Month: June 2019

FERC Modernizes the Commission Forms Filing Process

FERC Modernizes the Commission Forms Filing Process

On June 20, the Federal Energy Regulatory Commission (FERC) announced that it is “revising its electronic filing format for certain data collections to make it easier for filers to submit and data users to analyze information.” They are hoping that modernizing the “data collections and making them more accessible,” will help to increase efficiency for both business information processing and regulatory filings. This is also intended to help further FERC’s goal to increase transparency and decrease the costs that come with preparing data for submission.

FERC is also planning to put together a database to make it easier to search through the forms and find the information they need.

The new filing format will be “eXtensible Business Reporting Language (XBRL), a nonproprietary, open technology standard.” Using XBRL will enhance both the system’s security and compatibility, and it should “allow efficient sharing of data across different information systems.” FERC said that this move has been supported by many groups in the industry.

The new standard forms will be “Form Nos. 1, 1-F, 2, 2-A, 3-Q electric, 3-Q natural gas, 6, 6-Q, 60 and 714.” FERC plans to “develop a draft XBRL taxonomy that will be discussed at a future technical conference.” They will also be accepting further comments on this subject before they issue an “order to adopt the final standard and establish an implementation schedule.”

FERC Bolsters the Cyber Security for the Nation’s Power Grid

FERC Bolsters the Cyber Security for the Nation’s Power Grid

The Federal Energy Regulatory Commission (FERC) has been working to upgrade the cyber security for the power grid, and on June 20 they announced that they had boosted the cyber security for the nation’s bulk electric system. They did this “by expanding the reporting requirements for incidents involving attempts to compromise operation of the grid.” FERC reports that this helps to close “a gap in the prior Critical Infrastructure Protection Reliability Standards,” which had previously only required groups to report if an incident disrupted or compromised reliability tasks.

The North American Electric Reliability Corp. (NERC) had already been tasked by FERC to make changes to the “reporting of cyber security incidents out of concern that the existing standards may understate the true scope of threats by excluding from reporting incidents that could facilitate subsequent efforts to harm the reliable operation of the grid.”

FERC Chairman Neil Chatterjee said that “Defending our nation’s electric grid against cyber security threats is one of the Commission’s most pressing challenges. It is vital that we ensure that NERC and the Department of Homeland Security have all the information needed to understand the evolving threat landscape for industrial control systems.”

This new Critical Infrastructure Protection Reliability Standard will require reporting for incidents that “either compromise or attempt to compromise Electronic Security Perimeters, Electronic Access Control or Monitoring Systems, and Physical Security Perimeters associated cyber systems.” The new standard also covers “disruptions or attempts to disrupt the operation of a bulk electric system cyber system.”

The individual entities in charge of parts of the bulk power system will have to develop their own criteria for how they will identify attempts to “compromise a cyber asset and then apply those criteria during its cyber security incident identification process.” This is intended to give the entities some flexibility in the development of their criteria as it applies to their systems.

The new standards will also address “the information to be included in Cyber Security Incident reports, their dissemination, and deadlines for filing. Reports and updates will be sent to the Electricity Information Sharing and Analysis Center and the Department of Homeland Security’s National Cybersecurity and Communications Integration Center.”

FERC said in their presentation of the changes that they believe the new standards will give them an “accurate picture of the rapidly changing cyber threat landscape.”

FERC Testifies before the House Committee on Energy and Commerce, Subcommittee on Energy, on Oversight of FERC: Ensuring Its Actions Benefit Consumers and the Environment, Part II: Commissioners Richard Glick and Bernard L. McNamee

FERC Testifies before the House Committee on Energy and Commerce, Subcommittee on Energy, on Oversight of FERC: Ensuring Its Actions Benefit Consumers and the Environment, Part II: Commissioners Richard Glick and Bernard L. McNamee

On June 12, the Chairman and Commissioners of the Federal Energy Regulatory Commission (FERC) testified before the Subcommittee on Energy Committee on Energy and Commerce on the oversight of FERC. The full hearing can be watched here. This is the testimony of Commissioners Richard Glick and Bernard L. McNamee.

