Saturday, July 22, 2017

LaFleur Braces for ‘FERC 2.0’ Under Trump

Since she was appointed to FERC in 2010, acting Chair Cheryl LaFleur has served with seven commissioners and two chairmen, Jon Wellinghoff and Norman Bay.

Cheryl LaFleur Trump IPPNY

LaFleur | © RTO Insider

Now, after operating without a quorum since February, she is about to be joined by as many as four new commissioners appointed by President Trump. It will be the biggest turnover at the commission since at least 1993 — a transition she has come to call “FERC 2.0.” (See Trump Nominates Republicans Powelson, Chatterjee to FERC; No 2nd Term for FERC’s Colette Honorable.)

The chairman sat down for an interview last week with RTO Insider editor Rich Heidorn Jr., a former FERC staffer, about whether the commission can maintain its reputation for nonpartisanship, her reflections on the commission’s May 1-2 technical conference on tensions between state policies and wholesale markets, and the grid security study ordered by Energy Secretary Rick Perry. The transcript below has been edited for clarity and length.

RTO Insider: So first off, a week after the technical conference, are you more or less optimistic about the future of the wholesale markets than you were before?

Cheryl LaFleur: I would say that the conference met our expectations, which I think were difficult to fulfill. We wanted to have all the different views represented and aired in a very transparent way to try to frame the issues and I think that happened. We wanted to get a better sense of what the consequences were of the different potential solutions, and I think to a large measure, that happened. And we wanted to create a sense of momentum behind the issue without having the ability to vote out anything to create a sense of momentum, and I think we did create a sense of momentum that we are now trying to sustain.

RTO Insider: In your opening remarks May 1, you talked about feeling like you had been punched in the gut when you read Sue Tierney’s words from the 2013 capacity market technical conference. In retrospect, do you feel like the 2013 conference was a missed opportunity? Or do you not have time for regrets about that? (See Power Markets at Risk from State Actions, Speakers Tell FERC; Capacity Market Attracts Praise, Criticism at FERC.)

Cheryl LaFleur: Well, I don’t think this particular issue of state policies and the markets was really fully framed in 2013. Although I do clearly … Dr. Tierney did allude to it, and I remember at that 2013 conference, her distinctly talking about the Clean Power Plan and so forth, which nobody else was talking about then. I think actually, in my opinion, quite a lot came out of the 2013 tech conference. As part in response to conversations at that tech conference, we saw a settlement achieved in New England, which led to the sloped demand curve and the renewables exemption, which was very clearly discussed at the conference. And in some ways the Capacity Performance, Pay-for-Performance proposals that we saw come out of [PJM and] New England in some ways were generated by things at that conference so I thought that was one of our more productive conferences.

I said at the time of the 2013 conference and it’s still true, that there’s two competing things we hear all the time. The first is: Stop making changes in the capacity markets. And the second is: Make my change please. And I think the concept that when we’ve had a successful tech conference, it’ll be when nothing changes anymore because the world is going to be, as it is may be, illusory. Because I think the issues that are framed now in the 2017 tech conference have evolved.

RTO Insider:  So, there was a reference earlier today to the Rick Perry comments and this need to study grid reliability. Isn’t that kind of a slap in the face to what you guys at FERC have been doing for the last couple of years?

Cheryl LaFleur: Well, FERC and DOE we have always worked in parallel or in a complementary way. I mean, they made [us] aware they were putting out the memo. Presumably they’re going to do this study. I don’t remember when the 60 days run out, but it’s relatively soon and it’ll be a piece that’s part of the conversation.

RTO Insider: So, would it surprise you if they came up with anything you haven’t already talked about?

Cheryl LaFleur: I can’t surmise that. I mean, there’s always new things under the sun.

RTO Insider: So let’s talk about the quorum news. How well do you know Powelson and Chatterjee?

Cheryl LaFleur: I know both of them. In general, I’m saying I’m very happy that we got the news. I appreciate the White House making the announcement. I appreciate Sen. [Lisa] Murkowski [R-Alaska, chair of the Senate Energy and Natural Resources Committee] saying she was going to act on them quickly. I tried to sort of in general not comment on individuals. But I do know these gentlemen. I’m very happy to see this news this week.

RTO Insider: And do you have any sense of when the player to be named later [third Republican nominee] may be named?

Cheryl LaFleur: I read in the press soon, but hopefully soon.

RTO Insider: What came out of the conference that perhaps most surprised you?

Cheryl LaFleur: Nothing was really surprising, but I think it was very important and informative to hear the different views of the different states, and we only saw [a] microcosm. I believe we had three of the PJM states there, and it was interesting to see where they were coming from I thought. Hearing the New England states — their representatives were very honest about some of the things they would and would not accept. I think that in itself, if that’s all we got out of the day, that would’ve had value. Because I mean they chose to come into a forum that was a FERC forum and express those views and that was very important.

RTO Insider: How does that play out when, let’s say, you get that filing from ISO New England for this two-tier capacity auction? Does having heard from the states give you some sense of, well here’s what the political realities are and we have to kind of take that into account?

Cheryl LaFleur: Well I would first of all hope that in the process that’s going to ensue between now and whenever any filing is made that there would be a discourse with the states as they go along. I feel like I’m on a little bit of a tour now because I’m in New York, doing PJM in a few weeks and then I’m going to [the New England Conference of Public Utilities Commissioners’ Annual Symposium]. And I know between the NECPUC meeting and then the [New England Power Pool] summer meeting, ISO New England will be talking a lot to the states. Certainly here in New York, one state, one ISO, so I would hope a lot of that would happen as they go along and it wouldn’t be a case of picking up a filing and finding out a state was unhappy that I didn’t know before.

