Now that President Biden announced his three nominees to fill vacancies on the Federal Energy Regulatory Commissions (FERC), the Senate Energy and Natural Resources Committee is set to vet the nominees today, March 21. The three nominees for consideration are Judy W. Chang, David Rosner, and Lindsay S. See.
As the merits of these nominees are considered, it is imperative that senators focus on the bedrock functions of FERC and ensure that the reliability of America’s energy system is the top priority for any nominee that is confirmed. Clarity on how these nominees will regulate the energy system as FERC commissioners is essential to ensure Americans have the reliable power they need to run their lives and businesses.
In preparation for today’s hearing, here are EPSA’s five essentials that should be addressed during the FERC commissioner confirmation process.
1. Prioritize System Reliability
Reliable energy is the foundation of U.S. economic growth and prosperity. FERC needs to focus its authority as an economic regulator while ensuring a reliable energy system across the gas and electric sectors. The North American Energy Reliability Council (NERC) 2023 Long-term Reliability Assessment was yet another stark reminder that electric reliability may not be guaranteed in the future. Grid operators are grappling with an acceleration of dispatchable generation resource retirements, increasingly extreme weather events, physical and cyber security threats, and navigating gas and electric infrastructure interdependencies. In addition to those pressing concerns, NERC identified energy policy as a new risk to American grid reliability in its ERO Reliability Risk Priorities Report.
If these nominees are to be confirmed, these individuals must heed these warnings and ensure that any new or revised regulations FERC implements won’t undermine the delivery of reliable energy.
2. Address Current Operational Realities Within Regulations
The past decade has seen a preponderance of federal and state policies focused on emissions reductions, which is increasingly jeopardizing our energy reliability imperative. FERC needs to be laser focused on the reality of system operations, specifically the growing delta between aspirational goals and operational realities. The 2023 State of the Market Report for PJM found one of the key challenges facing the PJM markets is the potentially high level of expected thermal resource retirements between now and 2030 with no clear source of replacement capacity. While the exact number of retirements varies, the report estimated “total of between 24,000 MW and 58,000 MW of thermal resources are at risk of retirement.” The driving factor of retirement risk comes from government policies that are making it infeasible for power suppliers to operate dispatchable natural gas power plants economically.
Calls to replace dispatchable resources with intermittent renewables are misguided and purely aspirational – risking reliable grid operations. A megawatt of power from renewables is not equal to a megawatt produced by natural gas, hydro, or nuclear. FERC regulations must recognize the collective value and attributes each generation resource brings to reliable grid operations.
The U.S. Senate must ensure that these potential FERC commissioners are able to push back on federal and state policies that undermine their ability to ensure a reliable energy system – regardless of whether they pushed for such policies in the past.
3. Improve Results Within Markets Through Pragmatic Reforms
Given the rise in reliability challenges, some stakeholders are using this as an opportunity to advance an alternative model and scrap the restructured markets. Doing so would be foolhardy. Since their inception, restructured markets have consistently driven innovation, enhanced efficiency, and improved operations. Markets have delivered substantial economic and environmental benefits to customers and businesses through quick adaptation and investment in lower-cost, efficient resources, while maintaining reliability.
Despite all of the benefits markets have delivered, there is room to improve performance through reforms. FERC commissioners should focus on improving these results, acting quickly on restructured market requests, and not imposing preferred approaches or models to attempt to achieve a predetermined set of results via command and control mechanisms.
4. Adopt a Holistic Approach to Energy Infrastructure
Reliable power grid operations depend on electric (wires) and natural gas (pipeline) transmission infrastructure. Many stakeholders view electric and natural gas infrastructure as two independent systems, but in reality, the U.S. has one energy system that relies on interdependencies between the two. FERC’s authority to approve and authorize new transmission infrastructure, both electric and gas, is essential to integrate new resources into the system to meet rising demand.
Continuing to prioritize only electric transmission reform to accelerate renewable energy deployment ignores the needs of the entire system. FERC must approve the expansion of much needed gas transmission alongside electric transmission to meet the new operational paradigm in which we live and work.
5. Facilitate the Reliable Energy Expansion to Meet Rising Demand
Regulators must recognize the energy sector is undergoing more than a fuel source transition. Energy demand is rising for the first time in decades, largely driven by electrification, data centers, artificial intelligence, and manufacturing. To meet this rising demand, FERC will need to help preserve existing generation resources, as well as prepare the energy system for a reliable energy expansion. A critical component of this expansion is streamlining the approval process for infrastructure projects within FERC’s jurisdiction; the rest will be up to Congress to address permitting issues that are impacting every energy project throughout the country.
FERC commissioners must play a key role in providing reliability-based regulations to ensure grid operators and power suppliers can meet rising demand.
The Bottom Line
FERC, grid operators, and power suppliers have increasingly complex challenges that could compound into an energy reliability crisis. The three nominees must bring non-partisan and pragmatic solutions to ensure government regulations maintain reliability – not jeopardize it. FERC must remain focused on ensuring that consumers have safe, reliable, secure, and economic energy.
