The rapid evolution of the power grid will require the attention of one critical agency — the Federal Energy Regulatory Commission. And observers say no matter what happens Nov. 3, the agency will have no choice but to address the industry's transition, even if it means backing away from some of its more controversial policies.
Over the past four years, the commission has been accused of trampling on state efforts to move away from fossil fuels and toward zero-carbon, renewable resources.
"I truly believe that the leadership at FERC has been dysfunctional for 3.5 years and it is something that is not friendly, in my opinion, to the states," New Jersey Board of Public Utilities Chairman Joseph Fiordaliso said in an interview earlier this month. But others have praised the commission's continued independence in the face of a pro-coal Administration — for example in shooting down a proposed coal and nuclear bailout floated by the Department of Energy in 2018.
"The status quo isn't sustainable ... even under Trump 2.0 it's not sustainable."
Director, R Street Institute
"This commission … has, I believe, looked at things in a sort of apolitical way" under Chairs Kevin McIntyre and Neil Chatterjee, former FERC Chair Jon Wellinghoff, who served under Presidents George W. Bush and Barack Obama, said. "And that's a good thing, because that's how FERC should operate. FERC shouldn't operate on politics."
But despite FERC's role as an independent agency, the presidential candidates' wide gap on energy policy could lead to two different regulatory bodies post-election, making it a critical agency to watch in 2021. The commission's makeup will drive its response to state climate and clean energy policies, and the growth of renewable energy.
A second Trump term would likely produce a continuation of current policies, though mounting opposition to some wholesale market policies, particularly ones that impact clean energy, might limit what more the commission can do on that front. But a Biden win would create a wider spectrum of how aggressive FERC could get on clean energy, analysts say.
How liberal could FERC get under Biden?
Commissioner Richard Glick is considered to be the frontrunner for chairman under a Joe Biden presidency, in part for practical reasons — Glick has been the only Democrat appointee on the commission since the July 2019 departure of Cheryl LaFleur.
But if the nominees are not confirmed by the end of the year, conceivably Biden could forward two more Democrats, flipping the majority 3-2 in his party's favor.
The nominees are Virginia State Corporation Commission Chair Mark Christie and long-time industry consultant and former Natural Resources Defense Council lawyer Allison Clements, but confirming the two before the year's end is becoming less certain as the Senate's days in session grow limited.
A spokesperson for Senate ENR said in an email there's "a possibility" the committee could forward the nominees for full consideration of the Senate during Congress' lame duck period, which stretches from after the election a new session begins.
Traditionally, the president forwards a bipartisan pairing for Senate consideration when possible. But last fall, President Donald Trump upended that assumption by nominating Commissioner James Danly to FERC without a Democratic pairing, despite two vacancies at the time.
After a third vacancy loomed with the upcoming departure of Commissioner Bernard McNamee, another Republican named under Trump, the president forwarded a bipartisan pairing in July. No more than three commissioners can come from a single party. If confirmed, Christie would fill the spot of McNamee while Clements would fill the spot of LaFleur.
"The norm has been to pair the nominations, and especially given Christie is relatively moderate ... I think the money is on [Biden] sticking with those nominations."
Attorney, Sierra Club
Under that commission makeup, Biden is likely to choose Glick. But Biden could also cancel the nomination of Christie and push the commission in a more aggressive climate-friendly direction by choosing a more liberal nominee, and potentially a different chair.
Glick may be considered a more "moderate" Democratic pick, by some measures, said Todd Aagaard, a professor of law focused on energy and environment at Villanova Law School.
"That'll be an early indicator, I think, of the direction that FERC is likely to go," he said. "You could imagine someone who would be more aggressive than he has been."
For example, former presidential candidates Sens. Elizabeth Warren, D-Mass., and Bernie Sanders, I-Vt., supported a structural overhaul of the commission that would have turned FERC into FREC (the Federal Renewable Energy Commission), though a path forward for that plan never quite materialized and would likely face numerous hurdles.
"It's a lot harder to change institutions. And so that would be an incredibly ambitious undertaking," said Aagaard, though it would also likely be more resilient than ping-ponging between various presidential priorities. "If you have an institution, an agency that's been created with a strong environmental focus, it makes it harder to take that away. … But it's much harder to do that than to use existing institutions like EPA and FERC" under their current structure.
