FERC Commissioners Weigh in on Clean Power Plan Final Rule

From the August 11, 2015 issue of Public Power Daily

Originally published August 10, 2015

By Paul Ciampoli
News Director

Commissioners at the Federal Energy Regulatory Commission recently offered their thoughts on the Obama administration's final rule on the Environmental Protection Agency's Clean Power Plan to reduce carbon dioxide emissions from existing power plants.

While several commissioners expressed appreciation that the EPA participated in commission technical conferences earlier this year on the Clean Power Plan, they also said that the Clean Power Plan will lead to a "major transformation" of the regulation of the electricity sector and that as various compliance plans come together, FERC must take a "leadership role."

The Obama administration on Aug. 3 released the EPA’s final rule regulating carbon dioxide emissions from existing coal- and natural gas-fired power plants under Section 111(d) of the Clean Air Act.

FERC Commissioners Philip Moeller, Colette Honorable, Tony Clark and Cheryl LaFleur released statements in response to the final rule.

LaFleur said in her Aug. 3 statement that the EPA’s announcement of the final Clean Power Plan rule "is an important step forward in our nation’s response to climate change. Based on what I’ve seen thus far, I appreciate EPA’s consideration of FERC’s comments on timing, flexibility, and a reliability safety valve. I look forward to hearing feedback from states and other stakeholders as states begin to develop their compliance plans."

She said that meeting "the climate challenge while ensuring the reliability of the nation’s power supply will require a sustained focus in the coming years. FERC will have a critical role to play in these efforts. First, we need to ensure that the energy markets we regulate successfully adapt to changes driven by carbon regulation. Second, we must support the development of energy infrastructure – both electric and gas – necessary to enable changes in how we generate and use electricity."

Clark says commission must take 'leadership role'

Clark in his Aug. 3 statement said that he appreciates that the EPA took part in FERC's reliability technical conferences on 111(d) regulations and subsequently engaged with FERC staff while finalizing the regulation.

"Stakeholders testified at FERC technical conferences that realistic planning horizons for the major infrastructure projects necessitated by this regulation are often in the 5-12 year, or more, timeframe," wrote Clark.

"Given that many states may not have compliance plans finalized until 2018, such a timeframe will be challenging for compliance targets that begin in 2022. Furthermore, the regulation makes it likely consumers will be required to bear the burden of stranded costs of investments forced to retire years before the useful life of the asset has expired," he said.

"Whatever EPA believes are the environmental benefits of this regulation, it cannot be said that it will be easy or inexpensive. Such is the stuff of unicorns and leprechauns. For if EPA's energy vision was the most reliable and affordable means of providing power, we would not need the rule. Engineering experts, markets, utilities and their regulators would already be choosing these resources without EPA dictates. No amount of political posturing changes that fact," Clark said.

The commissioner went on to say that the action "now moves to the states which must assess their next steps. Many are deeply opposed to this regulation that could strip them of their traditional ability to set reasonable energy and environmental policies that work for their citizens. States will be faced with an exceptionally difficult decision. Either 'play ball' with the EPA, cede greater authority to Washington and become complicit in a plan that complicates efforts to ensure reliable, affordable power; or choose to let the EPA go it alone via a potentially unattractive Federal Implementation Plan."

With respect to FERC, "we must continue to make the case for reliability and the proper functioning of FERC-jurisdictional markets," Clark said. "As the various compliance plans come together, FERC must take a leadership role by requiring that the Federal Power Act, which governs reliability, rates and markets, does not take a backseat to an energy plan promulgated under a separate statute."

Honorable said that while she was still reviewing the rule, "it is evident that the EPA endeavors to address many concerns it received during the comment period. I appreciate the EPA's continued efforts to engage with stakeholders to understand how the plan would impact the energy sector. These efforts included sending top EPA officials to all four of our technical conferences earlier this year, along with continued meetings with FERC representatives."

She also said in her Aug. 3 statement that "the agency appears to have made a number of substantial changes to the rule, including extending compliance timelines and adding measures to protect reliability. These changes clearly demonstrate that the EPA listened to feedback from FERC and other stakeholders, and incorporated these suggestions into the final product. The rule should be better because of it."

Honorable went on to say that no matter "what we individually think of the Clean Power Plan, we are obligated to the public we serve to engage and work together—collaboratively and cooperatively. As I have espoused since joining the commission, collaboration and cooperation are indeed the foundation for our future work. Many states and regions are well on their way to meeting the rule’s objectives. And independent grid operators have suggested that regional approaches may work best for compliance. Over the months and years ahead, I will be focused on doing my part to support this very important effort."

Moeller sees 'major transformation' of electricity sector regulation

Moeller in his Aug. 4 statement said that the Clean Power Plan will "result in a major transformation of the regulation of the electricity sector. The most radical change may be that state air regulators and other state officials without a background in the electricity sector are now going to be charged with developing a state compliance plan. This will be a huge challenge for them. My biggest concern is that individual state plans could disrupt existing competitive wholesale markets, causing inefficiencies that would actually increase emissions."