Glick’s Testimony

In his testimony, Glick points out the dramatic changes happening in the electric industry as the country goes toward a “less carbon-intensive, more distributed electric generation fleet that is increasingly customer-centric.” Prices for renewable energy have been falling over the last few years and are predicted to keep falling. This is also true for distributed energy sources and battery storage. All of this has led to an increase in the use of those sources.

“In three of the last four years, wind and solar have accounted for the majority of new electric generation capacity in the United State and that growth is expected to further accelerate in the years ahead,” Glick said. “The growth in zero-marginal cost generation and low natural gas prices are playing a significant role in the changing resource mix by putting downward pressure on wholesale electric rates and displacing aging, uneconomic facilities.”

He pointed out that these changes are helping the country’s economy in a variety of ways, including the employ of almost 3.3 million people who are currently working in the clean energy field. The lasting impact on the environment and climate change is the most important part of this clean energy implementation. “The Intergovernmental Panel on Climate Change recently concluded that global temperatures are on track to rise by 1.5°C by as early as 2030, a result that could present ‘irreversible’ consequences.” Glick also mentioned that the “most recent National Climate Assessment points out that we are already experiencing the impacts of climate change and indicates that, absent a dramatic reduction in greenhouse gas emissions, annual economic losses caused by climate change will reach into the hundreds of billions of dollars by the end of the century.”

Glick shared that he thinks that FERC “is ignoring its statutory mandates under the Natural Gas Act by refusing to analyze reasonably foreseeable greenhouse gas emissions associated with new interstate natural gas pipelines and facilities used to import or export liquefied natural gas.” He explained that even though FERC “is not a climate regulator, the potential climate consequences of the Commission’s actions make it all the more important that the Commission faithfully execute its statutory mandates.”

He said the current “market rules can pose unintended barriers to those technologies’ full participation in wholesale markets. The Commission must be vigilant in breaking down barriers created by those antiquated market rules and ensuring that all resources can compete on a level playing field.”

As part of breaking down these barriers, last year FERC ” issued a final rule that requires RTOs/ISOs to facilitate the participation of electric storage resources in the wholesale electricity markets. The Commission required each RTO/ISO to establish a participation model for electric storage resources that recognizes the physical and operational characteristics of those resources. The model must: (1) ensure that electric storage resources are eligible to provide all capacity, energy, and ancillary services that they are technically capable of providing; (2) ensure that such resources can be dispatched and can set the wholesale market clearing price as both a seller and a buyer; (3) account for the physical and operational characteristics of such resources through bidding parameters or other means; and (4) set a minimum size requirement for electric storage resource participation that does not exceed 100 kilowatts.”

FERC also made the requirement that every “RTO/ISO specify that the sale of electric energy from their markets to an electric storage resource that the resource then resells back to those markets must be at the wholesale locational marginal price.”

“Beyond the electricity sector,” Glick said, “the Commission’s energy infrastructure permitting responsibilities can also impact emissions. The Commission has authority over the licensing of certain hydroelectric facilities as well as the siting of interstate natural gas pipelines and facilities used to import or export liquefied natural gas.”

FERC “is responsible for licensing and overseeing non-federally owned hydroelectric facilities in the navigable waters of the United States or on federally owned lands. Before issuing a license, the Commission must determine whether a hydroelectric facility is in the public interest.” Glick shared his belief that “the ability of hydroelectric facilities to generate zero-emissions electricity and to integrate other sources of zero-emissions electricity, thereby reducing greenhouse gas emissions from the electricity sector, should be an important aspect of the Commission’s public interest determination under the FPA.” FERC has to make the same determination before it approves any LNG pipelines or facilities.

McNamee’s Testimony

McNamee discussed the increase in LNG projects in recent months, “After two years in which no new LNG project was approved, the Commission has now approved — in a three-month period — four LNG export projects.”

“Since 2009, the [United] States has been the world’s top producer of natural gas. This natural gas is transported across the United States using over 300,000 miles of interstate natural gas pipeline.” McNamee explained that in 2018 FERC approved 44 new natural gas projects and 689 miles of pipeline came into service last year as well.

