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.
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 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.