FERC workshop on abandoned mine pumped storage

Federal hydropower regulators have scheduled a workshop to explore potential opportunities for development of closed-loop pumped storage projects at abandoned mine sites, as required by the America's Water Infrastructure Act of 2018.

Enacted by Congress and signed by President Trump in October 2018, the Act amends several portions of the Federal Power Act which govern how the Federal Energy Regulatory Commission issues preliminary permits, hydropower licenses, and approvals for qualifying conduit hydropower facilities. Among other requirements, the Act directed the Commission to issue a rule establishing an expedited process for issuing and amending licenses for closed-loop pumped storage projects under this section.

The Act also includes provisions designed to facilitate exploration of the use of abandoned mine sites for pumped storage projects. Section 3004 of the Act requires the Commission to hold a workshop within 6 months to explore potential opportunities for development of closed-loop pumped storage projects at abandoned mine sites, and issue guidance within one year to assist applicants for licenses or preliminary permits for closed-loop pumped storage projects at abandoned mine sites. In November 2018, the Commission docketed its action on Closed-loop Pumped Storage Projects at Abandoned Mines Guidance as Docket No. AD19-8-000 and established a schedule for rulemaking, public comment, and issuance of guidance.

The Commission has now issued a Notice of Workshop in the abandoned mine pumped storage docket, scheduled for April 4, 2019. The notice states that the workshop will involve roundtable discussions by panelists, moderated by Commission staff. The agenda for the workshop includes discussion of how to identify sites for development of closed-loop pumped storage projects at abandoned mines, as well as the benefits and challenges associated with the use of abandoned mines for pumped storage. The agenda also includes time for soliciting feedback from the workshop panel and other participants on what types of information would be most helpful to include in the guidance mandated by the Act.

Considering a Green New Deal

Will 2019 bring a "Green New Deal" for the U.S. or individual states?

President Franklin D. Roosevelt championed the original "New Deal" in the 1930s, as a series of federal reforms and measures designed to lift the U.S. economy out of the Great Depression. The First New Deal included banking and securities law reforms, funding for emergency relief operations by states and cities, and a Civil Works Administration. Later in the Roosevelt administration, a Second New Deal included labor law reforms, significantly increased federal employment through the Works Progress Administration jobs relief program, and the Social Security Act, among other measures.

More recently, the notion of a "Green New Deal" has emerged from a variety of sources. While the details of what constitutes a Green New Deal vary depending on the proponent, the basic concept most proposals have in common is a significant investment in clean energy to spur employment and revenue. For example:

• Mark Hertsgaard's 1998 book Earth Odyssey culminated with his vision of a "Global Green Deal" to transform global economies based on the New Deal.
• New York Times columnist Thomas Friedman has been credited with coining the "Green New Deal" phrase in a pair of opinion pieces in 2007. At the time, Friedman envisioned the government as "not funding projects, as in the original New Deal, but seeding basic research, providing loan guarantees where needed, and setting standards, taxes and incentives" to spawn business opportunities in clean power.
• In his 2008 presidential campaign, President Obama proposed addressing the nation's economic crisis by using green investments to promote new jobs, and the 2009 stimulus act included substantial measures along these lines which have been called a Green New Deal.
• In 2009, a United Nations program published a report calling for a "Global Green New Deal," again seeking transformation of global economies through investment in clean energy, systems and infrastructure.

The idea of a Green New Deal has again found some traction in 2019, although the details of what might be included remain unclear, as does the likelihood of its adoption. In 2018, as part of her successful campaign, now-Representative Alexandria Ocasio-Cortez proposed a federal "Green New Deal" to address climate change. While the concept does not appear to have been fully embraced by Congress, state legislation proposing state-level Green New Deals has started to arise. For example, Maine state Representative Chloe Maxmin has proposed a bill whose title has been published as LR 1034, "An Act To Establish a Green New Deal for Maine."

Whatever ultimate fate these proposals meet, the concept of stimulating the economy and improving environmental performance through investment in clean energy and other green infrastructure projects will likely remain on the table for the foreseeable future. Legislatures and policymakers will be faced with challenges and opportunities in crafting measures that will succeed, in terms of both enactment and actually making a difference. If nothing else, 2019 will bring continued discussion across all levels of government about how best to move the U.S. and individual states forward.

FERC acts on 2017 tax cuts

Federal utility regulators have taken a portfolio of actions in response to recent changes to U.S. tax law which reduced the tax rates applicable to many electric utilities and pipeline companies. Some rates for use of infrastructure will be reduced automatically, while regulators prompted others to explain why they should not be reduced to reflect the tax law changes. At the same time, regulators have opened an inquiry and proposed a rulemaking to address further aspects of the 2017 federal tax law change.

Late last year, Congress enacted the Tax Cuts and Jobs Act of 2017. That law amended U.S. tax law in a variety of ways. Among other things, the 2017 tax law changes reduced the federal corporate income tax rate from a maximum 35 percent to a flat 21 percent rate, effective January 1, 2018.

Many electric utilities and natural gas and oil pipeline companies stand to benefit from this tax reduction in the form of reduced income tax expense going forward, as well as a reduction in accumulated deferred income taxes on the books of rate-regulated companies. Where tax expense decreases, so does the cost of service.

Rates for use of some federally regulated energy infrastructure are set based on cost of service. On March 15, 2018, the Federal Energy Regulatory Commission took a series of actions to address the effect of the tax law changes on its regulated industries including electric transmission companies, interstate natural gas pipelines, and oil pipelines. According to the Commission, its actions “recognize the specific regulatory and operating parameters that must be addressed differently for each of the industries it regulates.”

Transmission rates for most FERC-regulated utilities automatically adjust with changes in the tax rates based on a formula whose inputs are updated annually or on some other regular cycle. For these utilities, a reduction in corporate income tax means a reduction in rates, although the ratemaking process means there can be a lag in time before rate reductions take effect.

But in some cases, utility tariffs provide for rates are either stated as a fixed number, or the formula includes a fixed tax rate. The Commission identified 48 companies whose transmission tariffs specifically reference tax rates of 35 percent. In a pair of show-cause orders issued under the Federal Power Act -- one for utilities with stated rates, and one for utilities with formula rates referencing 35 percent -- the Commission directed these companies to propose revisions to their transmission rates or show why they should not do so. It also issued two waivers allowing certain utilities mid-year rate adjustments to reflect the new tax law.

Interstate natural gas pipelines typically have stated rates for their services. These rates are approved by the Commission in a rate proceeding under Natural Gas Act sections 4 or 5 and remain in effect until changed in a subsequent section 4 or 5 proceeding. To revise its practices with respect to natural gas pipelines, the Commission issued a Notice of Proposed Rulemaking that would allow it determine which pipelines under the Natural Gas Act may be collecting unjust and unreasonable rates in light of the corporate tax reduction and the Commission’s recently revised policies on income tax allowance. Under the rule proposed by the Commission, interstate pipelines would need to file a one-time report called “FERC Form No. 501-G” describing the rate effect of these changes. In addition to filing the one-time report, each pipeline would have four options: a pro rata rate reduction, a rate settlement or case, an explanation why no rate change is needed, or merely filing the FERC report and letting the Commission decide if further action is required.