But given that Republican nominee Christie is considered a moderate conservative and has support from a broad array of stakeholders, he may not be controversial enough to warrant Biden breaking from the tradition of forwarding bipartisan pairings for the independent agency.
"The norm has been to pair the nominations, and especially given Christie is relatively moderate ... I think the money is on [Biden] sticking with those nominations," said Casey Roberts, a staff attorney with the Sierra Club's environmental law program. "But you just never know."
Another open question regarding the commission's composition is whether Chatterjee would remain on the commission through the end of his term — June 2021 — leaving FERC with a majority Republican body until then, if Christie and Clements are confirmed.
"If Biden wins, an important variable for FERC in 2021 will be the voting patterns of now Chairman Chatterjee. Just last month, Chatterjee took two significant steps to the political left."
Former advisor to Commissioner McNamee
Chatterjee in an email said that he would serve out his term "regardless of what happens in the November election," a message he has held consistently since taking over as chair.
There is somewhat of a precedent of FERC chairs stepping down from the Commission after being replaced as chair. Chairman Norman Bay resigned just hours after being replaced by LaFleur as Acting Chair under Trump, and Curtis Hebert left after President George W. Bush reportedly expressed his preference that Commissioner Patrick Wood take over as chair.
But though that history exists, stepping down after the term as chair is over "certainly isn't required," said Jeff Dennis, managing director and general counsel at Advanced Energy Economy. And given the chairman's public comments that he would stay out his term, a 3-2 Republican majority under a Biden Administration is "pretty likely" the commission we would see in 2021, he said.
What would the Biden Administration require from FERC?
The Biden Administration has an ambitious plan to bring the grid to zero-carbon electricity by 2035, an ambitious target that exceeds the goals of utilities' mid-century decarbonization plans, already considered aggressive by some in the industry. Getting that type of plan through Congress will be difficult in itself, dependent, in part, on which party secures the majority in the Senate.
"FERC's role could really hinge on whether Congress does enact any clean energy legislation, even if that energy legislation doesn't specifically task FERC with anything," said Ari Peskoe, director of the Electricity Law Initiative at the Harvard Law School's Environmental and Energy Law Program. For example, if Congress were to pass any sort of clean energy standard, FERC would be beholden to that law, regardless of who was in charge of the commission.
FERC's efforts over the past few years have been centered around "leveling the playing field" for energy resources, much of it said by NGOs and others to be aimed at state clean energy policies and subsidies, which Chatterjee and fellow conservative Republican-appointed commissioners have characterized as "distorting" the markets by giving renewable or zero carbon resources an advantage over fossil fuel generators. But under a federal clean energy standard, "everybody is under the same obligation," said Peskoe. "I don't think FERC could ignore that."
Updating transmission policy is the most obvious place for FERC to step in to accelerate renewables adoption, stakeholders from across the energy spectrum agreed. But even with a complete transmission overhaul it would be difficult to bring the grid to 100% carbon-free energy by 2035, according to some industry observers.
"The Biden administration's plan to decarbonize the electricity sector by 2035 faces the harsh reality that the new transmission lines needed to integrate zero-carbon renewables don't exist and are unlikely to be planned, built, and placed in service before 2035," Travis Fisher, a former advisor to McNamee who is now president and CEO of the Electricity Consumers Resource Council, said in an email. "Further, it's unclear how a resource-neutral FERC would deal with a national clean energy mandate."
But absent a clean energy standard, most stakeholders still hope for bipartisan transmission reform under a Glick-led FERC. Glick was unable to comment for this article.
How Glick might act on transmission?
It's unclear how aggressive Glick might be under a continuing Republican-majority FERC, but the commission's recent landmark order on distributed energy resources marked one rare moment of Chatterjee-Glick consensus, preceded by a conference on carbon pricing in which Chatterjee and Glick were the only two commissioners to stay through the full nine hours.
Chatterjee says his stance has stayed consistent — a focus on keeping power markets transparent and efficient, something he says both these policy efforts could address. Further, he has "worked hard to build consensus and work with my colleagues on a bipartisan basis," he said in an email. "I hope, and expect, that spirit of bipartisan cooperation to continue, regardless of the election outcome."