Last year, as a result of the Tax Cuts and Jobs Act of 2017 being passed, FERC issued Order No. 849 so they could “determine whether natural gas pipelines rates should be adjusted to reflect the corporate tax reduction in order for the rates to remain just and reasonable. Order No. 849 required jurisdictional natural gas companies to file abbreviated cost and revenue studies and provided those companies the opportunity to voluntarily reduce their pipeline rates or explain why no rate reductions are necessary. The Commission then uses the cost and revenue studies and the additional filings to determine whether to initiate an NGA section 5 investigation into the justness and reasonableness of a natural gas company’s rates and to potentially bring rate relief to its customers.” FERC has looked at about 91 percent of its review since then and has filed 21 rate settlements between shippers and pipelines and has filed of 11 rate reductions.

FERC Testifies before the House Committee on Energy and Commerce, Subcommittee on Energy, on Oversight of FERC: Ensuring Its Actions Benefit Consumers and the Environment, Part I: Chairman Neil Chatterjee and Commissioner Cheryl A. LaFleur

FERC Testifies before the House Committee on Energy and Commerce, Subcommittee on Energy, on Oversight of FERC: Ensuring Its Actions Benefit Consumers and the Environment, Part I: Chairman Neil Chatterjee and Commissioner Cheryl A. LaFleur

On June 12, the Chairman and Commissioners of the Federal Energy Regulatory Commission (FERC) testified before the Subcommittee on Energy Committee on Energy and Commerce on the oversight of FERC. The full hearing can be watched here. This is the testimony of Chairman Neil Chatterjee and Commissioner Cheryl A. LaFleur.

Chairman Chatterjee’s Testimony

Chatterjee pointed out that there have been some major changes in the energy industry over the last decade, and that FERC has worked to “remain vigilant about these changes and respond to them in ways that enhance competition in electricity markets, support the resilience of the bulk-power system, and lower costs to consumers.” He said one of the more recent changes was “the improvement in electric storage technologies.” He highlighted some of FERC’s work “regarding the participation of electric storage resources in wholesale electricity markets as an example of how FERC is responding to our evolving energy landscape.”

“Traditionally, a variety of factors have created challenges to storage resources’ participation in the wholesale electric markets,” Chatterjee said. This led FERC to issue Order No. 841 in 2018, “to remove barriers to the participation of electric storage resources in the capacity, energy, and ancillary services markets operated by regional transmission organizations (RTOs) and independent system operators (ISOs).” He said that the result of this order should lead to “an increase in the deployment of storage resources, which should result in greater reliability and lower prices for customers by enhancing competition.”

He explained that FERC has also been “evaluating barriers to the participation of distributed energy resource aggregations in the markets operated by RTOs and ISOs.” In 2018 a technical conference held by FERC staff, they worked to “gather more information regarding the participation of distributed energy resource aggregations in wholesale electricity markets, as well as to discuss more broadly the potential effects of distributed energy resources on the bulk-power system.”

Chatterjee also discussed the cyber and physical security issues affecting the energy infrastructure. “America’s critical infrastructure is increasingly under attack by foreign adversaries. The Department of Homeland Security (DHS) and Federal Bureau of Investigation have issued multiple public reports describing cyber-intrusion campaigns by foreign government actors against our critical infrastructure, including the electric grid.”

“Physical and cyber-attacks on our critical infrastructure systems have the potential to create significant, widespread, and potentially devastating effects” an attack could have. He explained that FERC has been working “to address cyber and physical security risks as consistent with section 215 of the Federal Power Act, which grants us the authority to approve and enforce mandatory Reliability Standards developed by the North American Electric Reliability Corporation (NERC).”

Chatterjee said FERC issued two orders in 2018 to help improve security. “First, at our October 2018 Commission Meeting, we approved NERC’s proposed Reliability Standards to address supply chain threats… Second, at our July 2018 Commission Meeting, we approved a final rule directing NERC to expand reporting requirements for critical systems. That final rule directed NERC to develop a standard that requires registered entities to report successful and attempted intrusions into critical systems to NERC’s Electricity Information Sharing and Analysis Center, as well as to DHS.”

He said FERC’s Office of Energy Infrastructure Security has been working “with partners in industry, states, and other federal agencies to address both cyber and physical security issues for critical energy infrastructure. These initiatives include, among other things, voluntary architecture assessments of interested entities, classified briefings for state and industry officials, and joint security programs with other government agencies and industry.”

