Commissioner Mark C. Christie Statement
March 18, 2021
Docket No. RM18-9-002
Order No. 2222-A
Item: E-1
Today the majority doubles down on siding with commercial interests seeking entry into the RTO/ISO markets and against the states and other authorities[1] whose job is to defend the public, not private, interest.[2] By doing so, the majority also sides against the consumers who for years to come will almost surely pay billions of dollars for grid expenditures likely to be rate-based in the name of “Order 2222 compliance.”[3]
It is indeed ironic that at the same time we hear many, including some members of this Commission, demanding that FERC ‘respect’ state public policies in capacity markets instead of imposing MOPR-type rules (and I have agreed with trying to accommodate state policies in RTO markets), this order goes in the exact opposite direction. So apparently ‘respect’ for state public policies only applies when states are doing what some want.
Sadly, instead of making the states, municipal and public-power authorities and electric co-operatives truly equal partners in managing the timing and conditions of deployment of behind-the-meter DERs in ways that are sensitive to local needs and challenges – both technical and economic – today’s order denies them any meaningful control by prohibiting any opt-out or opt-in options except in relatively tiny circumstances. This order – and its predecessor – intentionally seize from the states and other authorities their historic authority to balance the competing interests of deploying new technologies while maintaining grid reliability and protecting consumers from unaffordable costs.
A rapid concentration of behind-the-meter aggregated DERs at various locations on the local grid will inevitably require costly upgrades to a distribution grid that has largely been engineered to deliver power from the substation to end-user retail customers. Meeting the technological challenges of this re-engineering of the local grid are not insuperable but there are substantial costs and we all know these costs will ultimately be imposed on retail consumers. States, public-power authorities and co-operatives are far better positioned to manage these costs and competing interests in their own areas of responsibility than FERC.[4]
Order No. 2222-A is not “cooperative federalism,”[5] but its opposite. It undermines the overarching policy framework that Congress incorporated into the Federal Power Act decades ago: federal regulation of wholesale rates and the bulk power system; state regulation of retail rates and the local distribution grid. Any argument that allowing state policies to determine the entry of aggregated DERS into capacity or other markets will result in a ‘checkerboard’ or ‘patchwork’ of different policies, is an argument against state authority itself. The existence of fifty states by definition means a patchwork of 50 state retail regulatory structures, but that goes with the territory in our constitutional structure and is entirely consistent with the Federal Power Act’s basic division of federal and state authority. This panoply of diverse state policies is exactly what Justice Brandeis celebrated when he recognized states as laboratories of democracy.[6]
Unfortunately this order is a missed opportunity. It could have been a constructive move in the development and deployment of behind-the-meter DERs. For at least the next several years the regime set up should have been made fully “opt out” for all load-serving utilities, including state-regulated, municipals and co-operatives, which this Commission clearly has the authority to do.[7] Providing such flexibility to the states and other RERRAs would allow them to manage the deployment of behind-the-meter DERs in ways necessary to meet their own unique challenges.
In addition, at a time when there has been discussion about how to incentivize states to require or allow their utilities to enter RTOs/ISOs, I note that if the cost of entering an RTO/ISO is forfeiting a big chunk of the state’s authority to balance protecting its consumers with the costs of new technology deployments and associated grid upgrades, the incentive for states to approve RTO membership just took a nosedive in value with the approval of this order. Combined with the NOI obviously designed to remove or severely restrict the current opt-out provisions in Order Nos. 719 and 719-A on today’s agenda, these two orders may not only deter states currently outside RTOs from participation, but may well cause states in RTOs/ISOs to reconsider whether their consumers’ interests are best served by continued participation.
Let me be clear: encouraging the development of DERs is a good thing; eviscerating the states’ historic authority in the name of encouraging DER development is not. On the contrary, it is the states and other local authorities that are far better positioned than FERC to manage successfully the development and deployment of DERs in ways that serve reliability needs, that protect consumers from inflated costs, and that are far more sustainable in the long run.
For these reasons, I respectfully dissent.
[1] Other Relevant Electric Retail Regulatory Authorities (RERRAs), as referenced in both Orders No. 2222 and 2222-A, include municipal and public-power authorities, and electric co-operatives, all of whom face costly operational compliance challenges. See, e.g., November 6, 2019 Reply Comments of the National Rural Electric Cooperative Association (NRECA) at 3-6, February 13, 2017 Comments of American Public Power Association (APPA) and NRECA at 22; see also April 17, 2019 Supplemental Comments of APPA and NRECA at 2-3, 5-6.
[2] See also June 26, 2018 Comments of the National Association of Regulatory Utility Commissioners (NARUC) at 3-4 (“State commissions, like FERC, are required to act in the public interest. The limited opt-out provision envisions a scenario in which an entity that is solely motivated by its commercial interests makes a unilateral decision about its participation before the State commission can determine whether this distribution asset should participate in that market, which puts profits before State responsibilities. FERC should not eschew cooperative federalism and attempt to give control over resource adequacy and other crucial State decisions to a commercial stakeholder instead of FERC’s longstanding partners in energy regulation, State commissions.”)
[3] Technically speaking, Order No. 2222-A is issued today in response to requests for rehearing of Order No. 2222, approved by the Commission last September, when I was not a member. It keeps all the worst aspects of Order No. 2222 largely intact; the relatively minor changes it does make, render Order No. 2222 even worse in its infringement on state policies and potential costly impact on consumers.
[4] While Order No. 2222-A ostensibly leaves state regulators in charge of interconnection, that apparent authority is merely an illusion if state regulators are blocked from the fundamental decision whether interconnection for purposes of entry by aggregators into RTO markets is worth the costs to all consumers of the system upgrades necessary to protect reliability. Even more practically, this order invites endless litigation as commercial interests seeking entry into RTO markets challenge state interconnection policies as illegal barriers to entry and use litigation as a weapon against the state regulators, public-power authorities and co-operatives, which are limited in the resources they have available to fight such litigation. See, e.g., Order No. 2222-A at P 83 (“Consistent with the goals of Order No. 2222, the Commission will evaluate on compliance whether an RTO’s/ISO’s proposal delineates a role for RERRAs that would result in unjust and unreasonable limits on the participation of distributed energy resource aggregators in wholesale markets.” (footnote omitted)) (emphasis added).
[5] FERC v. Elec. Power Supply Ass’n, 136 S. Ct. 760, 780 (2016).
[6] New State Ice Co. v. Liebman, 52 S. Ct. 371, 386-87 (1932) (Brandeis, J. dissenting).
[7] The Commission recognizes in today’s order that even if it possesses jurisdiction, it may provide opt-outs and opt-ins to the RERRAs. Order at P 34 (in addressing the small utility opt-in, the Commission noted that “[a] RERRA that elects not to opt in under either Order No. 719 or Order No. 2222 does not intrude on the Commission’s exclusive authority over practices that directly affect wholesale rates because the Commission chose to provide such an opt-in and expressly codified this opt-in in the Commission’s regulations.” (footnote omitted)). To my point: even if the Commission believes it has exclusive jurisdiction, the Commission has the discretion to provide an opt-out or an opt-in. See id.