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White House announcement on FERC member leaves open questions on timing

Highlights

Confirmation would impose 3-1 Republican majority at FERC

Danly became general counsel under Chatterjee

Washington — Stopping short of a formal nomination, the White House late Monday announced its intent to name James Danly, general counsel of the Federal Energy Regulatory Commission, to fill a Republican seat at the commission that has been empty since Kevin McIntyre died in January.

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The long-anticipated action would give FERC three Republicans and one Democrat. Depending on timing of a formal nomination and Senate action, that would reduce the likelihood that a recusal by one member would leave FERC without a quorum on key wholesale power market decisions. It would also bolster certainty for pending natural gas project authorizations.

Danly joined FERC in September 2017, alongside then chief of staff Anthony Pugliese, soon after Neil Chatterjee came on board to serve as acting chairman. Danly moved to FERC from the energy regulation and litigation group at Skadden, Arps, Slate, Meagher and Flom, where he was listed as an associate. He graduated from Vanderbilt University Law School in 2013, and has also worked as a law clerk for 6th US Circuit Court of Appeals Judge Danny Boggs, and as managing director for the Institute for the Study of War. He is a former US Army officer with two deployments in Iraq.

QUESTIONS ON DEMOCRAT

It was still unclear whether the White House would also soon advance a nominee to fill the open Democratic spot on the commission, as Senate Democrats have strongly urged, or whether President Donald Trump will soon re-nominate Bernard McNamee, whose term runs out next June.

Senate Energy and Natural Resources Committee Ranking Member Joe Manchin, Democrat-West Virginia, said Tuesday he was "disappointed" that Trump only announced a Republican, though he remained hopeful the White House would quickly name a Democrat as well.

"FERC has a strong history of operating in a bipartisan fashion and failing to honor the tradition of a bipartisan pairing sets a dangerous precedent moving forward," he said.

Some observers anticipated Danly would not likely be seated at FERC until next year, but ClearView Energy Partners said it viewed the announcement as a White House effort to resolve the problem of a lack of a quorum on decisions, such as the pending capacity market reform proposal for PJM Interconnection. Those concerns have arisen since Democratic Commissioner Richard Glick has resumed recusing himself on matters related to his prior employer, Avangrid.

Over a year has passed since the commission found existing rules governing PJM's capacity market to be unjust and unreasonable, and a proposal (EL18-178) PJM filed to address state-subsidized generation has idled at the commission since last October. The grid operator last week said it would not move forward with auction deadlines for its capacity market until it received an order from FERC.

"If FERC moves on the PJM reform docket in November (instead of December, when Glick's recusal concludes), we would expect both auctions could be held sequentially in mid-2020, albeit likely a few months later than the April and May 2020 timing" previously projected, ClearView said.

"Further delays truncating the forward period could disincentivize new [power plant] builds by shortening the lead times for construction or changing the payback structure of existing/potential financing agreements, which could in turn result in somewhat less liquidity in the auction," Kieran Kemmerer, a power market analyst with S&P Global Platts Analytics, said.

REGULATORY PHILOSOPHY

During his time at FERC, Danly has gained a reputation for intelligence and legal skills, as well as for espousing a philosophy of operating as a "humble regulator." His April keynote address at an energy conference left some with the impression that he believed in a narrow reading of law with little room for agency discretion.

On the power side, that might support a less assertive role for FERC in defending integrity of the wholesale markets as they come into tension with state policies and generation mix preferences.

Danly also is seen as having played an important role in FERC's decision in May 2018 to scale back FERC's considerations of greenhouse gas emissions in natural gas pipeline reviews. The shift has divided the commission and drawn court challenges.

John Moore, director of the Sustainable FERC project, said that before senators vote on his nomination they must ask him what it means to be a "humble regulator."

"Would Danly defer to the authority of states to set their own clean-energy policies? Would he continue FERC's flawed climate review of pipelines that he defended in court?" he asked.

Gary Kruse of LawIQ said that if the White House were to pass on moving a Democratic nominee, the big risk would be "continuing the path toward polarization." The gas sector could later face the prospect of Democrats not consulting with the minority if they control the White House after the next election, he said.

-- Maya Weber, maya.weber@spglobal.com

-- Jasmin Melvin, jasmin.melvin@spglobal.com

-- Edited by Rocco Canonica, newsdesk@spglobal.com

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