Monday, March 18, 2019

Overheard at the NARUC Winter Policy Summit

WASHINGTON — More than 1,000 policymakers and industry officials gathered here last week for the National Association of Regulatory Utility Commissioners Winter Policy Summit, where they heard discussions on prospects for the growth of organized markets in the West, the future of coal and nuclear power, and President Trump’s environmental policies and re-election chances. Here’s some of the highlights of what we heard.

More than 1,000 people attended the NARUC Winter Policy Summit in D.C. | © RTO Insider

Wheeler Stand-in Defends Administration Policies

Brittany Bolen, associate administrator of the EPA Office of Policy, was the first to speak at the summit Feb. 11. Acting Administrator Andrew Wheeler was scheduled to appear, but according to NARUC President Nick Wagner, “he had something come up at the last minute.”

Brittany Bolen, associate administrator of the EPA Office of Policy | © RTO Insider

Bolen defended the agency’s actions under Trump that she said have provided “regulatory relief to create jobs and foster economic growth” while improving air quality.

“Within the last two years, we’ve been able to finalize 33 deregulatory actions that have saved the American people $2 billion in regulatory costs,” she said. At the same time, she said, “U.S. greenhouse gas emissions fell 12% since 2005. From 2005 to 2017, U.S. energy-related CO2 emissions fell by 14%.”

Last month, the Rhodium Group estimated that U.S. CO2 emissions rose 3.4% in 2018, something the Energy Information Administration predicted a year ago.

“We’ve given utilities and states the regulatory certainty they need to invest in new technologies,” Bolen said. “We recognize that you and your partners in the states have worked to provide efficiencies for a long time, and we are no longer ignoring you or, worse, usurping your authorities. We want to work together with you, and we believe our approach will provide greater certainty for you to implement your ideas and serve the people in your states.”

She said the agency is still reviewing comments on the Affordable Clean Energy (ACE) Rule, the Trump administration’s replacement for the Obama administration’s Clean Power Plan, on which the Supreme Court issued an “unprecedented” stay.

“With regards to the [ACE] Rule, what I’d like to do is just say at the outset: We are in fact regulating CO2,” Bolen said. “We are proposing to reduce CO2 emissions comparable to that of the Clean Power Plan,” saying it would result in a 34% reduction in electricity sector emissions below 2005 levels.

The ACE Rule identifies on-site heat rate improvements as the best system of emission reductions (BSER) for existing power plants, as opposed to the CPP, which set state emissions limits and encouraged switching to natural gas and renewables.

“So, unlike the CPP, our ACE Rule respects the rule of law and operates within the four corners of the Clean Air Act,” she said.

Similarly, she called the Obama administration’s determination that carbon capture and sequestration was the BSER for new coal-fired power plants “disingenuous. We believe they knew the technology was not adequately demonstrated as required by the statute.”

Bolen also defended the agency’s recent proposed finding that it was not “appropriate and necessary” to regulate mercury emissions.

“We’ve spent the last several months trying to communicate to the public and those interested about what we were doing with this proposal,” she said. “I know there’s some … misinformation about what is in this proposal.”

She stressed that the proposal was merely in response to the Supreme Court’s ruling in 2015 that EPA had not properly accounted for the costs of its Mercury and Air Toxics Standards, though it left the standards’ hazardous air pollutant (HAP) requirements in place. Though EPA issued a supplemental A&N finding the next year, Bolen said it still relied on the co-benefits of regulating mercury to justify the rule, “outside of the specific statutory requirements.”

But, she said, “we are not repealing the HAP emissions standards or other requirements of the MATS rule, which have been in place since 2012. … We recognize that power plants have spent roughly $18 billion to comply with the 2012 standards, and we acknowledge that in the last decade alone, mercury emissions have decreased by 90%.”

Bolen did not take questions from the audience.

Murkowski Optimistic on Congressional Action

Sen. Lisa Murkowski (R-Alaska), chair of the Senate Energy and Natural Resources Committee, said she was “on a celebratory high” as she received a standing ovation before speaking Wednesday.

The day before, the Senate had overwhelmingly passed sweeping conservation legislation that she and Sen. Maria Cantwell (D-Wash.) had introduced at the beginning of this year to protect millions of acres of land. It was the first of several bipartisan bills that Murkowski said could be approved by the new Congress.