But some conservatives say his record in recent months may indicate a crucial shift in priorities.
"If Biden wins, an important variable for FERC in 2021 will be the voting patterns of now Chairman Chatterjee," said Fisher. "Just last month, Chatterjee took two significant steps to the political left — first to issue the final rule on distributed energy resources and then to host an all-day, Commissioner-led technical conference on carbon pricing."
Chatterjee's recent favorable clean energy moves could potentially be good for transmission policy, say other stakeholders, something both the Chairman and Glick acknowledge needs to be overhauled, though they differ on how that should happen.
"That's one of the places where there could be real common ground among the commissioners, despite their differences," said Dennis.
In 2011, FERC attempted to tackle the enormous problem of transmission constraints in issuing Order 1000. But there is bipartisan consensus that the order did not work as intended and since then, the stakes for overhauling transmission have only become higher.
Wind and solar resources, located far from load centers, remain limited by how far their power can be transported. Given their geographical and weather constraints, which make them more economical in certain parts of the country, being able to carry those resources farther and faster, would bring efficiency and cost savings to the entire system, experts say.
Expected growth in renewable energy as well as increased electrification will require transmission investments to increase by $3 billion to $7 billion per year through 2030, according to a March report from the Brattle Group. But Order 1000 has limited development from being able to span across regions, stakeholders agree.
Chatterjee has acknowledged Order 1000 did not work out as intended, and, when it comes to transmission, his chairmanship has focused largely on incentivizing investments. In March, the commission issued a Notice of Proposed Rulemaking (NOPR), intended to stimulate development through issuing incentives based on a project's expected benefit to customers.
But Glick in his partial dissent argued the NOPR didn't go far enough. Incentives laid out in the notice do not propose a way to overcome the significant barriers that exist for projects, but instead only reward projects that would have likely been built anyway, he said.
"Incentives must actually incentivize something. A payment that does not incentivize anything is a handout, not an incentive," he wrote. "To be just and reasonable, incentives ought to do more than reward the projects that are already most likely to be developed. And yet that is most of what this NOPR would do."
His comments also reflected a broader understanding that the grid is changing rapidly, and to ignore transmission is to leave large amounts of wind and solar bottlenecked.
"Many of the most cost-effective resources needed to satisfy customer demand and meet state public policy goals are located far from load. Attempting to use the current transmission system to access those resources will generate enormous congestion costs, significantly increasing the cost of delivered power," he said. "So too will a piecemeal approach to expanding the transmission grid that does not adequately consider the fundamentals underlying the need for additional transmission."
Another priority Glick might pursue is upending the controversial PJM Minimum Offer Price Rule (MOPR) expansion.
There is going to be "massive pressure" to find an off-ramp, said Devin Hartman, director of energy and environmental policy at the free market think-tank R Street Institute. "The status quo isn't sustainable ... even under Trump 2.0 it's not sustainable," he said.
What will happen to the MOPR?
Under Trump or Biden, Chatterjee or Glick, the MOPR's future looks uncertain, said stakeholders.
States and clean energy advocates have been vocal opponents of the policy, but most stakeholders agree impacts will not be immediate. For that reason, Chatterjee has encouraged states and others concerned about the order to wait and see what happens.
"Let's see how this process plays out. Let's see how the [wholesale market capacity] auctions play out. I, for one, think the [independent market monitor] makes a compelling case that this action will not have the effect that some of the states and stakeholders fear it will have," he told reporters following threats from several states to exit the PJM market altogether.
"I don't think there would be a 'kumbaya' moment where everybody just says, ‘Let's get rid of the MOPR.'"
Director, Harvard Electricity Law Initiative
PJM's independent market monitor found the rule would likely not have consequential near-term impacts, particularly after PJM's compliance filing assuaged some clean energy industry concerns that mass amounts of wind, solar and nuclear resources wouldn't clear the capacity market auction. That short-term expectation may give FERC a cushion of time to address the order effectively, observers say.
Removing the MOPR, however, could toss the capacity market into greater uncertainty and would be a significant undertaking without an obvious path forward.
