House Energy and Power Subcommittee takes a look at the Federal Power Act; one small suggestion for reform

As had been announced in June of this year, the Energy and Power subcommittee of the U.S. House of Representatives is devoting some time to a deep look into the Federal Power Act (FPA). At the time of the June announcement the committee sent a letter to Federal Energy Regulatory Commission (FERC) saying:

As you know, the Committee has followed with keen interest the many market, regulatory, and technology changes currently affecting the electricity sector. Given the importance of electricity to our national security, our national economic interests and our basic health and welfare, both the Committee and the Commission have the critical responsibility of ensuring that, regardless of any present and future changes, consumers continue to receive reliable and affordable power.

The letter asked the following questions:

1. Have the competitive markets fared as expected since restructuring began over 20 years ago, particularly in terms of market efficiency, capital investment, reliability, electricity rates, and consumer impacts?

2. Are the competitive markets equipped to promote, integrate, and adapt to new technologies, new products and services, and state and federal policy changes?

3. What is the Commission’s view as to how non-FERC jurisdictional federal and state actions, such as the federal production tax credit or state renewable energy mandates, impact the operation of wholesale markets generally, and, specifically, in terms of impacts on reliability, resource and technology neutrality, and wholesale power prices?

4. How do new technologies, programs, incentives, and policy changes at the state and federal levels affect the jurisdictional “bright line”?  Is that line becoming increasingly blurred as a result of such changes?

5. Does the Federal Power Act continue to be well-suited for today’s electricity sector?  Is it well-suited for the electricity system of the future?

On September 7, 2016, the first hearing was focused on historical perspectives on the FPA. The subcommittee heard from former FERC Commissioner Clifford Naeve (1985-1988), former Deputy Secretary of Energy Linda Stuntz (1992-1993), former FERC general counsel Susan Tomasky (1993-1997), and former FERC general counsel Doug Smith (1997-2001). The speakers were chosen to provide perspective on the foundations for the FPA and for their roles at times in which FERC natural gas and electric power rules were quickly changing.

For folks in the electric power industry and their consumers the hearings represent both opportunity and a threat. Sustained attention from Congress may lead to fundamental changes, in fact signals a likelihood of change, which may turn out well and may not. The discussion makes clear that the federal-state jurisdictional split and operations at RTO markets are among the issues of concern.

Video of the hearings and witness statements are available on the House website. Note that the hearing actually starts about 35 minutes into the video.

If the U.S. Congress is going to revamp the FPA then on my wish list is a clear and firm statutory basis for ERCOT’s current jurisdictional status. Electric reliability and more economic operation of the grid in Texas and in the adjacent FERC-jurisdictional grids would be improved by larger, commercially-scaled and commercially available interconnections between ERCOT and surrounding power grids. Such connections will not develop so long as their existence threatens the status quo jurisdictional foundation of ERCOT, which is based in part of language in the FPA and in part on FERC’s interpretation of that language. If the framing of the law is preventing value-enhancing behavior by the industry, the law should change.

NOTE: Some background on ERCOT’s jurisdictional status is available in an article by Jared Fleisher that appeared in the Texas Journal of Oil, Gas, and Energy Law in 2008.