The energy agency that could thwart Democrats’ climate plans

Activists have long argued that the Federal Power Act and Natural Gas Act can be interpreted to allow FERC to regulate carbon emissions when it evaluates pipelines and power rates. But for decades, FERC regulators from both parties have disagreed.

The Federal Power Act gives FERC responsibility to oversee interstate power markets, but it must do so in concert with the states, which retain ultimate authority to decide which plants are built and shut down. The FPA does not give FERC explicit environmental authorities, and even its most liberal member doubts whether the law can be read to allow FERC to institute a price on carbon or other emissions regulations.

“I’m not entirely convinced at this point that we actually have the authority to go beyond what we’ve already been doing” to consider climate change in power markets, Democratic Commissioner Richard Glick told POLITICO this May. “I think it’s a different scenario if a [regional grid operator] comes in and suggests to us that we should approve a carbon [price] … than whether we should affirmatively, aggressively go out there and regulate greenhouse gas emissions through our ratemaking authorities themselves.”

Activists say Glick’s perspective shows why statutory changes are needed. Rather than a neutral overseer of the markets, they want FERC to take a more active role in pushing fossil fuel plants off the grid.

“The Federal Power Act says nothing about promoting renewable resources or greenhouse gas emissions or any of that kind of thing,” Subramanian said. “If the statutory mandate were clarified, whether or not you have Democratic appointees, they are statutorily mandated to consider environmental impacts or the carbon impacts of generation sources.”

Those changes, however, would upend decades of “fuel neutral” regulation that FERC staffers prize as a last bastion of nonpartisan regulation in an increasingly polarized Washington. That mission has been under threat in recent years as the Trump administration has pushed FERC to support financially stressed coal and nuclear plants, and some agency veterans compare the climate reform push to those White House efforts.

“Politicizing of fuel choices is not necessarily new, but it’s taken on a higher profile as we graft on environmental and climate issues” to FERC issues, said former FERC Chairman Pat Wood III, a Republican appointed by President George W. Bush. “I think you saw the reverse of that happen with the potential for a coal bailout in the first years of this administration.”

Some FERC observers say revising the commission’s statutes is unnecessary to fight climate change. If its authorities are not changed, a liberal majority at FERC could approve carbon pricing plans brought to it by regional grid operators, and New York market participants are slowly putting such a plan together. And if Congress or the EPA finish new carbon regulations, FERC could also serve as a more passive implementing agency, overseeing power reliability through the transition.

“I could imagine doing [climate legislation] in such a way where you don’t need to reform FERC,” said Ari Peskoe, Director of the Harvard Electricity Law Initiative. “If there was just a national [renewable energy standard], you would just need someone to make sure utilities are complying. That could be FERC, but it could also be [the Department of Energy] or EPA as well.”

FERC was expected to fill that implementation role for the Obama administration’s landmark climate rule for power plants before it was held up in court and abandoned by the Trump administration. In that case, FERC was tasked with ensuring that the carbon rules on coal plants would not interfere with electric reliability, and offered substantial comments that influenced the EPA’s final rule. It could take a similar role if Congress passes more ambitious climate regulations or EPA comes up with another plan.

But if FERC is to help implement a climate plan from Congress or EPA, activists say it will need to change its current course of counteracting clean energy policies. A new president could tap a new FERC chairman, but because of the agency’s staggered terms, all three Trump GOP appointees could be on the commission until mid-2021. Chairman Neil Chatterjee — a long-time protégé of Senate Majority Leader Mitch McConnell — has publicly pledged to complete his term, and if his Republican colleagues follow, they could preserve a GOP majority for months into a new administration.

“If we do have a big climate mandate form the federal government, you’re going to need some federal actor to be playing an [implementation] role,” Peskoe said. “But if you look at who is head of FERC in 2021 … maybe [Democrats] would want to just expand [the number of regulators] or start fresh.”

If a new administration wants to change FERC’s underlying statutes, Wood suggested a more modest approach. Instead of completely reshaping the agency, the former chairman said Congress could focus on expanding the commission’s authority to site electric transmission lines, which researchers say will be essential to deliver remotely located wind and solar energy to cities. FERC can force landowners to cede property to gas pipelines under its eminent domain authority, but it does not have the same power for transmission.

“Giving FERC more authority over transmission would be a great step, but you don’t have to call it a renewable energy commission to make it happen,” Wood said.