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Moeller reflects on time at FERC, work still to be done

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Onlyone FERC commissioner served longer than Philip Moeller, who since leaving theagency has buckled down in his new job working for the Edison ElectricInstitute. Still, he has plenty to say about his time at the commission and thechallenges facing the industry.

Moellerjoined FERC in July 2006 after being appointed by fellow Republican PresidentGeorge W. Bush. It was "an interesting time," Moeller said, recallingthat the commission approved the North American Electric Reliability Corp. asthe nation's first official electric reliability organization the same month hetook his seat with the agency.

Healso cited the dramatic changes that occurred in electricity markets duringthose early years. Power prices were "pretty high" from late 2006 toSeptember 2008, which made the generators happy but made consumers "prettymad at us," he said, noting that the dynamic changed when wholesale powerprices dropped dramatically in 2009.

Moreover,California launched its newly revamped market — dubbed a Market Redesign andTechnology Upgrade — in September 2006 after the original market design faileddramatically during the Western energy crisis of 2000-2001, Moeller added.

"Thatwas a pretty significant effort that was pretty controversial at thetime," he said. But the new design has been a success and continues toexpand beyond California's borders, which was "kind of hard to imagine ...10 years ago," the former commissioner quipped.

FERC has plenty of work leftto do

Moellersaid that when he departed from FERC in October 2015, he left behind an agencywith plenty of work ahead of it. One of the items topping that list was theneed to tie up the many loose ends related to FERC's implementation of itstransmission planning and cost allocation rule, Order 1000. Moeller, whodissented from parts of the final rule, maintained that he "saw theproblems coming."

Inparticular, Moeller observed that the RTOs were being put in the position ofhaving to pick transmission project winners without any guidance as to how thatprocess should work or what factors should be evaluated over others. "It'sjust a whole new set of issues for them with a lot at stake, and I think it'sfair to say they are really struggling as to how they move forward in a newrole for them," Moeller said.

Moelleralso dissented from FERC's demand response pricing rule, Order 745, which waslater upheld by theU.S. Supreme Court. He said he was surprised by the court's decision,especially after listening to the oral arguments. "I fought the goodfight, and felt like I had most economists on my side, but the court decideddifferently," Moeller said. He added that trying to guess which way thecourt ultimately will rule based on questions posed during oral arguments isfoolhardy "because they can surprise you."

Conversely,Moeller said he was not surprised that the Supreme Court in Hughes v. Talen Energy that a Maryland program providing long-termrate guarantees to an entity that agrees to build a new power plant in thestate intrudes on FERC's jurisdiction. However, he stressed that the courtprovided plenty of flexibility on what states can do to encourage thedevelopment of new or clean generation, possibly in a way that still impactswholesale markets. But, he said, exactly where the line should be drawn will bedecided in future test cases.

Similarly,Moeller maintained that FERC has signaled that it might sign off on certainstate actions that could impact power capacity markets. "But when do thoseactions cross the line?" he asked, suggesting that FERC will soon beforced to make more of those calls. Thus, Moeller said he is very encouraged bydiscussions taking place in the ISO New England Inc. and the regarding waysstate policies can be incorporated without causing problems with wholesalemarkets.

Moelleradded that PJM's markets were not really designed to reflect the value nuclearand certain other power plants provide in maintaining system reliability on a24/7 basis. Because those plants are becoming increasingly important, Moellersaid a discussion on whether market rules need to be changed to reflect thatvalue "is very worthwhile and I'm hoping that continues and actually leadsto something."

RTOsand ISOs are on the right track in trying to finding potential solutions ontheir own without waiting for FERC to impose a top-down approach, Moeller said."The stakeholder process allows them to work through what could be somevery complicated market rules before actually filing something worthy ofserious consideration," he explained.

Does Congress need to modifythe FPA?

Lookingat the bigger picture, Moeller said Congress may need to revisit the FederalPower Act to clarify what constitutes a sale under that act versus a sale underlocal jurisdiction, as well as the proper treatment of aggregated distributedresources such as rooftop solar.

Hissuggestions echothose made by former FERC staff members at a recent hearing on Capitol Hill —one of several planned oversight hearings on the FPA. Policymakers have paidmore attention lately to jurisdictional issues for power markets in the wake ofthe two recent Supreme Court cases.

Moelleralso said Congress could provide permitting certainty, including possiblefederal siting authority for wholesale transmission. "If something likethe [Clean Power Plan] moves forward, I don't know how you hit [the gas andrenewable] building blocks without more pipes and wires," Moeller said.

Turningback to his time at FERC, Moeller said that it was "terrifically fun andinteresting" and that he enjoyed the camaraderie of the othercommissioners and the staff. "The agency works very well. … It's notperfect, but if all the agencies in the federal government ran as well as FERC,we'd be in a much better spot," Moeller said.

FERChas generally been given high marks for acting as an independent agency andstaying relatively apolitical. Moeller largely agreed with that assessment,although he noted that Republican commissioners tended to favor somewhat higherreturns for transmission projects. He also cited a "bit of a philosophicaldivide" on contract sanctity issues and demand response compensation.

Inaddition, Moeller acknowledged some opinions among the FERC commissioners on theClean Power Plan that reflected their political affiliations. But he alsopraised the U.S. EPA for agreeing to extend the plan's compliance deadlinesafter participating in a series of FERC technical conferences on thereliability implications of the rule.

"I'mguessing they weren't thrilled that the commission had those technicalconferences when they were announced. But I think in the end, even they seemedto agree that we all learned a lot from those," Moeller said.

AlthoughFERC is down to just three commissioners — the bare minimum needed to vote outan order — following the exit of Tony Clark at the end of September, Moeller saidthe agency still should be able to get its work done. As for getting the two emptyFERC seats filled again, he noted that any new nominees likely will faceincreased scrutiny regardless of who they are.

FERC"is a higher-profile agency now for a variety of reasons, and so theappointment process is going to reflect that and people are more engaged inthese issues if they're members of Congress or the U.S. Senate. They've had tothink about them more. It's not a calm time," Moeller observed.

Finally,Moeller — whom EEI hired to fill the newly created position of senior vicepresident of energy delivery and chief customer solutions officer — said one ofhis main areas of focus at EEI will be to advocate for "getting the ratesright."

"It'sa two-way grid now, both with information and energy production andconsumption, and that's pretty exciting, but you have to get the rate structureright so that cost causation lines up as it should," Moeller concluded.