“This is going to be the Congress that can finally reach agreement on a major policy act that promotes energy innovation, efficiency and so much more,” Murkowski said. “I think you have a different dynamic in this Congress.”

Sen. Lisa Murkowski (R-Alaska), chair of the Senate Energy and Natural Resources Committee | © RTO Insider

She said that because of the takeover of the House of Representatives by Democrats, people have expressed skepticism to her about any major legislation passing.

“I disagree on that. I think we can find some common ground here,” she said, noting the conservation bill again. “I think we’ve demonstrated that not only can we do something in a bipartisan way, but also in a bicameral way.” According to The Washington Post, the bill is broadly supported in the House, which will vote on it later this month, and White House officials have indicated privately that the president will sign it.

But Murkowski expressed some frustration over the “billions, literally billions, of dollars of energy infrastructure projects, including pipelines [and] LNG export facilities … in the queue” at FERC. The commission “needs to have that full team to address that growing backlog,” she said.

Another priority for Murkowski is reforming the Public Utility Regulatory Policies Act. “We all love PURPA right?” she asked, prompting groans.

Murkowski was asked about whether there had been any progress on the Nuclear Waste Fund. According to an audit report by the Energy Department’s inspector general in May last year, $44.5 billion sat in the fund, intended to be used to build a permanent repository for nuclear waste. Since the Nuclear Waste Policy Act became law in 1983, utilities purchasing power from nuclear plants have paid fees into the fund, passing the cost through to ratepayers.

Congress designated Yucca Mountain in Nevada as the site for the repository in 1987, but the state has continuously opposed the move, tying it up in the courts, eventually leading the Obama administration to abandon the choice.

“The reason I am optimistic that you will see some progress in nuclear: This is something that, every time I talk with [Energy] Secretary [Rick] Perry, he brings it up with me,” Murkowski answered. “Every time I have an opportunity to be in the same room with [Sen.] Dianne Feinstein [D-Calif.] and [Sen.] Lamar Alexander [R-Tenn.], we all look at one another and say, ‘Wait a minute. We have got to get back to our nuclear waste act that we rolled out congresses ago.’ …

“There’s a dynamic right now on this discussion of nuclear waste that I haven’t felt or been part of for a good handful of years right now. So I feel more optimistic than ever. So, keep urging us in that direction, because that helps.”

Chatterjee: Focused on PURPA, Order 1000 Reforms

FERC Chairman Neil Chatterjee | © RTO Insider

FERC Chairman Neil Chatterjee later Wednesday also told the audience that PURPA reform was “one of my top priorities.”

“Given the front-line role that states play in implementing PURPA, I know this is an important subject to many in this room, and one that many of you have reached out to me about most frequently,” Chatterjee said.

He noted that in 1979, the year after PURPA was enacted, Sony released the first Walkman.

“Fast-forwarding to today … the Walkman was followed by the Discman, MP3 players and the iPod, and now streaming services.

“We’ve similarly seen the rise of renewable resources. They’ve become better able to compete in the marketplace, and those marketplaces themselves have evolved significantly. But notably, our PURPA policy hasn’t seen the same sort of evolution.”

Chatterjee also said the commission needs to revisit Order 1000. “I’ll just put it to you straight: Everyone seems to agree that Order 1000 is not working as intended. But when it comes to this topic, that’s about the only thing stakeholders can agree on.”

Some stakeholders have told him FERC should “repeal and don’t replace” the order, but Chatterjee defended competition in the transmission sector as a way to lower costs to consumers. “As we think about addressing Order 1000, I believe we owe it to consumers to put our best effort forward toward spurring competition to work and getting the scope of competition right,” he said.

Speaking to reporters after his speech, Chatterjee said, “I don’t like to set expectations or timelines, but I am very optimistic that 2019 will be a fruitful year at the commission, and that many of the issues that I laid out here today will be things that we will address.”

Asked about the impasse over natural gas infrastructure approvals, Chatterjee would only say that he was “very encouraged by the constructive dialogue I’ve been having with all my colleagues.” (See related story, Glick Shines Light on FERC Dispute over GHG.)

Western EIM Ponders Day-ahead Market

Washington state Commissioner Ann Rendahl | © RTO Insider

Washington Utilities and Transportation Commissioner Ann Rendahl moderated a panel on the Western Energy Imbalance Market’s growth and plans to add a day-ahead market to its current real-time offering.