"The one thing most stakeholders agree on is the need for regulatory certainty, and in the case of PJM, the need to begin running capacity auctions again," Fisher said. "If a Democrat FERC Chairman wants to unwind the MOPR, he or she will have to deal with the political fallout of yet again heaping uncertainty onto FERC-jurisdictional markets."
"I don't think there would be a 'kumbaya' moment where everybody just says, ‘Let's get rid of the MOPR' … I don't know that there would sort of be one market design that everybody would rally around," said Peskoe.
But there is broad consensus that newer resources, such as offshore wind, will likely not clear. And despite the short-term cushion, market and clean energy advocates alike say the order is unsustainable, and could be unwound in a number of ways.
"There would have to be recognition that this is clearly where the industry is heading and the markets have to adapt," said Peskoe.
If a clean energy standard is passed under Biden that may in itself dilute the MOPR a bit, said legal experts, because the federal standard would then become the minimum standard across the country. A new FERC chairman may also send a signal to the grid operator to forward a different proposal.
Glick has been vocal about his opposition to the MOPR as well as other FERC orders he sees as interfering with state-level clean energy policies, suggesting that he would move far away from those actions if he were chair.
Four more years?
Chatterjee's time as FERC chair is self-described as a focus on keeping the markets competitive and maintaining a level playing field. There has been strong opposition to his actions within the eastern wholesale markets from states and clean energy advocates, and some say the strength of that opposition could limit similar policies from going forward even under a second Trump Administration.
"FERC is still is going to continue to face pressure on the MOPR from states," who have threatened to exit the RTOs entirely, or replace MOPR with a Fixed Resource Requirement or some other means, said Sierra Club's Roberts, responses that all come with a high price tag for everyone involved.
"FERC still has its own interest in maintaining its influence through RTOs, and there's going to be some limit to how much it's willing to continue to punish states that participate in those markets. So I think that'll constrain some of the worst impulses," she said, particularly if Clements and Christie are confirmed.
Clements, as a Democratic nominee will likely side with Glick on some of the more aggressive perceived affronts to state renewable policy, while Virginia Corporation Commission Chair Christie will likely provide a conservative pro-state voice that has thus far been missing from the commission, stakeholders agreed.
Regardless of who is running the commission, it is likely to be more effective than it has been for the past four years, said Hartman, for purely procedural reasons.
"There is so much important work for the Commission to do, and I'm excited and honored to be a part of it."
FERC has seen an unusual amount of turnover under Trump — the commission has been under three different chairmen and seen six commissioners leave since January 2017. With Chatterjee as chair and the addition of two qualified commissioners "I could see FERC firing on all cylinders in a way it hasn't in four years," said Hartman.
And two recent moves from a Chatterjee-led FERC are leading some stakeholders to believe a 2021 FERC under Trump might be willing to marry regulated markets and state decarbonization policies in a way that has yet to be done.
FERC's Order 2222, released in September, and recent confirmation that the commission does have the authority to implement a carbon price if brought forward by a state or a grid operator may present opportunities for "leveling the playing field in different ways," Peskoe said.
"Maybe that would include a carbon price down the road if one of the RTOs proposed it," he said. Although Danly might continue to take a narrow view on the commission's authority to implement such an order, and it's unclear how Clements and Christie might vote if confirmed. Chatterjee said that digging into carbon pricing will continue to be a priority for him in the new year.
"There is so much important work for the Commission to do, and I'm excited and honored to be a part of it," he said, adding he is most excited to "dive further" into carbon pricing and implementing 2222.
Order 2222 is "a solid, market-based approach that will help consumers, promote competition and take us into the future," he said.
Implementing FERC's Order 2222 will be a major lift in itself, said stakeholders. The commission left grid operators with a lot of flexibility and reviewing those compliance filings and ensuring they match the order's intent will no doubt take up much of 2021.
"There is one thing we know for certain: FERC will continue to play a major role in the build-out of tomorrow's electric grid, protecting the grid from cyber and physical threats and creating an environment that allows our energy transition to flourish – all while continuing to protect consumers through access to affordable, reliable energy," said Chatterjee.