LaFleur’s Testimony

LaFleur said that since the wholesale electric power markets were created 20 years ago, they have grown to the point that they now serve over two-thirds of the country. “These markets save customers money by driving the efficient dispatch of resources over a large footprint, facilitate the introduction of innovative technologies and greater customer-side participation in the power supply, and, depending on the underlying state regulatory construct, shift investment risk from electricity customers to company shareholders.”

She said there are some challenges the markets face, but even with those concerns, “participation in organized markets continues to expand, with utilities and states in the West and Southeast exploring integration into existing organized markets or the creation of new regional markets.”

She explained that recently ” there has been significant debate over whether power markets are “real” markets. Frankly, this debate concerns me, as I have observed it often occurs in conjunction with arguments favoring intervention on behalf of particular types of resources, at the expense of economic efficiency and therefore customer benefits.” LaFleur said that there needs to be regulation in every market to make sure it stays both fair and effective, but “the real-time nature of electricity, which requires the balancing of load and supply second by second, leads to a more complex market than many others, and requires more comprehensive regulation to ensure its proper function.”

Resource selection, Lafleur says, is a big challenge for both FERC and the electric industry as a whole. She said this is a complex issue, ” particularly in states that restructured their retail electricity supply, given the divided regulatory responsibilities among the states, the organized markets, and the Commission.”

“In recent years … power markets generally have been roiled by low gas prices and by the build-out of renewables that have different cost, operating, and geographic characteristics than traditional fuel-based generation. These lower cost resources have significantly decreased wholesale power prices, to customers’ benefit, but have also threatened the financial viability of certain traditional resources, particularly coal and nuclear plants.” Several states responded to those changes by seeking “either to retain resources that are not thriving in the market, or to accelerate the resource change by supporting new resources that the market would not otherwise procure.”

Another major issue that FERC is facing, according to Lafleur is: “once we have selected the resources we need for the future – whether by market forces, integrated resource planning, or some combination – how do we price and dispatch them?” There is evidence from all over the country that, in both “organized markets and bilateral market regions, indicates that a fundamental shift in how we procure and pay for energy is underway.”

It was only recently that it stopped being “accepted without question that electric power was priced on volume, since a major component of cost was the commodity cost of the fuel burned to generate it. Baseload, intermediate, and peaking resources each played a well-understood role in helping to balance load.” She said that the data from more recent years shows that “cost curves, which traditionally have identified baseload resources as the cheapest and peaking resources as the most expensive, now look differently in many areas. With persistently low natural gas prices, zero marginal cost renewable resources, and distributed energy resources changing the shape of load curves, the traditional cost structures that supported resources may no longer provide appropriate compensation.”

“To help adapt to the new resource mix, regional market operators and others are considering new ways of paying for power, with a focus on services instead of volume. This change is visible in the energy and ancillary services markets, with services such as flexible ramping products, scarcity pricing, new forms of reserves, and a greater attention to essential reliability services. In addition, some regions have revised their capacity markets to better ensure resource performance.”

FERC has been taking “steps to ensure that new resources, including storage, variable resources, demand response, and distributed energy resources, can compete to provide services that customers need.”

Lafleur also addressed the use of gas energy: “The growth in domestic natural gas production and gas-fired electric generation has led to considerable buildout of the nation’s gas pipeline network. I have called for reconsideration of how the Commission determines the need for pipelines to reflect market conditions and assess on a regional basis whether more infrastructure can be supported for these long-lived assets.”

She says that she also thinks FERC “must do a better job of assessing and considering the climate impacts of gas pipelines and liquefied natural gas (LNG) projects. Before determining whether a proposed pipeline project is in the public interest under the Natural Gas Act (NGA), the Commission must disclose and consider the project’s environmental impacts under the National Environmental Policy Act (NEPA).” However, when it comes to LNG projects, FERC “must find that the proposed LNG export facility is not inconsistent with the public interest under the Natural Gas Act, while the Department of Energy (DOE), not FERC, considers the public interest regarding the export of the gas itself.”

“In May of 2018, the Commission elected to remove much of the greenhouse gas (GHG) quantification and consideration from orders going forward. I disagree with this decision and continue to advocate that the Commission undertake robust climate analysis; specifically, quantifying, considering and assessing the significance of the direct, indirect, and cumulative GHG emissions from proposed projects.” Lafleur explained that she will conduct her “own GHG calculation and analysis to weigh against the pipeline benefits and set out my thinking in separate concurring statements.”