Jennifer Gardner, Western Resource Advocates | © RTO Insider

Jennifer Gardner, senior staff attorney for Western Resource Advocates, noted that although the EIM’s member companies are expected to serve two-thirds of the West’s load by 2020, only 5 to 10% of total transactions occur in real time. One challenge: Day-ahead transactions will have to include payments for transmission access, unlike the real-time market in which transmission is “essentially free,” she said.

Robert Taylor, Arizona Public Service | © RTO Insider

Robert Taylor, head of federal regulatory affairs for Arizona Public Service, said the key to the EIM’s growth has been its “evolutionary” not “revolutionary” pace, contrasting it with past failed efforts to develop a Western market.

“The reason this one … has been so successful is because it’s worked at an incremental pace. The EIM was a nice start. We were able to go in one at a time. We were able to get more comfortable with the market, the market rules. We were able to get more comfortable with our trading partners. And, quite frankly, we were able to get more comfortable with the CAISO — understanding how they work and that they would be responsive to our needs,” Taylor said. “It’s just a natural evolution to take a look at what the next step is with the day-ahead market and see if we can bring additional benefits to our customers.”

Idaho Commissioner Kristine Raper | © RTO Insider

Idaho Public Utilities Commissioner Kristine Raper agreed that “evolutionary change” has led to the prospects of a true regional market. “I think it is reasonable for the regulators to want to be part of something that has a little more teeth than what the [EIM] Governing Body currently has within the larger CAISO,” she said.

Former Montana Public Service Commissioner Travis Kavulla, a member of the Governing Body, said he is seeking feedback from transmission-dependent utilities, independent generators and power marketers. “Clearly we can’t have a market design solely intended to benefit big vertically integrated utilities that have both big power fleets and a lot of transmission,” said Kavulla, now director of energy and environmental policy for think tank R Street Institute. “We need to be fair and equitable to all of the participants.”

Kavulla also said he is concerned about CAISO’s role.

Former Montana Commissioner Travis Kavulla | © RTO Insider

“I’m just very conscious that we can’t let RTO management become a kind of Hal 9000 which is saying, ‘I can’t let you do that, Dave,’” he said, in a reference to the malevolent A.I. in “2001: A Space Odyssey.”

“It’s become a real problem in other parts of the country where RTOs somehow have, by default, or by delegating powers under themselves, become de facto policymakers. That’s not appropriate, and it’s not the role that was envisioned for them. They’re there to ensure economic efficiency and make sure the market works, but ultimately to accommodate the desires of stakeholders, including the foremost among the stakeholders: consumers and their government representatives,” he said. “I have lots of opinions on whether policymakers are making wise decisions about energy policy. I do know, though, that RTOs should not be the referee in that particular situation.”

Keeping Nuclear Power Alive

Doug Vine, Center for Climate and Energy Solutions | © RTO Insider

In a panel on the future of nuclear power, Doug Vine, senior energy fellow at the Center for Climate and Energy Solutions, said zero-emission credits, such as those enacted in New York, New Jersey and Illinois, are the best policy solution available for keeping financially ailing nuclear generators in operation.

Vine said keeping existing nuclear plants operating is crucial to meeting greenhouse gas reduction targets. “This is why we’re saying that we need nuclear and renewables, not renewables attempting to replace nuclear power.”

John Parsons, MIT | © RTO Insider

John Parsons, executive director of the Massachusetts Institute of Technology’s Center for Energy and Environmental Policy Research, agreed.

“To reach the [state emission] targets, it became clear the reactors needed to be a part of the equation,” he said.

In New England, which lost the Vermont Yankee nuclear plant in 2014 and faces the closure of the Pilgrim nuclear generator in Plymouth, Mass., by June 1, “we are going to fail to meet our 2020 targets,” Parsons said. “I think the numbers are what will force people to confront the choices that have to be made. And that favors appreciating the value that’s in the nuclear plants that people found easy to overlook.”

But Steve Clemmer, director of climate and energy research and analysis for the Union of Concerned Scientists, said it is unrealistic to expect the U.S. can extend licenses to keep all its remaining generators operating for 80 years. The Nuclear Regulatory Commission, which initially licensed plants for 40 years, had granted 20-year extensions to 89 reactors through early 2018. Three of those have since retired regardless. The first request for a second 20-year license extension was filed by the Turkey Point Units 3 and 4 reactors in January 2018.