While cost-of-service ratemaking typically applies to public utilities and interstate natural gas pipelines, most oil pipelines set their rates using indexing. With respect to oil pipelines regulated by the FERC, the Commission said it will address tax changes in the 2020 five-year review of the oil pipeline index level.

Concurrently, the Commission opened an inquiry into the effect of the Tax Cuts and Jobs Act of 2017 on all jurisdictional rates, including whether the Commission should address certain changes relating to accumulated deferred income taxes and bonus depreciation. In a presentation to the Commission, staff described this Notice of Inquiry as "a vehicle to help the Commission build a record to determine whether additional action is needed."

In a separate policy statement and order issued on March 15, the Commission revised its policies to disallow income tax allowance cost recovery in MLP pipeline rates.

FERC performance report and budget request

A U.S. energy regulatory agency has published a report detailing its fiscal year 2017 performance and requesting an appropriation of $369,9000,000 in funds from Congress for fiscal year 2019, to be offset by fees on regulated industries.

The Federal Energy Regulatory Commission or FERC is an independent regulatory agency, housed within the U.S. Department of Energy. The Commission has statutory jurisdiction over many aspects of the nation's wholesale electricity, natural gas, hydropower, and oil pipeline sectors. 

FERC's FY 2019 Congressional Performance Budget Request / FY 2017 Annual Performance Report describes the Commission's mission assisting consumers in obtaining reliable, efficient, and sustainable energy services at a reasonable cost through appropriate regulatory and market means. It recites the Commission's 3 goals: ensuring just and reasonable rates, terms and conditions; promoting safe, reliable, secure and efficient infrastructure; and mission support through organizational excellence.

The Commission recovers the full cost of its operations through annual charges and filing fees assessed on the industries it regulates as authorized by the Federal Power Act (FPA) and the Omnibus Budget Reconciliation Act of 1986, which requires it to “assess and collect fees and annual charges in any fiscal year in amounts equal to all of the costs incurred . . . in that fiscal year.” This revenue offsets the Commission's appropriation, resulting in a net appropriation of zero.

The report projects a FY 2019 appropriation of $369,900,000 "for necessary expenses of the Federal Energy Regulatory Commission to carry out the provisions of the Department of Energy Organization Act." This represents an increase of $2,300,000, or about 0.6%, over the Commission's FY 2018 budget request. The report describes its activity as requiring 1,465 full-time equivalents (FTEs) to execute its mission in FY 2019.

Energy policy in the 2018 State of the Union

U.S. President Donald Trump delivered the 2018 edition of the State of the Union speech on January 30, 2018. Unlike many previous such addresses, this one barely covered energy policy, focusing instead on a variety of other matters. But the speech offers insight into the Trump administration's view of the national situation, as well as into its priorities.

Energy policy and resources have often featured prominently in previous State of the Union addresses, and in remarks in 2017 President Trump advocated for a national strategy of "energy dominance." By contrast, President Trump's 2018 State of the Union speech mentioned U.S. regulation, production, and trade in energy only briefly, emphasizing his deregulatory agenda and pro-export philosophy.

The Trump administration posted an online version of his 2018 remarks as prepared for delivery. In that version, only two sentences use the word "energy":

We have ended the war on American Energy — and we have ended the war on clean coal.  We are now an exporter of energy to the world.

A transcript released by the U.K. media source The Independent suggests President Trump stuck close to his script on this (and other points):

We have ended the war on American energy, and we have ended the war on beautiful clean coal. We are now very proudly an exporter of energy to the world. 

These statements appear to relate to announcements made over the last year. Back in March 2017, President Trump signed an executive order which he described as "putting an end to the war on coal. We’re going to have clean coal — really clean coal." The U.S. does export a significant amount of energy -- and last year the Energy Information Administration projected that the U.S. would likely become a net exporter of energy within several years "as petroleum liquid imports fall and natural gas exports rise." Subsequent developments over the last year have lent preliminary support to this prediction.

President Trump's 2018 State of the Union speech did not otherwise directly address energy policy. That said, he did emphasize policy goals and achievements with respect to economic factors, such as tax cuts, job creation in manufacturing and other sectors, and improved small business confidence, as well as matters like national defense and immigration.

It can be tempting to infer administrative priorities from what is or isn't covered in a speech like this. At the same time, any leader has limited time to cover a host of important topics. With respect to energy matters, the speech emphasizes the Trump administration's focus on reducing regulations and increasing exports of America-produced energy resources.

Boom in FERC hydro relicensing

U.S. federal hydropower regulatory staff currently has a full workload processing original license, relicense, and exemption applications, as well as its compliance and dam safety work, according to testimony presented to the House Energy & Commerce Committee, Subcommittee on Energy -- and this workload is expected to increase as many hydro projects face relicensing proceedings.

The Federal Energy Regulatory Commission regulates over 1,600 non-federal hydropower projects located at over 2,500 dams, under Part I of the Federal Power Act.  These projects collectively represent about 56 gigawatts of hydropower capacity, over half of the nation's total hydropower capacity.

The Federal Power Act generally requires non-federal hydropower projects to be licensed by the Commission if they: (1) are located on a navigable waterway; (2) occupy federal land; (3) use surplus water from a federal dam; or (4) are located on non-navigable waters over which Congress has jurisdiction under the Commerce Clause, involve post-1935 construction, and affect interstate or foreign commerce.  Licenses are generally issued for terms of between 30 and 50 years, and are renewable.

According to testimony presented to the House Energy & Commerce Committee, Subcommittee on Energy on May 3, 2017, the Commission's relicensing workload "has started to increase and will continue to remain high well into the 2030s."  Between fiscal years 2017 and 2030, the Commission projects that about 480 older projects will begin the pre-filing consultation stages of the relicensing process.  These projects facing relicensing represent about 45 percent of Commission-licensed projects, and one-third of jurisdictional licensed hydropower capacity.

The testimony also notes that some of these projects may face different standards in a relicensing context than were considered when their current or original licenses were issued.  Many projects now entering relicensing were first licensed in the early to mid-1980s, following the enactment of PURPA but prior to enactment of modern environmental standards.

For example, the Electric Consumers Protection Act of 1986 directed the Commission, when issuing licenses, to give equal consideration to power and development, energy conservation, fish and wildlife, recreational opportunities, and other aspects of environmental quality.  This mandate may not have applied to a 40-year license issued in 1982, but would come into play during a relicensing case initiated in 2017.

The House Subcommittee on Energy is considering discussion drafts and several pieces of legislation affecting hydropower, including the Hydropower Policy Modernization Act of 2017; the Promoting Hydropower Development at Existing Non-Powered Dams Act; the Promoting Closed-Loop Pumped Storage Hydropower Act; the Promoting Small Conduit Hydropower Facilities Act of 2017; and the Supporting Home Owner Rights Enforcement Act.

