FERC quizzed on potential Midwest blackouts, rising gas use

Acting FERC Chairman Cheryl A. LaFleur and her three current colleagues were peppered by questions Dec. 5 on issues ranging from the potential for Midwest blackouts in 2016, to better coordination between the natural gas and electric sectors and FERC’s role in everything from grid security to gas exports.

The assortment of issues raised by House Energy & Commerce Committee members led Rep. Joe Barton (R-Texas), to remark that he was “struck by the breadth of FERC authority.”

Meanwhile LaFleur and fellow commissioners Philip Moeller, John Norris and Tony Clark tended to suggest to the Subcommittee on Energy and Power that FERC’s authority might be wide – but not deep. FERC must collaborate with not only the Department of Energy (DOE) and Environmental Protection Agency (EPA) but scores of state, local and regional agencies, the commissioners noted.

The subcommittee is chaired by Rep. Ed Whitfield (R-Ky.), who said it was a mistake for the Obama administration “to prevent even the option of building a new coal plant in the future.”

Norris acknowledged that uncertainty over environmental regulation, including potential carbon dioxide limits, has made investors extremely leery about new coal generation.

Moeller took things one step further by saying that tight capacity margins are expected to result in 2016 from coal retirements due to the Mercury and Air Toxics Standards (MATS). Blackouts are possible, especially in the Midwest, he said.

“We could hope for a cool summer in the summer of 2016 but that’s not a prudent approach,” Moeller said.

“Shame on us if we have rolling blackouts in the Midwest in 2016,” said Rep. John Shimkus (R-Ill.). The United States is a top international energy producer and this should not be possible, Shimkus said.

Whitfield said the federal government has incorrectly low-balled its earlier estimates of how much coal-fired capacity will retire.

It now looks like upwards of 7 GW of coal capacity could be retired in the Midcontinent ISO (MISO) in coming years, said Commissioner Clark.

Clark wants to see FERC maintain its independence and provide information so that other entities can understand the implications of various policy changes.

Rep. Morgan Griffith (R-Va.) said it was disappointing to hear that the White House did not consult the FERC commissioners before drafting its much-publicized climate control policy.

FERC adjusts to rise of natural gas

LaFleur appeared after being appointed acting chairman only 10 days earlier due to the departure of Jon Wellinghoff.

This is a time when “our nation is making substantial changes” to its energy system and infrastructure, LaFleur. The abundance of natural gas to balance renewable energy is a big advantage that the United States has over Europe, LaFleur said.

FERC has been working on gas-electric coordination for about 22 months, Moeller started. The parties have worked on communication in times of extreme weather events.The parties are also tackling the mismatch between the electric and natural gas business days, Moeller said.

“The biggest story in energy today is the revolution that is taking place in shale gas,” Clark said. This is dramatically affecting where utilities are placing money. Coal’s dominance is decreasing and natural gas-fueled power is on the rise.

As a result, FERC is trying to address when more generators are “simultaneously” turning toward natural gas, Clark said.

Natural gas exports are also an issue pending before FERC.

Exporting liquefied natural gas (LNG) was “nearly unimaginable only a decade ago, Clark said. Now FERC has 13 pending applications, LaFleur noted.

When asked by Barton on how FERC works with DOE on LNG applications, LaFleur said FERC largely works “in our own lane” on technical issues. DOE looks at whether LNG export proposals are in the national interest, LaFleur said.

On other topics:

** FERC is studying the issue of capacity markets where existing generating units are provided financial incentives for “being there,” LaFleur said. “We are looking at capacity markets to see if they attract the investment they need,” LaFleur said.

The acting FERC chair mentioned this after one lawmaker noted that baseload capacity is typically built on a 40-year investment horizon but forward capacity markets tend to only look three years into the future.

** FERC is seeing lot of gas pipeline requests, especially spurs, and FERC gets 92% of those done within a year, LaFleur said.

** LaFleur noted there was a decision two years ago on how to compensate demand response.

FERC got much advice and feedback during the hearing.

Rep. Kathy Castor (D-Fla.) said the traditional utility model is dying and FERC is doing a good job of easing the integration of new renewable energy.

Rep. Fred Upton (R-Mich.), who chairs the full Energy committee, said the United States should follow the lead of Canada and other nations have deadlines for environmental reviews.

Finally, Rep. Ralph Hall (R-Texas), age 90, said he hopes FERC doesn’t feel it must “conjure up ways to regulate something.”

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.