of zero-marginal-cost generation from wind and solar.
The sole sitting Democratic FERC member, Glick has been a vocal opponent of the agency majority’s view that state-subsidized resources are given an unfair advantage in the wholesale markets and should be subjected to minimum offer price rules that force them to bid into the market at higher prices.
The Federal Power Act, Glick insisted, was very clear in granting states jurisdiction of resource decision making, and many states are using that authority to address greenhouse gas emissions, an externality in the competitive power markets. “Since the federal government at this point doesn’t have a program addressing [greenhouse gas] emissions, it shouldn’t be for us to say the states can’t either,” the commissioner maintained.
Glick added that PJM, ISO New England, and the New York ISO, the three grid operators with mandatory capacity markets, were constantly coming to FERC with proposals changing how various issues are dealt with in those markets.
Further, “we’re telling almost every entity bidding in [the capacity markets] what they can bid in at, whether it’s because of state policies, market power, or various curves,” Glick said. “We’re micro-managing every aspect of the capacity markets. This is managed competition, which makes managed competition healthcare look like a small thing.”
Glick expressed frustration with every market issue seemingly ending up in litigation and questioned whether anything was being achieved. “If we don’t reassess where we’re headed, we’re going to put in peril the future of RTOs in general because states are going to pull out and we’re going to create more and more litigation,” he said.
State, federal tensions
Glick lamented growing tensions between the states and federal government, pointing particularly to wholesale power market issues and infrastructure development.
During an earlier discussion at the conference, Will Toor, executive director of the Colorado Energy Office, quipped that right now his state was looking at everything going on at the federal level with fear. While that drew some laughs, Toor more seriously contended that states are fighting to maintain their ability to meet their clean energy goals as cooperative federalism is being eroded as the Trump administration takes steps to revoke state authority in multiple arenas.
Glick said this tension could have adverse implications for the future of organized markets. For instance, he said, if states feel that FERC is preventing them from implementing certain energy policies or planning to correct for those policies in the wholesale markets, the states are going to look to remove their utilities from the RTO.
“That’s not effective,” Glick said. “If we’re going to do that, we might as well go back to the old cost-of-service regulation. … The commission needs to think twice before we go down that path.”
Glick told reporters on the sidelines of the conference that “some preliminary conversations” had taken place regarding the need for the commission to take a broader look at capacity markets, resource adequacy and states’ authority in the power sector. While he couldn’t speak for fellow commissioners’ positions on those topics, he said stakeholders that participate in those markets “realize we can't continue doing what we're doing because the future of the RTOs are at stake.”
Glick was cautious not to speak specifically to pending issues before the commission. Concerning the PJM capacity market order, he did say that he believed there were “several items or errors in the commission's order that a court could easily use to overturn that decision.”
When asked whether stakeholders could expect an expeditious decision from FERC on rehearing and compliance issues tied to that proceeding, Glick said it was “completely up to the chairman." But he hoped the commission would “move more quickly with everything,” expressing dismay with an array of matters that remain pending, some for years.
Jasmin Melvin is a reporter for S&P Global Platts. S&P Global Market Intelligence and S&P Global Platts are owned by S&P Global Inc.