Steve Clemmer, Union of Concerned Scientists | © RTO Insider

“It might make sense to keep some plants going,” Clemmer said. “Others it makes sense to retire. There’s going to be significant investments needed to replace equipment. There’s legitimate safety issues to keeping them operating that long.

“It really comes down to are we going to be able to reduce the cost of new nuclear versus competing options like — not just renewables and energy efficiency — but also carbon capture and storage,” he added. “We’ve done some long-term analysis through 2050 … and some of those studies show that natural gas with carbon capture and storage might become a very competitive option in the future. And nuclear could be if we achieve the cost reductions that the industry is promising. But that’s highly uncertain.”

Political Analyst Sees Close 2020 Race

Political analyst Stuart Rothenberg predicted the 2020 presidential race will be close, despite Trump’s current low approval ratings.

Stuart Rothenberg, Roll Call | © RTO Insider

Rothenberg, who writes for Roll Call, said that because Trump has largely held on to the base of his coalition, he is unlikely to face a serious challenge in the Republican primaries. On Friday, William Weld, former governor of Massachusetts and the Libertarian Party candidate for vice president in 2016, announced he would challenge Trump for the Republican Party nomination.

In the 2018 midterm elections, the GOP lost many of the white, college-educated voters — particularly women — who supported Trump in 2016. Despite that erosion, Trump will be a formidable opponent, Rothenberg said.

“While he … looks behind when compared with generic Democrats, once the Democrats pick a candidate, he is going to skewer that nominee and attempt to demean, demoralize and destroy that candidate and polarize the country.”

DOE’s Walker Presses ‘Resilience Model’

Assistant Energy Secretary Bruce Walker, who heads the Department of Energy’s Office of Electricity, continued DOE’s campaign in support of coal and nuclear plants, repeating warnings about the U.S.’ increasing dependence on natural gas-fired generation. He also touted the grid “resilience model” DOE is developing.

Assistant Energy Secretary Bruce Walker | © RTO Insider

Walker cited the Worldwide Threat Assessment released by U.S. intelligence agencies in January, which concluded that Russian hackers have the capability to disrupt electrical service in the U.S. (See related story, Senators Call for Urgency on Energy Cybersecurity.)

He noted that most of the electric grid was built before computers and before the Sept. 11, 2001, terrorist attacks.

“What I’m really here to ask — particularly given the role of everybody here in this room — is that you take a step back and look at things like our [renewable portfolio] standards, look at affordability, look at emissions. But more importantly, look at the reliability and resilience of the system. We no longer live in an age where the infrastructure is not at risk. … I would ask that … you take those [threats] into consideration when things are being funded.”

On March 28, FERC and DOE will host a joint technical conference to discuss current cyber and physical security practices and how federal and state authorities can provide cost recovery for security investments.

‘Clean’ Coal Efforts Continue

Another DOE official, Lou Hrkman, deputy assistant secretary of the Office of Fossil Energy, said U.S. policymakers should be focused on developing carbon capture technology to keep coal generation viable.

Lou Hrkman, DOE Office of Fossil Energy | © RTO Insider

“Worldwide there’s really two conversations going on: Here in the U.S., where we’re trying to destroy coal, and the other conversation is in Asia, where they take a more realistic and pragmatic approach, while at the same time expanding coal’s usage.”

Because the Paris Agreement on climate change puts no cap on China’s GHG emissions until 2030, Hrkman said, “they will use this time to build some 1,900 coal power plants around the world.”

“You could shut down the entire U.S. coal fleet … and you’ll have absolutely zero effect on worldwide CO2 emissions,” he continued. “Once you … accept that simple fact, the goal should be carbon-free fossil energy.”

He said DOE is funding research that will lead to small modular coal plants that would be able to compete with natural gas on cost and ramping flexibility. The U.S. goal is to “leapfrog” the technology of coal plants being built in Asia, which have efficiency ratings as high as 42%.

Hrkman said the goal is to reach 50% efficiency and reduce carbon capture to $30/ton. “Currently capture technology that we’re looking at is around $47/ton. It’s a hard goal to reach. But we think … some of the new technologies out there, have the potential to get us there in the not too distant future.”

“Once we achieve the $30 carbon it will be affordable for industry to adopt and deploy. And if you combine that with 45Q tax credits, we think there’s quite a business case to have out there for the investment community.”

     – Michael Brooks and Rich Heidorn Jr.

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