FERC Resignation May Mean More Gridlock

Federal Energy Regulatory Commission (FERC) Commissioner Robert Powelson recently concluded the shortest term of any leader in the regulator’s history. His departure leaves a considerable challenge for the remaining four commissioners to avoid gridlock with several critical policy discussions on the docket.

Key Details

Powelson was nominated by President Trump in May of 2017 and confirmed last fall. During his tenure with FERC, he was typically regarded as a “moderate” on the political spectrum and enjoyed bipartisan support. His previous experience as a Pennsylvania utility commissioner was believed to have contributed heavily to his outspoken opposition to a 2017 Department of Energy (DOE) report on grid reliability. The report cited concerns over a threat to the stability of the nation’s energy supply stemming from financial challenges for power generators with nuclear and coal fuel sources. Critics, including Powelson, warned that potential mitigation of this threat via regulatory intervention could result in unnatural market distortions that eventually would yield higher energy prices for customers.

Powelson stepped down from FERC in mid-August 2018 to become president and CEO of the National Association of Water Companies, a trade group for the private water industry.

Major policy discussions that are either in progress or pending for FERC consideration include:

  • Grid resilience – On May 9, energy companies and regional grid operators filed their comments in FERC’s grid resilience docket and seemed divided on FERC’s role in securing the U.S. power infrastructure
  • PJM’s capacity market – In a landmark move, FERC rejected PJM’s proposal to compensate for state energy subsidies in its capacity market and went on to propose FERC authored changes that would significantly impact both the grid operator’s basic market construct as well as its relationship with state participants
  • Pipeline policy – For the first time since 1999, FERC is reviewing its pipeline approval policy with specific considerations to climate change in the decision process

Implications

On August 8, Politico.com reported that President Trump will nominate Bernard McNamee, head of the DOE’s Office of Policy, to fill Powelson’s seat. McNamee helped roll out the DOE’s coal and nuclear bailout plan that was rejected by FERC in January.

Energy industry participants may be left with few FERC answers for some time, as the vetting process of a FERC nominee is nuanced, and confirmation can be halted by a single vote in the U.S. Senate. This means that stakeholders interested in preserving the FERC political balance (3-2 in favor of the GOP) or seeking a replacement for Powelson with similar professional experience have the means for prolonging any vacancy.

FERC Chair Kevin McIntyre has downplayed the effects of Powelson’s departure, assuring the industry that the four remaining commissioners would work together and maintain their quorum status even if Obama-appointee Commissioner Cheryl LaFleur’s term concludes next June without a replacement.

Meanwhile, Powelson’s departure allows Democrats on the commission to halt votes with 2-2 ties until a replacement is confirmed by the Senate; significant, given the approaching major FERC policy discussions. (FERC is a bipartisan body and no more than three commissioners may be of the same political party.)

If confirmed, Bernard McNamee will most likely fall more in line with the White House’s energy priorities than Powelson. McNamee has, for example, echoed similar arguments for rescuing economically struggling coal and nuclear power plants as advocated by Energy Secretary Rick Perry.

Further, per Utility Dive, during McNamee’s time at the Texas Public Policy Foundation, he penned a pro-fossil fuels op-ed for The Hill as part of Earth Day festivities. In the op-ed, he wrote, “We have been told that fossil fuels are wrecking the environment and our health. The facts are that life expectancy, population, and economic growth all began to increase dramatically when fossil fuels were harnessed—and have continued to do so for the 200 years since the beginning of the Industrial Revolution.”

More Information

Utility Dive: https://www.utilitydive.com/news/how-fercs-unprecedented-pjm-order-could-unravel-capacity-markets/527053/

Hydro Review: https://www.hydroworld.com/articles/2018/07/powelson-announces-resignation-from-federal-energy-regulatory-commission.html

Politico: https://www.politico.com/newsletters/morning-energy/2018/08/09/name-emerges-for-ferc-310660

The Hill: http://thehill.com/opinion/energy-environment/383605-this-earth-day-lets-accept-the-critical-role-that-fossil-fuel

This report is part of ScottMadden’s Fossil Minute series. To view all featured Fossil Minutes, please click here.

Additional Contributing Authors: Mike Flint, Ryan LaMonica

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