FERC proposes FAST Act CEII rules

The Federal Energy Regulatory Commission has proposed amending its regulations designed to protect critical information about utility infrastructure.  If adopted, the new regulations would govern the treatment of Critical Energy/Electric Infrastructure Information (CEII) whose disclosure and misuse could put the electric grid at risk.

In the wake of the September 11, 2011 terrorist attacks, the Commission took steps to identify and protect sensitive information it considered "Critical Energy Infrastructure Information," or CEII.  In general, FERC defined CEII as specific engineering, vulnerability, or detailed design information about proposed or existing critical infrastructure (physical or virtual) that:

1. Relates details about the production, generation, transmission, or distribution of energy;
2. Could be useful to a person planning an attack on critical infrastructure;
3. Is exempt from mandatory disclosure under the Freedom of Information Act; and
4. Gives strategic information beyond the location of the critical infrastructure.

Some previously public material was designated as CEII, and going forward newly filed or issued documents had to be screened for CEII.  FERC also created a process to allow individuals with a valid or legitimate need to access CEII, while protecting it from other disclosure.

But last year, Congress weighed in on the protection of certain sensitive information about infrastructure.  The Fixing America's Surface Transportation (FAST) Act, signed into law on December 4, 2015, included provisions designed to improve the security and resilience of energy infrastructure in the face of emergencies.  In particular, the FAST Act added section 215A to the Federal Power Act, directing the Commission to issue regulations covering the security and sharing of "Critical Electric Infrastructure Information."

Federal Power Act section 215A(a)(3) defines the new term Critical Electric Infrastructure Information as:

information related to critical electric infrastructure, or proposed critical electrical infrastructure, generated by or provided to the Commission or other Federal agency, other than classified national security information... Such term includes information that qualifies as critical energy infrastructure information under the Commission’s regulations.

As interpreted by the Commission, this encompasses "not only information regarding the Bulk-Power System but also information regarding other energy infrastructure (i.e., gas pipelines, LNG, oil, and hydroelectric infrastructure) to the extent such information qualifies as Critical Energy Infrastructure Information under the Commission’s current regulations. "

On June 16, 2016, the Commission issued a Notice of Proposed Rulemaking, proposing to amend its regulations to implement the provisions of the FAST Act pertaining to the designation, protection and sharing of critical electric infrastructure information, and also proposing to amend its existing regulations pertaining to CEII. The proposed changes include criteria and procedures for designating information as CEII, a specific prohibition on unauthorized disclosure of that information, and sanctions for knowing and willful wrongful disclosure of CEII by federal personnel.

Comments on the Notice of Proposed Rulemaking are due 45 days after its publication in the Federal Register.

Federal tax credits drive renewable power, CO2 reduction

A report by the U.S. Energy Department's National Renewable Energy Laboratory found that recent extensions to tax credits for wind and solar energy will drive a net peak increase of 48-53 gigawatts in installed renewable generation capacity in the early 2020s.

NREL is the U.S. Department of Energy's primary national laboratory for renewable energy and energy efficiency research and development.  NREL is operated for the Energy Department by The Alliance for Sustainable Energy, LLC.

In its February 2016 report, Impacts of Federal Tax Credit Extensions on Renewable Deployment and Power Sector Emissions, NREL examined the potential impact of recently extended federal tax credits on the deployment of renewable generation technologies and related U.S. electric sector carbon dioxide (CO₂) emissions.

At issue are federal tax credits for renewable energy: the wind production tax credit (PTC) and the solar investment tax credit (ITC).  Congress acted in December 2015 to extend by 5 years the expiration dates for these tax credits, with a phaseout or ramp down of tax credit value over time.

The NREL study examined two key questions, under models with high and low natural gas prices:

1.  How might renewable energy deployment in the contiguous United States change with these recent federal tax credit extensions?
2. How might this change in renewable energy deployment impact CO₂ emissions in the power sector?

Under both sets of natural gas assumptions, the NREL study found that tax credit extension scenarios show greater renewable technology investments through the early 2020s than scenarios without extensions:

The study found that scenarios with tax credit extensions also show lower CO2 emissions from the U.S. electricity system:

Cumulative emissions reductions over a 15-year period (spanning 2016-2030) as a result of the tax credit extensions are estimated to range from 540 to 1,400 million metric tons CO₂.

In all scenarios, nearly all of the estimated growth in renewable energy capacity was primarily comprised of new solar and wind capacity, as opposed to biopower, geothermal, or hydropower technologies.

The NREL study concludes that tax credit extensions can have a "measurable impact" on future renewable energy deployment and electric sector CO2 emissions under a range of natural gas price assumptions.

US Supreme Court upholds wholesale demand response

The Supreme Court of the United States has issued an opinion upholding regional electricity grid operators' ability to operate wholesale demand response programs under federal authority.  In that opinion, FERC v. Electric Power Supply Assn., the Supreme Court reversed a lower court's decision invalidating the Federal Energy Regulatory Commission's regulation of electricity demand response.   While further evolution of demand response will continue, the Supreme Court's 6-to-2 ruling puts regional wholesale demand response programs back on surer footing after the uncertainty injected by the lower court's previous ruling.  A grid portfolio including some degree of demand response can provide beneficial environmental, reliability, and economic effects compared to pure generation.  It appears relatively more likely that existing regional wholesale demand response programs may continue to operate under federal authority, and relatively less likely that a new state-driven demand response paradigm will arise.

As described in the Supreme Court opinion, wholesale electricity demand response programs pay consumers for commitments to reduce their consumption of electricity during peak demand periods or other times of scarcity or high prices.  For about 15 years, wholesale market operators have increasingly adopted wholesale demand response programs, with the blessing of both Congress and the FERC.  In 2011, the FERC issued its Order No. 745, establishing a rule requiring market operators to pay the same price to cost-effective demand response providers for conserving energy as to generators for producing it. 

But that order was challenged by an association of generators, among others.  In May 2014, the D.C. Circuit Court of Appeals issued a ruling in Electric Power Supply Association v. Federal Energy Regulatory Commission vacating Order No. 745.  Its chief logic was that FERC lacked authority to issue the order on jurisdictional grounds -- because in the lower court's view, Order No. 745 directly regulates the retail electric market.  Under the Federal Power Act, FERC is authorized to regulate "the sale of electric energy at wholesale in interstate commerce," but cannot regulate "any other sale" (i.e. any retail sale) of electricity.

But today's Supreme Court ruling held that the Federal Power Act does provide FERC with the authority to regulate wholesale market operators' compensation of demand response bids.  The Court divided its analysis of this point in three parts.

First, the Supreme Court held that the practices at issue directly affect wholesale rates.  In the Court's words, "Wholesale demand response is all about reducing wholesale rates; so too the rules and practices that determine how those programs operate."

