By Rich Heidorn Jr.
WASHINGTON — A key House committee last week approved what would be the first comprehensive energy legislation in eight years, but hopes for passage dimmed after Republican amendments eroded bipartisan support.
H.R. 8, the North American Energy Security and Infrastructure Act of 2015, cleared the House Energy and Commerce Committee 32-20 on Wednesday with support from only three Democrats. The bill includes measures to improve energy infrastructure, resilience and reliability while increasing scrutiny of RTOs and FERC.
A preliminary draft of the bill had passed a subcommittee unanimously. But Wednesday’s markup devolved into partisan sniping after Chairman Fred Upton (R-Mich.) replaced the original bill with a 208-page amendment that stripped gas and electric infrastructure funding sought by Democrats. The amendment also includes provisions that would speed the approval of liquefied natural gas export terminals and repeal current law requiring that federal buildings phase out the use of fossil fuel-generated energy.
The changes left Rep. Frank Pallone (D-N.J.), the ranking Democrat on the committee, fuming. “This bill only aims to help polluters in my opinion,” he said. “It continues to ignore the impact of climate change, which remains the biggest threat to our energy security and way of life.”
Upton said the bill is intended to create jobs, improve infrastructure and ensure affordable energy. “While it has been difficult to find bipartisan consensus on as many fronts as I would have liked, I believe we have written a substantive, thoughtful bill,” he said in opening the committee markup.
Congress has not approved a comprehensive energy bill since the Energy Independence and Security Act of 2007. While the House bill is unlikely to pass as is, many of its provisions could find their way into final legislation if bipartisanship prevails.
The Senate Energy and Natural Resources Committee passed its own legislation, the Energy Policy Modernization Act, on July 30 by a bipartisan 18-4 vote.
The package, crafted by Chairwoman Lisa Murkowski (R-Alaska) and ranking member Maria Cantwell (D-Wash.), also would expedite LNG projects and streamline the federal permitting process. It includes measures to improve energy efficiency and cybersecurity and encourage hydropower and geothermal development.
Below is a summary of the House bill’s major provisions affecting the electric industry:
The bill would require traditional vertically integrated utilities to incorporate “reliable generation” into their integrated resource plans, defining it as generation facilities with firm-fuel contracts, dual-fuel capability or sufficient on-site fuel to operate “for the duration of an emergency or severe weather conditions.” (Section 1107)
The requirements would not apply to companies engaged in competitive, unbundled retail electric sales.
FERC Reliability Review
FERC, in consultation with the North American Electric Reliability Corp., would be required to conduct reliability analyses of any federal rule affecting electric generators that is expected to result in an annual effect on the economy of at least $1 billion. The FERC review would evaluate the impact of the rule on electric reliability; resource adequacy; the nation’s electricity generation portfolio; the operation of wholesale markets; electric transmission lines; and natural gas pipelines. (Section 1108)
The bill would require all utilities to develop plans for improving the resilience of their systems against physical sabotage, cyberattacks, electromagnetic pulses, geomagnetic disturbances, severe weather and earthquakes. Among the measures that utilities may consider are the hardening of distribution facilities; technologies that can isolate or repair problems remotely, such as advanced metering and monitoring and control systems; cybersecurity measures; distributed generation; microgrids and non-grid-scale energy storage. (Section 1107)
State regulators “shall consider” authorizing spending on such improvements, the bill says.
The legislation also establishes a competitive grant program for states and local governments for spending on resilience and reliability. (Section 1201)
Strategic Transformer Reserve
The bill would authorize the creation of a stockpile of large power transformers and trailer-mounted mobile substations to recover from the threats listed above. (See “Hardening.”)
The issue caught Congress’ attention as a result of the April 2013 rifle attack on Pacific Gas and Electric’s Metcalf substation and a campaign by former FERC Chairman Jon Wellinghoff to raise awareness of the grid’s vulnerabilities. Wellinghoff cited a 2013 FERC analysis that he said concluded that an attack that disabled nine critical substations could cause an extended blackout in the continental U.S. (See Report: Sabotage Threat Uncertainty Could Lead to Wasteful Spending.)
