FERC: Leveling the Power Transmission "Playing Field"
Posted September 17, 2013
As the Senate considers confirming Ron Binz as the next chair of the Federal Energy Regulatory Commission (FERC), rhetoric is heating up and putting the independent regulatory agency in a place it is uncharacteristically but increasingly finding itself these days – the spotlight.
In recent weeks, a few special interests have attempted to paint Binz, and FERC itself, as ploys in furthering the president’s “anti-coal” agenda. But the anti-coal charge doesn’t work when you think through the (still relatively unknown) role that FERC actually plays in energy regulation.
What is it FERC does, exactly?
FERC has several different jobs, none of which allow for favoring particular types of power generation over others. In addition to its authority over gas pipeline permitting and hydroelectric facility licensing, the Commission is charged with ensuring transmission grid reliability, protecting consumers from unreasonable costs, and creating a level playing field for all types of resources that provide transmission or generation services. Richard Caperton at Center for American Progress recently described some of these roles in a great blog.
Ensuring the reliability of the nation’s electric grid, while protecting consumers and competition, is no small task. The states and other entities contribute, but it’s FERC that is ultimately responsible for making sure our backbone transmission system keeps working, through hurricanes and floods and other disasters, so that your lights turn on when you flip the switch. The sheer magnitude of this obligation, along with its technical subject matter, helps explain why FERC operates in a strong bipartisan tradition of practical problem-solving. (The agency is led by five commissioners - three from the president’s party and two from the other party.).
Consumer preferences, state renewable energy and energy efficiency policies, and straight economics are driving a rapidly evolving generation mix, including more wind and solar power and other renewable energy, together with energy savings opportunities - energy efficiency (permanent reductions in electricity demand through more efficient appliances, windows, insulation, etc.), demand response (voluntary customer reductions in electricity use during peak, or other, periods). Newer technologies, such as flywheel and advanced battery storage and high-tech transmission lines, also are becoming commercially available solutions to meet grid reliability needs.
FERC’s obligation with regard to all of these resources is to make sure that no unfair barriers to entry exist. What FERC cannot do, what it is prohibited by law from doing, is to design rules that discriminate in favor any of these resources over conventional fossil fuel generation, or vice versa.
Can’t choose winners or losers
FERC is prohibited by law from picking winners and losers. But in light of our quickly changing generation mix, the problem ends up being that FERC’s rules, developed over the last 75 years, by default are designed to facilitate fossil fuel generation. When FERC acts to provide grid access for renewable and other clean energy resources, FERC is simply giving them the same access to markets that their fossil fuel competitors receive. The story is not new – FERC had to make significant modifications to its rules to allow the grid to accommodate a large influx of nuclear power in the 1970s, and then again (albeit to a lesser extent) in response to a surge of natural gas generation in the late 1990s.
President Obama has appointed Ron Binz to lead the agency at a critical juncture in our electric history. Public policies supporting renewable power and energy efficiency, increasingly severe weather events that cause blackouts, and customer demand for clean resources like rooftop solar and electric vehicles are transforming the grid. So, this week’s rhetoric is correct in the sense that the president is making an important appointment to an important if obscure federal agency. However, it’s wrong in its prediction that Ron Binz will prove anti-coal or even anti-gas at FERC. As a public utility commissioner in Colorado, it was Ron Binz’s job to help shape the state’s resource mix. But at FERC, his very different job will be to accommodate whatever resource mix that reliability needs, state polices, and customer demand entail.