Second, the Supreme Court noted that FERC has not regulated retail sales.  "Here, every aspect of FERC's regulatory plan happens exclusively on the wholesale market and governs exclusively that market's rules.  The Commission's justifications for regulating demand response are likewise only about improving the wholesale market."  Putting the first and second sets of conclusions together, the Court found that the rule established by Order No. 745 complies with the plain terms of the Federal Power Act.

Third, the Court noted that adopting a contrary view would conflict with the core purposes of the Federal Power Act: "The FPA should not be read, against its clear terms, to halt a practice that so evidently enables FERC to fulfill its statutory duties of holding down prices and enhancing reliability in the wholesale energy market."

The Supreme Court also addressed an alternative holding by the D.C. Circuit Court that the Order No. 745 compensation scheme is arbitrary and capricious under the Administrative Procedure Act.  The Supreme Court noted that its "important but limited role" in reviewing FERC's decision "is to ensure that FERC engaged in reasoned decisionmaking."  Noting FERC's detailed explanation of its choice to compensate demand response providers at LMP, the same price paid to generators, and its lengthy responses to contrary views, the Supreme Court held that "FERC's serious and careful discussion of the issue satisfies the arbitrary and capricious standard."

Justice Kagan delivered the Court's opinion, joined by Chief Justice Roberts and Justices Kennedy, Ginsburg, Breyer, and Sotomayor.   Justice Scalia filed a dissenting opinion, in which Justice Thomas joined, noting his belief that the Federal Power Act prohibits the FERC from regulating the demand response of "retail purchasers of power."  Justice Alito did not participate in the case.

The case now returns to the D.C. Circuit for "further proceedings consistent with this opinion." If Order No. 745 stands and FERC retains jurisdiction over the compensation paid to wholesale demand response market participants, it seems likely that existing regional wholesale demand response programs will continue to operate under federal authority.  As the Supreme Court found, these wholesale demand response programs can provide significant consumer savings when properly implemented.  How will demand response continue to evolve in the wake of FERC v. EPSA?  How does this decision reshape the boundary between wholesale (federal) and retail (state) jurisdictions?  What's next for demand response?

Climate and energy in 2016 State of the Union

President Obama delivered his final State of the Union address on January 12, 2016.  The White House has posted his remarks as prepared for delivery to Congress.  Climate change, and related energy and environmental issues, formed a prominent theme in this year's speech.

The White House.

Climate change first surfaced in the 2016 State of the Union as part of one of four "big questions" President Obama posed for the nation.

Second, how do we make technology work for us, and not against us -- especially when it comes to solving urgent challenges like climate change?

After announcing a "moonshot" medical research effort to cure cancer to be led by Vice President Joe Biden, President Obama said, "We need the same level of commitment when it comes to developing clean energy sources."

He then spent several minutes addressing climate change directly.  First, he noted effective consensus that climate change is a topic worth tackling:

Look, if anybody still wants to dispute the science around climate change, have at it. You will be pretty lonely, because you’ll be debating our military, most of America’s business leaders, the majority of the American people, almost the entire scientific community, and 200 nations around the world who agree it’s a problem and intend to solve it.

He then touted the economic and environmental effects of investment in renewable and distributed generation and energy storage:

But even if -- even if the planet wasn’t at stake, even if 2014 wasn’t the warmest year on record -- until 2015 turned out to be even hotter -- why would we want to pass up the chance for American businesses to produce and sell the energy of the future?

Listen, seven years ago, we made the single biggest investment in clean energy in our history. Here are the results. In fields from Iowa to Texas, wind power is now cheaper than dirtier, conventional power. On rooftops from Arizona to New York, solar is saving Americans tens of millions of dollars a year on their energy bills, and employs more Americans than coal -- in jobs that pay better than average. We’re taking steps to give homeowners the freedom to generate and store their own energy -- something, by the way, that environmentalists and Tea Partiers have teamed up to support. And meanwhile, we’ve cut our imports of foreign oil by nearly 60 percent, and cut carbon pollution more than any other country on Earth.

Gas under two bucks a gallon ain’t bad, either.

President Obama then called for changes to transition to clean energy sources:

Now we’ve got to accelerate the transition away from old, dirtier energy sources. Rather than subsidize the past, we should invest in the future -- especially in communities that rely on fossil fuels. We do them no favor when we don't show them where the trends are going. That’s why I’m going to push to change the way we manage our oil and coal resources, so that they better reflect the costs they impose on taxpayers and our planet. And that way, we put money back into those communities, and put tens of thousands of Americans to work building a 21st century transportation system.

Now, none of this is going to happen overnight. And, yes, there are plenty of entrenched interests who want to protect the status quo. But the jobs we’ll create, the money we’ll save, the planet we’ll preserve -- that is the kind of future our kids and our grandkids deserve. And it's within our grasp.

Climate change is just one of many issues where our security is linked to the rest of the world.

His final reference to climate change came while discussing international engagement, and "seeing our foreign assistance as a part of our national security":

When we lead nearly 200 nations to the most ambitious agreement in history to fight climate change, yes, that helps vulnerable countries, but it also protects our kids.

Climate, energy, and environmental issues thus featured prominently in the 2016 State of the Union speech.  Over the coming year, these themes -- domestic and international action on climate change, investment in renewable energy and distributed generation, transition away from oil and coal -- will likely continue to play out at the federal level.

Previewing climate and energy in 2016 State of the Union

President Obama is scheduled to deliver his final State of the Union address tonight. As in previous years, he is likely to address climate change, energy and environmental issues.  What will the 2016 State of the Union have to say about these topics?

We know from previous years' State of the Union speeches (2013, 2014, 2015) that energy, the environment, and climate change have played an increasing role in the Obama administration's priorities. While the administration released a "preview" video on Youtube for the 2016 address,  the brief clip doesn't include any substantive remarks about climate, energy, or the environment.

However, the Obama administration has been active on climate, energy and environmental issues, with key developments in the past year such as the adoption of the U.S. Environmental Protection Agency's Clean Power Plan regulations limiting power plant emissions of carbon dioxide and the denial of the Keystone XL pipeline's Presidential Permit application.  Indeed, President Obama has said that "no challenge poses a greater threat to our children, our planet, and future generations than climate change — and that no other country on Earth is better equipped to lead the world towards a solution."

Climate change, energy, and the environment are likely to be mentioned along with other administration priorities such as international relations, national security, gun violence, and the economy.  Indeed, the White House's State of the Union website features sections titled Economic Progress, Acting on Climate, Engagement in the World, Health Care Reform, and Social Progress and Equality.

Under the "Acting on Climate" heading, the administration website for this year's address notes the December 2015 Paris agreement on climate change, reduced domestic emissions, the largest investment in renewable energy in U.S. history, and associated job creation.  The website also provides a "Record on Climate Change", listing details of the administration's actions to address climate change.

President Obama's final State of the Union address to Congress will be streamed live at https://www.whitehouse.gov/sotu on January 12, 2016 at 9PM ET.

