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Benjamin Zycher: How a Federal Regulator Is Hijacking Energy Policy

The Federal Energy Regulatory Commission is reaching well beyond its mandate to punish fossil-fuel energy producers. Sometimes you really do have to hit the mule between the eyes to get its attention. The mule of interest here is not a drug smuggler, but instead the Federal Energy Regulatory Commission, whose the legal mandate is straightforward: “Economically Efficient, Safe, Reliable, and Secure Energy for Consumers . . . at a reasonable cost through appropriate regulatory and market means, and collaborative efforts.”

In other words, FERC is supposed to maintain a decided stance of neutrality and objectivity with respect to the complex choices among competing forms of energy to be delivered to consumers. As a crude generalization, that means FERC should support the investment and energy-technology outcomes driven by market competition, whatever the distortions introduced by federal, state, and local policies. It is not FERC’s job to enforce policies — in particular, politically driven favoritism consistent with the current opinions of elites — not enacted by Congress.

Notwithstanding the fervent prayers of many special-interest groups, Congress has promulgated no such laws in the context of climate policies and greenhouse-gas emissions. But climate obsessions are fashionable, and invitations to the right cocktail parties yield the kind of high that the smugglers cannot deliver. Like most public officials, FERC commissioners feel political pressures, and have incentives to yield to them as they contemplate the future trajectories of their careers. Moreover, some of the FERC commissioners believe in the climate “crisis” narrative, and are determined to do something about it, notwithstanding the absence of any attendant legal mandate.

And so we now observe a growing penchant on the part of FERC’s majority to implement favoritism toward unconventional energy, wind and solar power in particular, combined with a real bias against fossil fuels whatever the competitive advantages of the latter. However unsurprising, this shift is deeply inappropriate and will yield increasingly adverse impacts over time.

The latest example of this trend is the recent decision by FERC to approve a request from ISO New England — an independent system operator managing the power grid in six northeastern states — to terminate its contract with the proposed Killingly Energy Center, a 650 megawatt power plant in Connecticut to be fired with natural gas.

ISO-NE is less than subtle in its pursuit of applause from the right-minded: Its “vision” is “To harness the power of competition and advanced technologies to reliably plan and operate the grid as the region transitions to clean energy.” (The description of wind and solar power as “clean” is classic disinformation, a topic for another day.) So, as with FERC, reliability ostensibly is a central objective for ISO-NE, a parameter now crucial “amid heightened reliability concerns in New England this winter.” Nonetheless, ISO-NE requested that the contract be terminated, arguing that “the natural gas pipeline system in the northeast is limited,” and in particular “citing project delays.”

Whom do they think they’re kidding? The gas-pipeline system in the east is “limited” — that is, there is too little delivery capacity given the region’s energy needs — precisely because of opposition to new pipeline infrastructure from interest groups promoting wind and solar power. And about those “project delays”: Wind and solar projects experience such delays as much or more than conventional power projects. Is there another project in the planning stage that will substitute for Killingly so as to further ISO-NE’s stated reliability “vision?” Well, no: An ISO-NE spokesman argues that “We have taken numerous actions to improve energy security in the region, including implementing many operational tools.” Then why was the new project considered at all? The obvious answer is that it is needed to achieve the system’s reliability objectives. The president and CEO of ISO-NE was more candid: “We have managed to keep the lights on here through a combination of skill and luck.”

Opponents of the project argue that it would emit up to 2.2 million tons of carbon dioxide each year, that is, three one-hundredths of 1 percent of U.S. emissions, and four one-thousandths of 1 percent of the global total. The global climate impact under any set of assumptions: almost literally zero. (Net-zero emissions by the U.S. as a whole: 0.173°C.) And even that ignores the fact that the absence of Killingly means that older power plants with greater emissions will have to remain online longer and operate more intensively.

FERC is supposed to be the adult in the room. It obviously knows about the serious reliability problems in the ISO-NE service area. It obviously knows the severe human and economic consequences of a widespread power outage in the region this winter, or at any time for that matter. And it obviously knows the specifics of its legal mandate. But it has endorsed this deeply misguided termination as part of its growing favoritism toward unconventional power, regardless of the adverse impacts upon the reliability of power supplies, which is the actual FERC mandate.

This is a continuation of a trend. FERC last year began a review of its longstanding policy statement on the certification of new interstate natural-gas facilities, pipelines in particular. FERC has asked for:

. . . new information and additional perspectives that would assist the Commission in moving forward with its review.

To guide the process and focus on adding to the existing record, the Commission seeks comments on new questions. . . . For example, the Commission requests comments on how it identifies and addresses potential health or environmental effects of its pipeline certification programs, policies and activities on environmental justice communities.

Precisely where in FERC’s legal mandate is there any reference at all to such “new questions?” FERC is supposed to focus on efficiency, safety, reliability, and security. Those do not include thinly disguised rationales to justify its new penchant for sticking its nose into matters that heretofore were none of its business, climate policy foremost among them. And the new focus on “environmental justice communities” — three words whose definitions are infinitely elastic — is so amorphous and so open-ended that FERC will be able to define any constraints it chooses on applications for gas pipeline approvals, in a manner essentially independent of the actual legal mandate that Congress has promulgated. Is such a process proper in a nation supposedly governed by the rule of law?

Will FERC now expand its “mandate” to include (dubious) analysis of the climate impacts not only of the proposed pipelines themselves, but also of the natural gas to be transported? The answer is far from obvious, a reality that does not bode well for investment in basic energy infrastructure. More generally, a regulatory process increasingly ad hoc, ill-defined, politicized, driven by decision criteria far outside FERC’s actual areas of expertise, and certain to display shifting standards over time will not prove consistent with the long-term flow of private-sector investment needed to preserve and enhance the safety, efficiency, and environmental improvement that are the fundamental goals and outcomes of a market economy. Thus has FERC embarked on a path deeply perverse, however popular among interest groups opposed ideologically to fossil fuels, in terms of both energy policy and the protection of the rule of law.

Benjamin Zycher is a resident scholar at the American Enterprise Institute.

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Posted: January 26, 2022 Wednesday 08:54 AM