We’ve had a really busy week. It was great to connect with so many colleagues and friends at NARUC and around town. It’s been a whirlwind, so I wanted to pause today and take stock of the different aspects of the conversations I was engaged in.
The good news is that it’s the most exciting time to be part of our industry. Every time I get to talk with state Commissioners, market participants, and stakeholders, I am reminded that around the country, smart and dedicated people are working at all levels on solutions to our greatest energy challenges.
But the other side of the coin is that these reliability and cost challenges the energy system faces are daunting and near term. Some of the orders we are voting on today demonstrate the complexities involved with relying on what are increasingly outdated and insufficient market rules for ensuring affordability and reliability.
Now, this isn’t for a lack of trying. Over the last few years, we have held technical conferences on resource adequacy issues across the country. We initiated an AD docket to gather RTOs’ perspectives on future market design. We hosted a technical conference on extreme weather reliability and held a forum—and are now holding a second—specific to reliability and related market issues in New England.
Regions are also trying. PJM, NYISO and SPP each put forward Effective Load Carrying Capability (ELCC) proposals. You all know that a broad collection of utilities in the West put forward and had approved a resource adequacy proposal that allows them to share capacity more easily with one another, while also employing ELCC techniques.
One of these proposals remains pending from MISO, but otherwise, the Commission has ultimately accepted each and every one. Despite what I know has been real efforts by regions, market participants, and their stakeholders, I do not believe all of these proposals were sufficient to satisfy the relevant legal benchmarks.
Unfortunately, the Commission is setting too low a bar in ensuring just and reasonable outcomes. Two proceedings dealing with the same dilemma are on the agenda today, E-3 and E-15.
E-3
E-3 is MISO’s seasonal capacity proposal. I appreciate the desire to accept capacity market revisions such as MISO’s, because they address these urgent reliability challenges that we are talking about. I also appreciate that our options to modify any deficiencies in the proposals from a just and reasonable perspective are limited in the wake of the D.C. Circuit’s decision in NRG v. FERC.
But the standard under the Federal Power Act is not whether a proposal improves upon the status quo – it is whether the proponents of the proposal have demonstrated it to be just and reasonable. If anything is true, it is that our energy system is undergoing rapid transformation. What may have been just and reasonable in the past may not prove just and reasonable today.
Looking forward, we as a Commission are not without tools. My dissent in E-3 notes that the Commission could have opened an Order to Show Cause pursuant to Federal Power Act section 206 to ensure that MISO carries out sufficiently legally adequate reforms.
E-15
In E-15, I join the majority in rejecting a complaint against ISO-NE for maintaining inadequate capacity accreditation rules. But to the Chairman’s point, today’s decision should not be the end of the story.
The Commission has a responsibility to consider reform of market rules in New England as well. The record shows and stakeholders agree that the region’s current rules are not up to the challenge of ensuring winter reliability. More generally, I am encouraged that grid operators and market participants are starting to address system challenges.
But that does not relieve the Commission of its obligation. And obligation creates opportunity. The Commission has the opportunity to chart the course for the reliability and market design improvements that are required to keep pace with our changing realities.
E-1
E-1 is one of the more important votes we are taking during at my time on this Commission. I am pleased that we are taking unanimous action aimed at strengthening core elements of these new winter weather reliability standards.
It’s worth taking a moment to remember what brought us to this point—what revealed in really heartbreaking ways the need to better prepare our electric system for extreme winter weather. The 2021 FERC-NERC report on Winter Storm Uri tells us:
- More than 4.5 million people in Texas lost power during [Uri], and some went without power for as long as four days, in sub-freezing temperatures. At least 210 people died . . . with most of the deaths connected to the power outages, of causes including hypothermia, carbon monoxide poisoning, and medical conditions exacerbated by freezing temperatures.
- In cities including Austin, Houston, and San Antonio, over 14 million people were ordered to boil drinking water and conserve water due to broken pipes and power outages.
- Analysts with the Federal Reserve Bank of Dallas estimated that the outages caused direct and indirect losses to the Texas economy of between $80 to $130 billion.
And Uri was not a one-off event. The report notes that it was —at the time—the fourth cold-weather-related event in the last ten years (including the one 10 years before in Texas) to jeopardize Bulk Electric System reliability. And of course, that does not yet include our findings from Elliott.
FERC has a responsibility to use the tools within its authority to mitigate the risk of such a catastrophe happening again. And our most powerful tool is to implement reliability standards that establish industry-wide baselines.
There are a number of good measures in what we accept today, to be sure. But the critical generator weatherization requirements as proposed are, to be frank, not up to the task. The proposal before us requires existing generators to weatherize so they are capable of operating for one hour at extreme cold temperatures beginning in April of 2027.
Yes—one hour—in 2027—over four years from now. Needless to say, that doesn’t bring comfort that we can get through a multi-day winter event like Winter Storm Uri, and waiting for four additional winters before weatherization requirements kick in does not reflect the urgency we feel.
I take the time to say all this because phase two implementation is coming up. Today’s order directs NERC to make a number of critical improvements to the weatherization requirements, the timeline for compliance, and the timeline for taking corrective actions. It is my hope that with this guidance the next proposal we receive from NERC will reflect the lessons we all have learned in recent years.
I want to thank all of my colleagues for working collaboratively to arrive at a strong order. I particularly want to thank Commissioner Danly and his team for working closely with us on this order. Lastly, I want to thank the staff team—you did a great job synthesizing a lot of input.