House subcommittee holds hearing on FERC oversight

Members of the Federal Energy Regulatory Commission testify today before the House Energy & Commerce Committee, Subcommittee on Energy and Power, as that committee considers its oversight of the FERC.

The FERC is an independent administrative agency within the Department of Energy.  Its mandate includes regulating the transmission, reliability, and wholesale sale of electricity in interstate commerce pursuant to the Federal Power Act; the transmission and sale of natural gas for resale in interstate commerce pursuant to the Natural Gas Act; the transportation of oil by pipeline in interstate commerce pursuant to the Interstate Commerce Act; and evaluating proposals to build liquefied natural gas (LNG) terminals and interstate natural gas pipelines, as well as the licensing of non - federal hydropower projects.

As described in a committee background memorandum for today's hearing, the Subcommittee on Energy and Power is exploring whether FERC’s statutory authorities require modernization to reflect current energy realities.  Chief among those statutory authorities are the Federal Power Act and the Natural Gas Act.  The committee memorandum also notes an interest in evaluating "whether FERC is overstepping its existing statutory boundaries to pursue policy goals not intended by Congress."

Specific issues expected to be examined at the hearing include:

• Potential impacts of the U.S. EPA's Clean Power Plan rule on electricity markets, fuel diversity, and electric reliability;
• Commission oversight of organized wholesale electricity markets and their operation
• Risks to the security of the electric grid, including physical and cyber security, geomagnetic disturbances, electromagnetic pulse, and severe weather;
• How to integrate renewable, intermittent resources and distributed generation;
• The role of demand response and other demand-side management technologies in wholesale markets, at issue in the EPSA v. FERC case pending before the U.S. Supreme Court; 
• Electric transmission operations and planning, including implementation of Order No. 1000;
• Natural gas pipeline permitting, LNG siting, and hydropower licensing;
• FERC market manipulation authorities and enforcement practices; and
• FERC’s implementation of the mandatory purchase obligation from qualifying facilities (QFs) under section 210 of the Public Utility Regulatory Policies Act of 1978.

Based on prefiled documents, today's hearing features:

• testimony by FERC Chairman Norman Bay
• testimony by Commissioner Cheryl LaFleur
• testimony by Commissioner Tony Clark
• testimony by Commissioner Colette Honorable

More information about today's hearing can be found on the committee's webpage.

DOE report finds Solyndra gave "false and misleading" info

The Department of Energy's Office of Inspector General has released a special report finding that failed solar panel maker Solyndra, Inc. provided the Department with inaccurate and misleading information during the application process for a $535 million loan guarantee.  The report summarizes the results of a 4-year investigation into what went wrong with the Solyndra matter, and what lessons the Department can learn as it proceeds to exercise its authority to grant an additional $40 billion in loan guarantees.

In 2005, Congress established a federal loan guarantee program for eligible energy projects that employed innovative technologies. Title XVII of the Energy Policy Act of 2005 authorized the Secretary of Energy to make loan guarantees for a variety of types of projects, including those that “avoid, reduce, or sequester air pollutants or anthropogenic emissions of greenhouse gases; and employ new or significantly improved technologies as compared to commercial technologies in service in the United States at the time the guarantee is issued.”

The Department of Energy loan guarantee program was expanded by the American Recovery and Reinvestment Act of 2009, which added billions of dollars of new authority to support renewable energy, electric transmission, and advanced biofuels projects.  The Department's Loan ProgramsOffice has supported a portfolio of more than $30 billion in loans, loan guarantees, and commitments covering more than 30 projects across the United States.

The Department made its first award under this program in September 2009, approving a $535 million loan guarantee to a company called Solyndra, Inc.  Solyndra said it would build a solar photovoltaic equipment manufacturing facility in Fremont, California.  The Energy Department disbursed over $500 million to Solyndra through the program.  But just two years later, Solyndra showed signs of failure, as it ultimately stopped operations and manufacturing, let 1,100 employees go, and filed for bankruptcy.  U.S taxpayers lost over $500 million.

The Solyndra matter drew significant public attention, with even the Department calling it an "ordeal" and many labeling it a scandal.  What went wrong?  Should the government have guaranteed Solyndra's loans?  Was the loan guarantee program flawed?  Or was it acceptable bad luck that the first awardee failed?

Since 2011, the Department of Energy's Office of Inspector General has investigated the Solyndra matter.  Its special report released August 24, 2015, describes the Inspector General's findings:

Our investigation confirmed that during the loan guarantee application process and while drawing down loan proceeds, Solyndra provided the Department with statements, assertions , and certifications that were inaccurate and misleading , misrepresented known facts , and, in some instances, omitted information that was highly relevant to key decisions in the process to award and execute the $535 million loan guarantee. In our view, the investigative record suggests that the actions of certain Solyndra officials were, at best, reckless and irresponsible or, at worst, an orchestrated effort to knowingly and intentionally deceive and mislead the Department.

In particular, the report identified "notable misrepresentations and omissions made to the Department by Solyndra" relating to Solyndra's sales contract commitments and ability to command a premium market price for its panels.  The report suggests this false and misleading information led the Department to approve the loan guarantee, when it might not have done so with the right information.  The report found that Solyndra failed to meet contractual obligations from the loan guarantee documents relating to truth and full disclosure.

The Inspector General's special report also found that the Energy Department's due diligence efforts were "less than fully effective", with missed opportunities to detect and resolve indicators that portions of the data provided by Solyndra were unreliable.  Nevertheless, the report concludes that ultimate blame should fall on the company: "the actions of the Solyndra officials were at the heart of this matter, and they effectively undermined the Department’s efforts to manage the loan guarantee process. In so doing, they placed more than $500 million in U.S. taxpayers’ funds in jeopardy."

The Department of Energy continues to offer loan guarantees for a variety of technologies and projects.  The report suggests that the Department strengthen its due diligence process, and reemphasize to loan applicants their absolute obligation to be truthful, complete, timely and transparent.

Cross-border infrastructure and presidential permits

A recent report casts doubt on whether proposed federal legislation would actually accelerate decisions on the siting of cross-border energy infrastructure.

Cross-border pipelines and electric transmission lines play an important role in the North American energy industry.  Under U.S. law, cross-border energy infrastructure projects require a presidential permit and a finding of consistency with the national interest.  Executive orders give the State Department jurisdiction over cross-border oil pipelines, the Department of Energy jurisdiction over electric transmission lines, and the Federal Energy Regulatory Commission jurisdiction over natural gas pipelines. 

Recent projects like the Keystone XL pipeline have focused attention on the presidential permit process, as that project's presidential permit application has remained pending for years.  Some have raised questions about the scope of agency review and perceived differences in the approaches taken by the State Department, Energy Department, and FERC.

As a result, several members of Congress have proposed legislation designed to accelerate the permitting process.  These bills include:

• the Keystone XL Pipeline Approval Act (S. 1): passed in Congress but vetoed by President Obama
• the American Energy Renaissance Act of 2015 (S. 791 and H.R. 1487)
• the North American Energy Infrastructure Act (S. 1228)

These bills take various approaches, including limiting agency jurisdiction over cross-border energy infrastructure or the scope of agency review, or setting strict deadlines for agency action following completion of environmental review.

