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Upton: No easy fixes to power markets, little money for infrastructure


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Upton: No easy fixes to power markets, little money for infrastructure

Fred Upton is leading the U.S. House of Representatives' review of U.S. power markets at a pivotal time for the industry, but the Michigan lawmaker is being careful not to rush legislative action on the sector's complex set of challenges.

Upton chaired the House Energy and Commerce Committee from 2011 until chair term limits required him to give up that leadership role in early 2017. He now leads the committee's energy subcommittee.

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U.S. Rep. Fred Upton, R-Mich., chairman of the House Energy and Commerce Committee's Energy Subcommittee.

Source: S&P Global Market Intelligence

One of Upton's key jobs lately has been spearheading the subcommittee's "Powering America" hearings series, which has gathered industry and government leaders to testify on some of the most pressing issues facing U.S. electricity markets.

The hearings so far — eight this year and one in 2016 — have touched on everything from potential changes to the Federal Power Act to better accommodate state clean energy goals to defining grid reliability as natural gas and renewable generation expand and coal-fired and nuclear output decline. Moreover, consumers are becoming more involved in managing their own power supply through self-generation, smart meters, rooftop solar and other technologies.

"It's very complicated. The issues are about as in-depth as you can find," Upton said in a Nov. 29 interview. And the series is not over. Although subcommittee members have yet to nail down topics for 2018, "I would guess that we'll do a number of hearings that continue on the path that we’ve been."

The series has already inspired proposals from committee members. Following a "Powering America" hearing in September, U.S. Rep. Tim Walberg, R-Mich., introduced a bill to ease utilities' mandatory purchase obligations under the Public Utility Regulatory Policies Act, commonly known as PURPA. The law requires utilities to buy energy or capacity from small qualifying renewable energy projects in a bid to diversify the generating mix, but PURPA critics say the law is susceptible to abuse by developers and no longer as necessary given the growth in renewable generation over the past decade.

But Upton is mostly taking a wait-and-see approach on whether he or other committee members will propose major legislation to address industry challenges. "We'll see where it takes us. I don't know what that 'pot of gold' looks like at the end yet," he said. "We're all trying to get a better understanding of how can we make these systems more efficient and better for the consumer."

Upton is also reserving judgment on the U.S. Department of Energy's controversial request for the Federal Energy Regulatory Commission to craft a rule ensuring certain coal and nuclear plants can fully recover their costs in regions with competitive energy and capacity markets.

Gas, renewable and even oil groups say the proposal would unfairly advantage noncompetitive generating resources, disrupt wholesale markets and raise costs for consumers. But coal and nuclear backers say current market rules are not adequately compensating those plants, forcing the early retirement of units that are needed to ensure a reliable and resilient grid.

The DOE asked FERC to respond to its request by Dec. 11. Upton said he wished FERC had more time to consider the proposal but otherwise withheld comment on the department's request. He also demurred on whether the DOE was impinging on FERC's authority as an independent agency.

"We'll see what type of direction they take," he said. "I'm not convinced that they're going to go [it] alone. So we'll see."

FERC has already been studying the shift in the U.S. energy mix and possible policy and market rule changes to accommodate the transition. But developing any needed potential long-term solutions could still take a while.

Commissioner Neil Chatterjee, who temporary led the agency until new Chairman Kevin McIntyre was sworn in Dec. 7, has therefore been developing an interim solution to keep at-risk coal and nuclear plants operating. In addition, coal and nuclear proponents, including American Electric Power Co. Inc. and Exelon Corp., have begun pressing Congress to authorize tax credits for those energy sources until FERC comes up with a longer-term strategy.

When asked whether interim action was necessary to ensure grid reliability, Upton said utilities in his home state of Michigan are not concerned and that state regulators and existing market rules seemed to be effective in keeping needed resources available.

"I don't know that anything is really imminent in terms of what needs to be done, but … I would guess that we'll probably do another hearing on that probably next year," Upton said.

In the meantime, the Energy and Commerce Committee has advanced several bills to streamline infrastructure permitting, including for hydropower facilities and pipelines, and to help resolve the U.S. nuclear waste storage policy stalemate.

Upton said he hopes the full House will take up a bill before Christmas introduced by Rep. John Shimkus, R-Ill., that seeks to overcome the decades-old impasse over storing spent fuel from nuclear plants.

House Bill 3053, or the "Nuclear Waste Policy Amendments Act of 2017," would authorize the DOE to begin a consolidated interim storage program for commercial nuclear waste and allow waste to be stored at privately owned facilities. The bill would require the U.S. Nuclear Regulatory Commission to decide whether to allow construction of a permanent storage facility at the Yucca Mountain site in Nevada before any interim storage program can be finalized.

Looking to 2018, Upton said Republicans in Congress could finally roll out an anticipated infrastructure bill, a response to President Donald Trump's ambitious call to support $1 trillion in infrastructure projects. But the lawmaker said recent and future disaster funding for Puerto Rico, Texas and other parts of the country devastated by hurricanes could reduce Congress' appetite for a big broad infrastructure bill. The GOP's tax reform proposals, if enacted, could also hit the U.S. deficit and curb willingness for infrastructure spending.

"Because of the hurricanes we've got literally $100 billion … that’s being spent that no one figured was going to be out there in August," Upton said. "It's going to be hard I think to see big chunks of money for infrastructure come forward. But there is a need for it so who knows what'll happen and what'll be in the President's state of the union address or in his budget."