trending Market Intelligence /marketintelligence/en/news-insights/trending/g0hqSHqxtwHrDq5K7ZHnRw2 content esgSubNav
In This List

'Partisan' FERC threatens Calif. energy policy, grid expansion, attorney fears


Insight Weekly: Recession risk persists; Banks pull back from crypto; 2022 laggard stocks rally


Highlighting the Top Regional Aftermarket Research Brokers by Sector Coverage


Energy Evolution | A transition to cleaner energy drives demand for new nickel mines


Energy Evolution | Looking ahead to the energy transition in 2023

'Partisan' FERC threatens Calif. energy policy, grid expansion, attorney fears

After last year's election of Donald Trump as president of the United States, California energy insiders debated whether the Federal Energy Regulatory Commission would stick to its official policy of fuel neutrality or move toward an activist agenda to prop up conventional baseload power plants amid a national shift toward flexible natural gas and renewable energy resources.

That debate appears one step closer to being settled depending on how FERC responds to the U.S. Department of Energy's surprising proposal aimed at supporting struggling nuclear and coal-fired power plants by directing FERC to issue a rule requiring the country's regional grid operators to "ensure that certain reliability and resilience attributes of electric generation resources are fully valued." FERC, an agency not known for its fast action, on Oct. 2 opened a public comment period for the proposal and promised to act on it within 60 days.

"It's a bad tell, in my opinion, on how craven the FERC appointees are going to be in pushing the agenda of their boss, who they now understand to be the president," Matt Freedman, staff attorney with consumer advocacy group The Utility Reform Network, or TURN, said Oct. 4 during a panel discussion in downtown San Francisco. "I don't think we've seen FERC this partisan or this polarized, meaning they are just doing the bidding of the president ... I see this as the first of potentially many things to come from FERC. That's what makes me nervous."

Despite Freedman's concerns, FERC's new chairman, Neil Chatterjee, has acknowledged the agency's independence and pledged to "adamantly enforce" that independence. And his colleague and fellow newcomer, commissioner Robert Powelson, on Oct. 4 stressed that "FERC does not do politics. We don't do energy politics." Powelson was also surprisingly frank about his view of the DOE proposed rule, saying he would not support a rule that undoes organized competitive markets and would leave FERC if forced to do so.

Speaking during a Power Association of Northern California luncheon, Freedman nevertheless said DOE's proposed rule could be "very problematic" for an effort backed by Gov. Jerry Brown to merge the California ISO with neighboring balancing authorities to export the state's excess solar power to other states. Last-minute legislation enabling the grid expansion effort to move forward stumbled in the final days of the session but could return in 2018, in the second half of California's two-year session.

TURN, which already had concerns that a move toward a Western regional grid could run counter to California's energy and climate policy goals, is even more troubled now.

"Based on what we saw last week, it would be foolish to imagine that FERC is not going to take this opportunity to essentially weaponize its jurisdiction to go after state policies when the California ISO comes to it with a whole series of changes," the attorney said. New tariffs and a new governing structure for a regional grid operator in the West would require FERC's approval, he noted. "That's the realpolitik dimension of it."

Freedman's concerns also run counter to those of regional grid proponents like Ralph Cavanagh, the co-director of the Natural Resources Defense Council's energy program. He recently argued that "nothing will change" in the federal government's regulation of California energy matters under a regional organization because the California grid operator already is fully regulated.

The TURN attorney, however, argued that California's ability to defend its energy and environmental policies would be weakened.

"If the [ISO] board is appointed by the governor and approved by the state senate, I think California has much more influence on the process at the ISO itself," Freedman said, adding that de-politicizing the board's current governance would leave the state exposed to risks. "How do we prevent a situation where California signs off on the regionalization effort, and the ISO goes to FERC and FERC decides they want to a new conditions," he asked, calling for some kind of additional "suckers insurance."

Just as state lawmakers mull the proposal to "cut the ISO loose" and merge with other balancing authorities, the federal regulator's looming actions take on greater significance for the Golden State because many more plants would be affected across the West than in California itself, Freedman cautioned.

Kip Lipper, the chief policy advisor to California Senate President Pro Tempore Kevin de León agreed the DOE proposal to FERC complicates the already "complicated, controversial issue" of grid expansion. "What are the potential risk of FERC and DOE preemption to California's clean energy and climate policies?" he asked at the event. "The loss of oversight and control over California's power grid is a very significant question that needs be addressed."