Could federal legislation like this speed up the process for reviewing proposed cross-border pipeline and electric transmission projects?  A recent report by the Congressional Research Service suggests that overall timelines for project review are driven by the scope of the environmental review process, not by delays following that environmental review or agency idiosyncrasies.

In particular, the report found that agency review is "driven largely by the National Environmental Policy Act (NEPA)", which requires federal agencies to consider the environmental impacts before acting.  Moreover, the report notes that the same NEPA requirements apply to all three:

Faced with Presidential Permit applications for energy projects of similar physical scope, the agencies appear to perform NEPA reviews of similar proportion. Very short, smaller projects are generally reviewed more narrowly and quickly, whereas multi-state projects of large capacity are subject to more expansive environmental review and tend to face much greater public scrutiny and comment—regardless of which agency has jurisdiction. 

The report also found that NEPA review is the key driver of overall permitting decision timelines:

As long as agencies apply NEPA to Presidential Permitting decisions, changes to the delineation of, or jurisdiction over, the border-crossing portion of large projects for permitting purposes may not change the scope of project environmental review. The imposition of decision deadlines on the permitting agencies after NEPA review is complete, either for national interest or public interest determination, could provide greater process certainty to stakeholders. However, the overall project review would still be contingent on the completion of NEPA review. Thus, the effects of legislative proposals to change cross-border infrastructure permitting on the review or approval of future border crossing energy infrastructure projects are open to debate. 

It's unclear how the Congressional Research Service report will affect pending legislation.  Likely more influential may be any final action by the State Department on the Keystone XL project's application for a presidential permit.  Nevertheless, interest in cross-border energy trade will likely continue to grow.

House subcommittee considers reliability draft

A congressional committee is considering legislation to assure reliability and security of the U.S. electricity grid.  The House Subcommittee on Energy and Power's discussion draft includes a series of provisions designed to harden the grid against disturbance.

To understand the discussion draft, you must first understand its context.  2015 is a time of great change for the U.S. electricity system.  The grid continues to shift away from coal-fired generation and towards use of natural gas and renewable energy sources.  New environmental regulations affecting power plants are taking effect.  Smart grid technology now enables real-time communication and coordination between supply and demand for electricity, but creates millions of potential access points for hackers to target the grid.  Meanwhile utilities plan to invest more than $60 billion in transmission infrastructure over the next decade. 

Faced with these shifts, the House Subcommittee on Energy and Power held a hearing today on a "discussion draft" of proposed measures to strengthen grid reliability, security and readiness to survive disturbance.  The discussion draft includes measures that would:

• Resolve conflicts between choosing whether to comply with an emergency order from the Department of Energy or violate environmental obligations;
• Require the Federal Energy Regulatory Commission to complete an independent reliability analysis of any proposed or final major federal rule that affects electric generating units;
• Direct the Secretary of Energy to develop and adopt procedures to enhance communication and coordination between governmental entities and the private sector to improve emergency response and recovery;
• Give the Secretary of Energy powers to address grid security emergencies, and facilitate information sharing;
• Require the Energy Department to submit a plan to Congress evaluating the feasibility of establishing a Strategic Transformer Reserve for the storage, in strategically-located facilities, of spare large power transformers in sufficient numbers to temporarily replace critically damaged large power transformers;
• Direct DOE to create a voluntary Cyber Sense program to identify cyber-secure products and technologies intended for use in the bulk-power system, like controls and SCADA systems;
• Directs state public utility commissions and utilities to improve grid resilience and promote investments in energy analytics technology to increase efficiencies and lower costs for ratepayers while strengthening reliability and security; and
• Require FERC to work with each regional transmission organization to encourage a diverse generation portfolio, long-term reliability and price certainty for customers, and enhanced performance assurance during peak period.

As noted in the opening statements of Chairmen Ed Whitfield and Fred Upton, elements from this discussion draft may be included in a bipartisan energy bill expected to emerge from the House committee later this session.

Energy and State of the Union 2015

President Obama delivered his 2015 State of the Union address on January 20, 2015.  In his remarks as prepared for delivery, he addressed energy-related themes including the growth of U.S. energy resource production and climate change.

As in his 2013 and 2014 addresses, increased domestic production of energy resources featured prominently in the 2015 State of the Union speech, for its economic, political, and national security benefits:

At this moment – with a growing economy, shrinking deficits, bustling industry, and booming energy production – we have risen from recession freer to write our own future than any other nation on Earth.  It’s now up to us to choose who we want to be over the next fifteen years, and for decades to come...

We believed we could reduce our dependence on foreign oil and protect our planet.  And today, America is number one in oil and gas.  America is number one in wind power.  Every three weeks, we bring online as much solar power as we did in all of 2008.  And thanks to lower gas prices and higher fuel standards, the typical family this year should save $750 at the pump.

During the past several years, U.S. production of oil and natural gas has increased significantly.  According to the U.S. Energy Information Administration, total U.S. crude oil production averaged an estimated 9.2 million barrels per day (bbl/d) in December 2014, and forecasts for oil productino continue to grow.  EIA predicts that projected crude oil production will reach 9.5 million bbl/d in 2016, constituting the second-highest annual average level of production in U.S. history (after 9.6 million bbl/d in 1970.)

EIA also predicts continued growth in the use of renewable energy resources to produce electricity and heat. In 2014, 6.4% of electric generation came from hydropower and 6.7% from nonhydropower renewables. EIA projects continued growth of nonhydropower renewables, reaching an electricity generation share of 7.9% by 2016.  Wind is the largest source of nonhydropower renewable generation, and it is projected to contribute 5.3% of total electricity generation in 2016.

President Obama also addressed climate change in this year's State of the Union address, and his administration's efforts to combat and mitigate its effects:

2014 was the planet’s warmest year on record.  Now, one year doesn’t make a trend, but this does – 14 of the 15 warmest years on record have all fallen in the first 15 years of this century. 

I’ve heard some folks try to dodge the evidence by saying they’re not scientists; that we don’t have enough information to act.  Well, I’m not a scientist, either.  But you know what – I know a lot of really good scientists at NASA, and NOAA, and at our major universities.  The best scientists in the world are all telling us that our activities are changing the climate, and if we do not act forcefully, we’ll continue to see rising oceans, longer, hotter heat waves, dangerous droughts and floods, and massive disruptions that can trigger greater migration, conflict, and hunger around the globe.  The Pentagon says that climate change poses immediate risks to our national security.  We should act like it.

That’s why, over the past six years, we’ve done more than ever before to combat climate change, from the way we produce energy, to the way we use it.  That’s why we’ve set aside more public lands and waters than any administration in history.  And that’s why I will not let this Congress endanger the health of our children by turning back the clock on our efforts.  I am determined to make sure American leadership drives international action.  In Beijing, we made an historic announcement – the United States will double the pace at which we cut carbon pollution, and China committed, for the first time, to limiting their emissions.  And because the world’s two largest economies came together, other nations are now stepping up, and offering hope that, this year, the world will finally reach an agreement to protect the one planet we’ve got.