RTO Insider: In other words, them filing an intervention.

Cheryl LaFleur: Or I mean I would hope that we would’ve known where the states were on the issues as we went along. Because really, as I said at the conference, the regional markets exist because of changes in state policy that gave rise to them. And they exist with the support of the states so they’re very important constituencies.

RTO Insider: If in fact the capacity market becomes less central to, let’s say operations in PJM, because public power persuades the commission that they should have more latitude, is that necessarily a failure of the markets? Or would you say that the capacity markets have always been kind of a Rube Goldbergian device, and so it’s to be expected some people may want to opt out of it?

Cheryl LaFleur: There are different ways you can do resource adequacy, and a spectrum of different ways you can do resource adequacy, and I try to have an open mind about the ways that the regions do it. If you look at the way the Southwest Power Pool does resource advocacy versus California versus New England, there’s different models.

I feel the only failure would be if we didn’t plan for resource adequacy and stumbled into something. Or if something fell between the cracks in the federal government and the state government. But different systems that different states come up with, I have an open mind.

RTO Insider: How, if at all, do you expect the new commissioners to change the dynamics on the commission? As long as I’ve been following the commission — back to when I worked there under Pat Wood — what I’ve always been impressed by in the FERC building, as opposed to much of the rest of Washington, is the lack of partisanship. We rarely mention commissioners’ party affiliations because you don’t really see that playing out in how they vote. Any reason to think that might change under the new regime?

Cheryl LaFleur: Well I think FERC does have the strong tradition of bipartisanship and making decisions based on the facts and the law, and I certainly hope that we’ll continue and that the new commissioners, as they’re sworn in, will continue in that tradition. I think in terms of the dynamics — not partisanship, just the dynamics in general — we’ll see a change in the commission the likes of which we haven’t seen since 1993, maybe even more. Because generally, you have one commissioner at a time come on, you have the four who were there and one individual comes on. And every time a new person comes, it changes the shape of the whole. But to have up to four come on at a time — including a chairman — that’s a big turnover. In 1993, four came at once, but the chairman was there already. So, that’s a big turnover. But I believe the tradition of — or more than a tradition — the expectation of making decisions by the record and bipartisanship will continue.

RTO Insider: Somebody had floated the notion that the president is not actually required to appoint two Democrats to the other seats. He can appoint three Republicans, but he can appoint independents or what have you. Have you heard anything about that — that there is going to be any change in the way they handle that?

Cheryl LaFleur: No I believe the law says only three of the president’s party. I have heard no changes.

RTO Insider: So you don’t anticipate that’s likely to happen.

Cheryl LaFleur: The White House has not shared with me their plans. I’ve said all along my hope is that they appoint people who are experienced in energy, and so far, they have.

RTO Insider: And along the lines of that, have you been given any indication whether they might continue you in an interim position as chair for a while after the new commissioners are sworn in?

Cheryl LaFleur: No.

RTO Insider: Okay. We’ll all have to wait to find out.

Cheryl LaFleur: I mean there’s so many different ways this can go. I think a lot also is riding on when the third nomination comes, and how these nominations proceed. But, regardless of how long I’m chairman, my focus right now is on getting the backlog and the issues that are pending before us framed in the best way we can to help the onboarding commissioners come up to speed, and helping the work of the commission to move forward. I intend to stay afterward as a commissioner so I’ll be there for the transition. But even if I weren’t, the FERC staff will be there, and many of them have been there through several chairmen.

RTO Insider: Is there anything that I haven’t asked you about that you want to put out there as your message coming out of either the tech conference, or just kind of the state of play right now?

Cheryl LaFleur: Well I guess I would just say on the tech conference, we have not yet issued, I don’t believe, our request for comments, but we hope to hear from voices beyond the ones who spoke at the tech conference. We know there were people who volunteered to speak, and others who might not have volunteered, but have something to say, and we hope to hear from them.

The only other thing you haven’t asked about is Commissioner [Colette] Honorable, which is also, it was only a couple weeks ago that happened. I was very sorry to hear her plans, although it’s obviously up to her. But she’s been a wonderful colleague and a great addition to the commission.

RTO Insider: Well we kind of assumed that prior to Commissioner Bay leaving, that her position would go to a Republican to make the balance. Once he left, in theory she could have stuck around. Do you know if she had an indication from the White House that she would not be reappointed?

Cheryl LaFleur: I don’t know any of that, and it’s not my place to say. While we’re talking about the new guys, she was great. She is great; she’s still there.

RTO Insider: And let me ask you one last question about the criticism of the public interest groups who claim they were not allowed to testify at the conference, and also about a lack of transparency in the RTOs. [See Public Interest Groups Cry Foul over Technical Conference, RTO Transparency.] I just wondered if you had any response on that, any comment on that.

Cheryl LaFleur: Well we tried to balance the panels and have a consumer viewpoint on every one of the panels, and I think we did, but as I said, we’re going to be putting out a request for comments and we certainly hope to hear from others as well.

RTO Insider: Are you happy with the level of transparency in the RTOs?

Cheryl LaFleur: I really don’t have any comment on that. We have an obligation to oversee their stakeholder processes and the way they decide things, and I asked a question about that at the tech conference in fact.

RTO Insider: I must have missed that.

Cheryl LaFleur: I don’t want to prejudge the … I don’t really have any comment. No, I think I picked up on one of the [witnesses] that said something about the stakeholder processes.

RTO Insider: Well thank you very much for your time, appreciate it.

Cheryl LaFleur: Thanks a lot.

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