FERC Invites Comments on State Energy Policy Technical Conference

by Akin Gump Strauss Hauer & Feld LLP

Akin Gump Strauss Hauer & Feld LLP

On May 1 and 2, 2017, the Federal Energy Regulatory Commission (FERC or the “Commission”) held a technical conference to “discuss the interplay between state policy goals and the wholesale markets”1 operated by the three eastern RTOs/ISOs.2  The technical conference featured a broad consensus among industry participants, economists, grid operators and state regulators that potential conflicts between state energy policy goals and wholesale electricity markets—designed to achieve lowest-cost dispatch—have reached a tipping point.  Seeking additional input on the technical conference, FERC staff issued a Notice late last week inviting “all interested persons” to file initial and reply comments addressing the outcomes of the conference, including potential solutions, “principles and objectives” underlying suggested solutions, and procedural steps that the Commission should take, if any.  Comments may also address the agenda topics and questions presented in the Supplemental Notice of the technical conference.

The Notice specifically invites comments on five possible paths forward that were identified by FERC staff during the technical conference:

Path 1 – Limited or No Minimum Offer Price Rule: an approach that would either not apply the minimum offer price rule to state-supported resources or limit application of the minimum offer price rule to only state-supported resources where federal law pre-empts the state action providing that support

Path 2 – Accommodation of State Actions: an approach that would accommodate state policies that provide out-of-market support with the operation of the wholesale markets by allowing state-supported resources to participate in those markets and, when relevant, obtain capacity supply obligations, subject to adjustments necessary to maintain certain wholesale market prices consistent with the market results that would have been produced had those resources not been state-supported

Path 3 – Status Quo (i.e., Litigation): an approach that would rely on existing tariff provisions applying the minimum offer price rule to some state-supported resources, and continuing case-by-case litigation over the specific line to be drawn between categories of state actions that may or may not result in a state-supported resource being subject to the minimum offer price rule

Path 4 – Pricing State Policy Choices: an approach in which state policies, to the extent possible, would value the attributes (e.g., resilience) or externalities (e.g., carbon emissions) that states are targeting in a manner that can be readily integrated into the wholesale markets in a resource-neutral way; for those state policies that cannot be readily valued and integrated into the wholesale markets, Path 4 would also require consideration of what, if anything, the Commission should do to address the market impacts of these state policies; for instance, other approaches for these state policies may include accommodation, application of the minimum offer price rule or an exemption from the minimum offer price rule

Path 5 – Expanded Minimum Offer Price Rule: an approach that would minimize the impact of state-supported resources on wholesale market prices by expanding the existing scope of the minimum offer price rule to apply to both new and existing capacity resources that participate in the capacity market and receive state support.3

FERC staff also invites comments on (i) how a path forward should be selected, (ii) the urgency of developing a solution, (ii) long-term expectations regarding the interaction between wholesale markets and state policies, and (iv) how competitive market frameworks can be reconciled with state preferences for certain resources.  In drafting comments, FERC staff indicates that commenters may reference materials from the technical conference’s record,4 including the day-one and day-two transcripts, “but are encouraged to avoid repetition or replication of previous material.”5

Initial comments are due on June 22, 2017, and should not exceed 15 pages.   Reply comments are due July 7, 2017, and should not exceed 10 pages.

1 Notice Inviting Post-Technical Conference Comments, Docket No. AD17-11-000 (May 23, 2017) (available here).

2 PJM Interconnection, L.L.C.; the New York Independent System Operator, Inc.; and ISO New England, Inc.

3 Notice at 1-2.

4 Docket No. AD17-11-000.

5 Notice at 3.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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