The Federal Energy Regulatory Commission today took a step toward advancing technology-neutral carbon pricing by states rather than the current practice of subsidizing particularly low-carbon electricity generation. FERC issued a proposed policy statement that says it has authority under part 5 of the Federal Power Act to review wholesale market rules that incorporate state carbon pricing mechanisms.
The proposal also says FERC wants the regional wholesale market operators, the RTOs and ISOs, to consider and explore how this might work. The proposal follows FERC’s Sept. 30 technical conference on carbon pricing in the markets FERC regulates. At the meeting, Chairman Neil Chatterjee said he heard wide agreement on the issue.
“The overarching takeaway,” he said, “is that if states continue to pursue carbon pricing, RTOs and ISOs can and should explore the feasibility and benefits.” Chatterjee said carbon pricing “has emerged as an important, market-based tool that had wide support from across sectors.” Stressing that FERC “is not an environmental regulator, he noted that the commission “may be called upon to review proposals that incorporate a state-determined carbon price into these regional markets.”
According to FERC, 11 states have some version of carbon pricing “and other entities, including the regional markets, are examining this approach.”
Chatterjee stressed that the proposed policy statement had bipartisan support, but his fellow Republican commissioner, James Danly, issued a partial dissent and a partial concurrence. Danley didn’t quarrel with the idea that the FERC-regulated markets may come up with proposals on implementing state carbon pricing regimes, but the policy statement is “premature and unnecessary” and FERC would be better advised to “wait until there is a proposal before it.”
The sole Democrat currently on the commission, Richard Glick, supported the proposed policy statement.
It was a dissent-filled hour with a long agenda, particularly on electricity matters. The commission approved a string of 10 orders on petitions for waivers of missed deadlines and other departures from electric tariff rules. While FERC is pondering a broader policy statement, it stuck with its traditional four-part case-by-case review of petitions.
The commission in May, notes an analysis by the Jones Day law firm, “issued a proposed policy statement that may signal a significant change to FERC’s policy on waivers related to remedial relief.” FERC, says the firm, “has regularly granted parties case‑specific waivers of public utility tariffs where the following four-part test is met: (i) the applicant acted in good faith; (ii) the waiver is of limited scope; (iii) the waiver addresses a concrete problem; and (iv) the waiver does not have undesirable consequences, such as harming third parties.
The parade of waivers orders brought a torrent of dissents from Glick and Danly. Glick noted that the FERC order denies a request from Borrego Solar Energy for a missed deadline, caused by a California stay-at-home order to prevent the spread of the corona virus. Glick said it was “simply a disgrace.”
Danly objected to the waivers on the grounds that FERC is flying in the face of the filed rate docrine. He said the commission had failed “to engage in reasoned decision making.” Of the 10 orders, he said, “eight don’t even mention that they are retroactive.” Two orders specifically use that rationale to reject” the request. “They can’t all be correct.”
— Kennedy Maize