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Essential Energy Insights - October 2021


FERC chairman presents ambitious priorities list

Neil Chatterjee outlined a wide-ranging, ambitious priorities list for his tenure, however long that may be, as the head of the Federal Energy Regulatory Commission in an address delivered Oct. 17 at the Energy Bar Association's midyear forum.

Confirmed by the Senate Aug. 3 for a term ending June 30, 2021, and tapped days later to temporarily serve as chairman until Jones Day attorney Kevin McIntyre is confirmed, Chatterjee has wasted no time settling in, naming a chief of staff and general counsel.

Chatterjee is leading the commission's effort to respond to the U.S. Department of Energy's request that it quickly finalize a rule to value resilience in wholesale power markets. The notice of proposed rulemaking (FERC docket RM18-1) the DOE sent to FERC in late September has been criticized as a blatant attempt by the Trump administration to push coal-fired and nuclear generation into a more advantageous market position over renewables and natural gas.

Chatterjee, however, said during the Energy Bar Association forum that "the DOE NOPR fits comfortably within [FERC's] efforts" to facilitate the creation of market structures that incent reliability-related investment, monitor and enforce grid reliability within those markets, and provide oversight of the North American Electric Reliability Corp.'s reliability standard-setting activities.

"I believe there's real value in Secretary [Rick] Perry initiating conversation regarding whether FERC-jurisdictional organized markets adequately compensate certain generators for their contributions to the reliability and resilience of the nation's grid," Chatterjee said. "This is entirely consistent with FERC's historical efforts to ensure that organized markets provide necessary compensation for reliability-related services."

In Chatterjee's view, the NOPR builds on the commission's existing regulatory initiatives on price formation. "It's a conversation that I believe we need to have," he said. "We must ensure that we don't find ourselves coming to regret not having asked hard questions like these amongst all the changes in the energy industry."

Beyond maintaining grid reliability and resilience, Chatterjee said other key areas where "FERC can build upon the successes of the past to grow stronger in meeting the demands of the future" include natural gas and hydroelectric project reviews, electric transmission investment incentives, cybersecurity, de novo reviews in enforcement actions, and Public Utility Regulatory Policies Act reforms.

Chatterjee noted that FERC's review from formal application submission through issuance of a FERC certificate, on average, can take around 30 months for hydropower projects, four years for relicensing of hydro projects and 18 months for significant natural gas pipeline projects.

"Ultimately, I would like to see FERC significantly reduce its review timelines for major natural gas pipeline certificates and other projects," he said. "I'm under no illusions as to the magnitude of that challenge," he added, noting it will necessitate a deeper dive into existing regulations, policies and practices than previously undertaken and an enormous effort by FERC staff already engaged on a number of other critical issues facing the commission.

The chairman predicted that effort would include a look at the commission's relationships and interactions with other federal and state agencies involved in the permitting process. "Even if legislation is not enacted to make those interactions more efficient, I believe we should pursue understandings that can be reached on an agency-to-agency basis to help improve the review process," he said.

Chatterjee also pointed to increased stakeholder participation by both those for and against pipeline projects as well as legal challenges adding to regulatory uncertainty for projects. "I anticipate that a flashpoint for many of those legal challenges will be the question of economic need for new natural gas pipeline projects," he contended.

In a rare split decision on natural gas infrastructure, FERC on Oct. 13 approved the 604-mile, 1.5 Bcf/d Atlantic Coast Pipeline and the 301-mile, 2 Bcf/d Mountain Valley Pipeline, two major greenfield projects to move gas from the Marcellus and Utica plays amid growing demand in the mid-Atlantic.

Commissioner Cheryl LaFleur dissented, saying she was not persuaded the two projects as proposed were in the public interest. Chatterjee characterized her dissent as suggesting "that FERC should depart from its longstanding policy of relying on precedent agreements with shippers to demonstrate economic need in favor of weighing a broad range of economic, social and aesthetic values."

Chatterjee said he strongly disagreed with his colleague's position. "The commission has historically prioritized precedent agreements in its analysis because those are clear, unequivocal statements of economic need by the market itself," he said. "The companies who are willing to enter into contracts to pay for transportation service on a pipeline have a much clearer understanding of the market need for the gas than we could develop through studies in Washington, D.C."

Jasmin Melvin is a reporter for S&P Global Platts which, like S&P Global Market Intelligence, is owned by S&P Global Inc.