The Energy Department would be required to develop a plan for the reserve and identify preferred funding options, including fees on owners and operators of bulk-power systems and critical electric infrastructure, federal appropriations, and public-private cost sharing. (Section 1105)
Grid Security Emergencies
If the president declares a grid security emergency, the Secretary of Energy would have authority to order measures to protect or restore the reliability of critical electric infrastructure. (Section 215A)
It would limit FERC review of merger and consolidation acquisitions to those of $10 million or more. (Section 4222)
FERC would be required to create an Office of Compliance Assistance and Public Participation to “promote improved compliance with commission rules and orders.” (Section 4211)
The proposal is an apparent response to complaints by some in the Washington energy bar that FERC’s Office of Enforcement, formerly headed by Chairman Norman Bay, is unfair and heavy handed. (See Gates, Powhatan Say FERC Enforcers Didn’t Share Crucial Info.)
The office would “promote improved compliance” with commission rules through outreach and publications and, “where appropriate, direct communication with entities regulated by the commission.’’
The provision is intended to provide entities subject to FERC regulation “the opportunity to obtain timely guidance for compliance with commission rules and orders” — an opportunity FERC says it already offers through “no-action” letters.
The Government Accountability Office would be required to conduct reports on each RTO’s and ISO’s “market rules, practices and structures.” (Section 4221)
The grid operators would be judged on a number of issues, including whether they produce just and reasonable rates; facilitate fuel diversity, reliability and advanced grid technologies; and promote “equitable treatment of business models, including different utility types.”
GAO also would evaluate the transparency of grid operators’ governance structures and stakeholder processes as well as the transparency of dispatch decisions, including the need for out-of-market actions and the accuracy of day-ahead unit commitments.
The report also would review how well grid operators facilitate “the ability of load-serving entities to self-supply their service territory load.”
The American Public Power Association, which opposes mandatory capacity markets, said the bill doesn’t go far enough. The group said the bill doesn’t address problems faced by public power utilities “forced to participate in the FERC-blessed mandatory capacity markets and is silent on the issue of self-supply for such LSEs.”
APPA, which represents more than 2,000 community-owned, not-for-profit utilities, said it wants the legislation changed to allow wholesale markets to “become more affordable and workable for public power utilities that are willing and able to build a variety of power generation facilities if not blocked from doing so by rules skewed toward certain market participants.”
Financial traders could benefit from a requirement that RTOs ensure “the proper alignment of the energy and transmission markets by including both energy and financial transmission rights in the day-ahead markets.”
Industry sources said the provision would encourage more widespread use of products similar to PJM’s up-to-congestion trades and ERCOT’s point-to-point congestion hedges.
RTOs and ISOs operating capacity markets would be required to provide to FERC an analysis of how the markets use competitive forces and include “resource-neutral” performance criteria. FERC would be required to report to Congress on whether each market meets the criteria and make recommendations for those that don’t. (Section 215B)
A final decision on a federal authorization for gas pipelines would be due no later than 90 days after FERC issues its final environmental document, unless a schedule is otherwise established by federal law. (Section 1101)
Frank Macchiarola, executive vice president for government affairs at America’s Natural Gas Alliance, praised the bill, saying that it “recognizes and seeks to maximize the opportunities presented by our nation’s domestic energy abundance.” ANGA represents independent natural gas exploration and production companies in North America.
The Energy Department would be required to evaluate all carbon capture and sequestration projects funded by the agency every two years. (Section 1109)
The bill would reauthorize hydroelectric production incentives through fiscal year 2025 and require FERC to minimize infringement on private property rights in issuing hydropower licenses. (Sections 1301-1304)
FERC would be authorized to issue exemptions from licensing requirements for development of new hydropower projects at existing non-powered dams.
It would build on changes in two bills enacted in 2013 that streamline regulations on small hydropower sites. A 2012 Energy Department report said the powering of non-powered dams could unlock 12 GW of generating capacity. (See Tiny Hydro Projects Joining Generation Mix in PJM.)
APPA said it was disappointed that the bill does not include “substantive” licensing reform.
“The current hydropower licensing process must be reformed so that public power and other utilities can increase reliable emissions-free hydropower generation without unnecessarily prolonged resource agency review,” it said.
The bill would provide special relief for one hydro project, however.
The developers of the proposed hydro project on the U.S. Army Corps of Engineers’ W. Kerr Scott Dam on the Yadkin River in North Carolina would have an additional six years to start construction under the bill. Wilkesboro Hydropower has proposed adding a turbine that would generate 2 MW at the unpowered dam.
FERC granted the developers a license in July 2012 giving them two years to begin construction and five years to complete it. In May 2014, FERC granted Wilkesboro Hydropower a two-year extension (P-12642-007).
Under the Federal Power Act, FERC told the developers, the deadline for starting construction may only be extended once.