His 2015 remarks on climate change reflect a belief or fear that Congress will not act on the issue, or will act to frustrate the Obama administration's efforts on climate change.  In 2013, President Obama asked Congress to develop a market-based solution to climate change, but said he would take executive action if Congress failed to act.  In 2014, he noted Congress's apparent unwillingness to act, and highlighted his administration's proposed new standards on power plant emissions of carbon.  This year's remarks continue the trend of featuring executive-branch solutions, and downplaying the likelihood of near-term legislative support.

Will U.S. production of energy continue to grow?  What economic, political, and national security impacts will flow from the shifts in and growth of the U.S. energy sector?  Will the U.S. continue to act -- or take more serious action -- on climate change?  The remainder of 2015 -- and of President Obama's term in office, which runs into January 2017 -- will show how these themes evolve.

NH conduit hydropower project approved

Federal regulators have determined that a proposed hydropower facility at a New Hampshire wastewater treatment plant can be built without a license, under a recently enacted law.  The Federal Energy Regulatory Commission staff has found that the Ammonoosuc Water Treatment Plant Hydroelectric Project proposed by the City of Berlin Water Works is a qualifying conduit hydropower facility under federal law.  Like other conduit projects, the Ammonoosuc project involves the addition of a turbine into an existing system of pipes and pressure reduction valves, and can create additional renewable energy with few incremental impacts.

Under the Federal Power Act, most hydropower projects in the U.S. require licensure by the Federal Energy Regulatory Commission.  But last year, Congress passed the Hydropower Regulatory Efficiency Act of 2013, easing the regulatory burden on projects.  That law exempts certain so-called "conduit" hydropower facilities from the licensing requirements of the Federal Power Act.  Conduit facilities generate electricity using only the hydroelectric potential of a non-federally owned conduit, such as a tunnel, canal, pipeline, aqueduct, flume, ditch, or similar manmade water conveyance that is operated for the distribution of water for agricultural, municipal, or industrial consumption, and is not primarily for the generation of electricity.  To qualify, conduit facilities must have an installed generating capacity that does not exceed 10 megawatts (MW), and must not have been licensed or exempted from the licensing requirements of Part I of the Federal Power Act on or before August 9, 2013.  The Federal Energy Regulatory Commission subsequently issued Order No. 800, updating its rules to conform to the newly streamlined process.

While qualifying conduit hydropower facilities are not required to be licensed or exempted by the Commission, developers of qualifying facilities must file a Notice of Intent to Construct a Qualifying Conduit Hydropower Facility with the Commission.  On August 28, 2014, the City of Berlin, New Hampshire's Water Works filed such a Notice of Intent.  The proposed Ammonoosuc Water Treatment Plant Hydroelectric Project would have an installed capacity of 21 kilowatts (kW) and would be located on the existing 16-inch-diameter raw water transmission main immediately upstream from the pressure-reducing valve for the City of Berlin's water treatment plant.  The project would have an estimated annual generating capacity of 85 megawatt-hours.

The newly streamlined process can work quickly.  On September 10, Federal Energy Regulatory Commission staff issued a preliminary determination that the proposal satisfies the requirements for a qualifying conduit hydropower facility, which is not required to be licensed or exempted from licensing.  The Commission then posted this preliminary determination for public comment for 45 days.

No public comments were received, so on October 31, Commission staff issued its written determination that the Ammonoosuc Water Treatment Plant Hydroelectric Project meets the qualifying criteria under section 30(a) of the Federal Power Act, and is not required to be licensed under Part I of the Federal Power Act.

With this finding in hand just 64 days after filing its application, the city water department can continue securing the remaining approvals necessary to develop the Ammonoosuc Water Treatment Plant Hydroelectric Project.  Securing a FERC hydropower license can be a major endeavor, so the streamlined regulatory treatment now available to qualifying conduit hydropower facilities can be a major advantage.  How many other water treatment plants and other conduit owners will follow the Berlin Water Works' path and develop their own hydroelectricity assets using this easier regulatory process?

FERC Order 800 eases hydropower regulations

The Federal Energy Regulatory Commission has issued an order streamlining its regulations for some small hydropower projects.  FERC Order No. 800 conforms the Commission's regulations to the Hydropower Regulatory Efficiency Act of 2013.  Between Order 800 and the Hydropower Efficiency Act, regulatory processes for developing some small hydropower projects have recently become easier.

Hydropower is one of the nation's most abundant sources of renewable energy -- and yet about 97 percent of the estimated 80,000 dams in the United States do not generate electricity.  While not all are great candidates for hydropower, some non-power dam sites offer significant opportunities to generate renewable electricity with minimal incremental environmental impact.

Congress had these dams in mind when it enacted the Hydropower Efficiency Act on August 9, 2013.  To encourage the use of these dams for electric generation, the Act aims to reduce the costs and regulatory burden on project developers during the project study and licensing stages.  In particular, the Act amended previous statutory provisions covering both preliminary permits and projects that are exempt from licensing.  These statutory changes prompted FERC to update its regulations to conform to the Hydropower Efficiency Act.

Order No. 800 formalizes the Commission's compliance procedures in its revised regulations on preliminary permits, small conduit hydroelectric facilities, and small hydroelectric power projects, and in a new subpart on qualifying conduit hydropower facilities.  Key changes include:

• New regulations recognize the Commission's new statutory authority to extend a preliminary permit once for not more than two additional years, allowing permittees up to 5 total years to complete their feasibility studies without facing possible competition for the site from others.
• Exempt small conduit hydroelectric facilities may now be located on federal lands, and all exempt small conduit hydroelectric facilities may now have an installed capacity of up to 40 megawatts.  Previously, non-municipal small conduit exemptions were limited to 15 megawatts.
• Exempt small hydroelectric power project facilities may now have an installed capacity of up to 10 megawatts.
• Qualifying conduit hydropower facilities, which do not require licensure under the Federal Power Act but do require the filing with FERC of a notice of intent to construct, are now covered under the regulations.

While several of these categories of facility appear similar, each is defined separately by statute.

• A small conduit hydroelectric facility, as defined in section 30 of the Federal Power Act, is an existing or proposed hydroelectric facility that utilizes for electric power generation the hydroelectric potential of a conduit, or any tunnel, canal, pipeline, aqueduct, flume, ditch, or similar manmade water conveyance that is operated for the distribution of water for agricultural, municipal, or industrial consumption and not primarily for the generation of electricity.
• A small hydroelectric power project, as defined in the Public Utilities Regulatory Policies Act of 1978 (PURPA), is a project that utilizes for electric generation the water potential of either an existing non-federal dam or a natural water feature (e.g., natural lake, water fall, gradient of a stream, etc.) without the need for a dam or man-made impoundment.
• A qualifying conduit hydropower facility, as defined in the Hydropower Efficiency Act, is a facility that meets the following qualifying criteria: (1) the facility would be constructed, operated, or maintained for the generation of electric power using only the hydroelectric potential of a non-federally owned conduit, without the need for a dam or impoundment; (2) the facility would have a total installed capacity that does not exceed 5 MW; and (3) the facility is not licensed under, or exempted from, the license requirements in Part I of the FPA on or before the date of enactment of the Hydropower Efficiency Act (i.e., August 9, 2013).

