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FERC has broad authority over the power sector’s interstate operations and planning activities and is the permitting agency for all interstate natural gas pipelines. With sweeping powers over these vital energy industries, FERC is a key player in facilitating the clean energy transition. FERC’s decisions influence the mix of resources generating electric power and affect the energy industry’s emissions. FERC is an independent regulatory commission whose members are nominated by the president and confirmed by the Senate. The administration has only indirect influence over FERC through its nominations. That said, the Department of Energy has undertaken several transmission studies and funding initiatives, including some dictated by the Infrastructure Investment of Jobs Act of 2021. Because FERC has exclusive jurisdiction over transmission operations and planning, its authority overlaps with this Biden administration priority.
Electric Transmission: Reforming Planning and Interconnection Processes
FERC proposed major reforms to transmission development to facilitate clean energy deployment.
Transmission is the industry’s nervous system that enables utilities, power generators, and consumers to coordinate operations and collectively improve the industry’s efficiency. Utilities have historically extended their transmission networks to meet industry challenges. In the 20th century, new transmission connected neighboring systems and new power plants, enhanced reliability, and facilitated regional trading. Today, transmission expansion is needed to exploit remote renewable energy resources and enable a more flexible network that can keep increasingly complex systems in balance and able to withstand severe weather or other disruptions.
In 2021, FERC held technical conferences on transmission development and operations and solicited public comments on several transmission topics. With the benefit of the record it developed in those proceedings, FERC has thus far proposed three major transmission rules in 2022:
- Long-Term Transmission Planning: Proposes to require transmission providers to plan for transmission needs based on projected 20-year changes to the resource mix and consumer demand.
- Interconnection Processes: Proposes reforms for standard agreements that govern procedures for connecting new generators, with the goal of cutting down delays in bringing new generation capacity online.
- Extreme Weather Performance: Proposes to require the North American Electric Reliability Corporation (NERC) to develop planning standards that account for extreme hot and cold weather events that can affect transmission reliability.
In the fourth quarter of 2022, FERC will hold technical conferences on transmission planning, rate oversight and interregional transmission development. It could issue additional proposed rules about transmission in 2023.
Interstate Power Markets: Reversing Trump-Era Rules that Hamstrung Clean Energy Resources
FERC approved revocation of rules that benefited fossil generators.
Three regional transmission organizations — PJM, New York ISO, and ISO New England — conduct annual or monthly auctions designed to ensure that the region has sufficient resources to meet peak consumer demand for electricity. These capacity auctions allow power plant owners to offer their generation capacity to the market. Auction rules approved by FERC limit resource owners’ offer prices in various ways. From 2018 to 2020, FERC imposed additional limits on offer prices that applied to resources benefiting from state policies. FERC has prioritized traditional power plants over new clean energy resources by forcing the latter to offer into the auction at higher prices than they had before the rules took effect.
Starting in the summer of 2021, each of the three market operators filed new auction rules to replace the limits imposed by the Trump-era FERC. FERC approved the rules proposed by the New York and New England organizations. However, when FERC voted on rules filed by PJM, it had only four commissioners, and the vote was split 2-2. When there’s a tie vote proposed rules go into effect, and several parties have challenged this result in federal appeals court, arguing that FERC cannot change its policies without issuing a majority-approved order. The Third Circuit is likely to decide the case in early 2023.
Natural Gas Pipelines: Considering Greenhouse Gas Emissions in the Permitting Process
A new approach to pipeline permitting is still in development.
The Natural Gas Act empowers FERC to permit construction of a new interstate pipeline when it finds that the project “is or will be required by the present or future public convenience and necessity.” In 1999, FERC outlined in a policy statement how it would analyze whether a particular proposed project meets the law’s standard. In 2018, FERC requested comments on potential updates to that policy, and solicited further feedback in 2021. Its notices of inquiry asked several questions about whether and how it should account for climate impacts of a new pipeline.
In February 2022, FERC issued a new policy statement that explained how it would analyze greenhouse gas emissions. For pipelines projected to emit at least 100,000 metric tons of greenhouse gases per year, including upstream production and downstream consumption, FERC would require the preparation of an environmental impact statement. In addition, FERC would also consider the project’s climate impacts, as well as the developer’s commitment to mitigate those impacts, in its permitting decision. Should FERC conclude that the developer’s proposed mitigation did not adequately reduce the project’s climate impacts, FERC could condition approval on the developer undertaking further mitigation efforts, such as purchasing offsets or renewable energy credits.
However, just one month later, FERC rescinded its new policy statement and requested additional comments. It is unclear whether FERC will re-issue its February 2022 policy, revise it, or stick with its still-effective 1999 policy.