In Order 800, the Commission is merely formalizing several practices it has already adopted since the enactment of the Hydropower Efficiency Act.  For example, the Commission has issued two-year extensions to preliminary permit holders, granted a small conduit exemption on federal lands, and issued conduit facility determinations on whether proposed projects are qualifying conduit hydropower facilities.  Nevertheless, the Act and Order No. 800 work together to offer an easier regulatory path for developers of small hydropower projects without new dams.

FERC tests 2-year hydropower licensing process

Licensing some new hydropower projects in the United States -- traditionally a lengthy process -- may soon become easier, as federal regulators have approved an experimental two-year process that may soon be used to license some projects.

Water spills over a small, non-powered dam in Maine.

The Federal Energy Regulatory Commission regulates most hydropower development in the United States.  Under Part I of the Federal Power Act, the Commission considers applications for hydropower project licenses.  While the traditional licensure process has resulted in the issuance of thousands of licenses, winning a license for a project can take many years -- and some licensure proceedings have stretched toward a decade.

In response to concerns that lengthy licensing procedures stifle hydropower development, last year Congress enacted the Hydropower Regulatory Efficiency Act of 2013.  That law directed the Commission to investigate the feasibility of a two-year licensing process for certain projects, develop criteria for identifying projects that may be appropriate for the process, and develop and implement pilot projects to test the process.

In January 2014, the Commission solicited pilot projects to test a two-year process.  Two kinds of projects were eligible: hydropower development at existing non-powered dams and closed-loop pumped storage projects.  In the notice soliciting pilot projects, the Commission articulated additional criteria for eligibility including:

• The project must cause little to no change to existing surface and groundwater flows and uses;


• The project must not adversely affect federally listed threatened and endangered species;


• If the project is proposed to be located at or use a federal dam, the request to use the two-year process must include a letter from the dam owner saying the plan is feasible;


• If the project would use any public park, recreation area, or wildlife refuge, the request to use the two-year process must include a letter from the managing entity giving its approval to use the site; and


• For a closed-loop pumped storage project, the project must not be continuously connected to a naturally flowing water feature. 

Ultimately, the Commission selected a project proposed by Free Flow Power Project 92, LLC: a 5-megawatt project at the Kentucky River Authority's existing Lock & Dam No. 11 on the Kentucky River in Estill and Madison counties, Kentucky.  Lock and Dam 11 were originally built from 1904-1906 and support a twenty mile long pool of water 201 miles above the mouth of the Ohio River, but have not previously supported a FERC-licensed hydropower project.

The Free Flow Power applicant's request to use the 2-year licensing process was filed on May 5, 2014, so the two years runs through May 5, 2016.  The Commission staff has issued a process plan and schedule with interim milestones through February 2016.  Compared to a traditional licensure process, the proposed schedule is accelerated -- but will this pilot case remain on schedule?  Will the accelerated process satisfy the various stakeholders, including the developer, regulator, neighbors, and public?

FERC testifies on EPA carbon regulations and electric reliability

The U.S. Environmental Protection Agency's proposed Clean Power Plan rule is projected to limit carbon dioxide emissions from power plants, improve human health and save money -- but will it jeopardize the reliability of the nation's electricity grid?

Poorly implemented carbon regulations could increase the risk of widespread power outages, but this risk can be managed, according to testimony offered by the Commissioners of the Federal Energy Regulatory Commission to the House Energy & Commerce Subcommittee on Energy & Power earlier this week.

In her written testimony, Acting Chairman Cheryl LaFleur acknowledged concerns that EPA's carbon rule may have an "adverse impact on the overall reliability of the bulk power system."  Noting that EPA's plan leaves much of the implementation to individual states, she suggested that the FERC work closely with states to consider how state implementation plans will affect the operation of the grid. 

Commissioner Philip Moeller's testimony was more critical of EPA's proposed rule, which he described as infringing upon the FERC's jurisdiction over electric system reliability.  Noting that electricity markets are interstate in nature, Commissioner Moeller warned that "the proposal’s state-by-state approach results in an enforcement regime that would be awkward at best, and potentially very inefficient and expensive."  He also expressed skepticism at the plan's inclusion of increased use of existing natural gas-fired generation as one "building block" states may use to reduce their power sector's carbon intensity.  Commissioner Moeller also pointed to EPA's Mercury and Air Toxics Standards (MATS) rule as giving him reliability concerns.  On the positive side, he urged state regulators to speed adoption of real-time pricing at the retail level, so consumers can feel price signals that could reduce the overall cost of energy.  Commissioner Moeller concluded with a plea that FERC be given a formal role in EPA's regulation of the electric power sector.

Commissioner John Norris testified that EPA's proposed rule is "an important first step that addresses climate change by appropriately seeking to reduce carbon emitted by our nation’s electric power system."  While he acknowledges that transitioning to a low-carbon economy is challenging, he expressed confidence that "we as a nation should be well positioned to meet those challenges."  Commissioner Norris cited the MATS standards as an example of our readiness: while EPA's MATS rule led to the retirement of many older, inefficient coal-fired power plants, the grid has generally responded in a way that will maintain reliability.  Commissioner Norris urged cooperation with electric reliability organization North American Electric Reliability Corporation (NERC) and states, and to be flexible in making market rule changes to enable states, regional transmission organizations and other system planners to meet resource adequacy requirements.

Commissioner Tony Clark testified that while the grid is more reliable than before, it remains vulnerable to cyberattack, physical security threats, and geomagnetic disturbances.  He also described environmental regulations as another source of risk, and warned of the "seismic" shift in EPA authority over the energy sector embodied in the rule.  Commissioner Clark described the Clean Power Plan as the most comprehensive reordering he has seen of the jurisdictional relationship between the federal government and states as it relates to the regulation of public utilities and energy development.  He painted a picture of states forced to choose between surrendering their authority over power plants willingly or losing it to federal supremacy.

Current FERC enforcement director Norman Bay also testified, noting that he was confirmed by the Senate as a Commissioner on July 15, but that he has not yet been sworn in.  His brief testimony focused on the need for cooperation between FERC, EPA, NERC, states, and regional transmission organizations to ensure reliability.

What happens next remains to be seen.  As expressed in the opening statements of Energy and Power Subcommittee Chairman Ed Whitfield and Energy and Commerce Committee Chairman Fred Upton, many remain concerned about what they perceive as an effort by EPA to assert control and new regulatory authorities over states’ electricity decision-making.  Will EPA's Clean Power Plan ultimately come into effect -- and if so, what path will it take?