A Critical Moment At A Critical Agency as the Baton Goes from Wellinghoff to Ron Binz (Hopefully)

Seth Kaplan

There are few more important, and more obscure, agencies in Washington D.C. than the Federal Energy Regulatory Commission the regulator of the wholesale electricity transmission systems and “bulk” (imagine big quantities, like giant tubs from Costco) U.S. electricity markets.

FERC oversees an incredibly complex electricity system.  Our grid meshes together rural systems, where power lines stretch hundreds of miles without interruption, with dense and sophisticated urban networks where millions of people are packed together and drawing power to charge cell phones, watch television, use computers, and make  hospitals, factories, homes and offices all hum.

The age of the elements of these incredibly diverse systems range from “physically touched by Thomas Edison” to “installed hours ago” with all that suggests in terms of technological sophistication.

On top of that physical complexity from a legal and regulatory perspective the American system is a bewildering mix of business and regulatory models with some places served by utilities that own generators and others, like nearly all of New England, served by utilities who are actually generally forbidden from owning power plants. And in contrast to many other parts of the world we mix together privately and publicly owned electricity systems, with many customers served by private “Investor Owned Utilities” but many others served by public entities like “municipal light companies” – and just to make life even more complicated our large generation is mostly owned by private companies with some giant exceptions in the form of hydroelectric dams and other generators owned by States like New York or Federal entities like the Tennessee Valley Authority.

This last bit of complexity is rooted deep in history, notably the declaration by Franklin Roosevelt, when running for President, that he generally favored private ownership of electricity generation and systems but “that where a community — a city or county or a district is not satisfied with the service rendered or the rates charged by the private utility, it has the undeniable basic right, as one of its functions of Government, one of its functions of home rule, to set up, after a fair referendum to its voters has been had, its own governmentally owned and operated service.”  This idea played out in his long run as President when the cornerstones were laid for both gigantic federally owned systems and for the FERC model of regulated private systems.

It is no wonder, given this complex mix of elements that some think the American electricity system is ungovernable.  But a few leaders have succeeded in using the tools available to them to reshape this unwieldy system and steer it in a good direction.  One of those leaders is the current, and soon to be former, FERC Chairman Jon Wellinghoff.

During Chairman Wellinghoff’s tenure FERC has instituted important reforms – pushing time and again for changes that remove the barriers to the new clean resources, like energy efficiency and renewable energy (like wind and solar) that are the rising stars of our energy system.   Under his leadership FERC has pushed aggressively against entrenched policies that gave a leg up to existing generators and utilities simply because they were already in place.  The idea of “pay for performance” that meant that new technologies could earn revenue from providing services to the electricity might sound simple and obvious but FERC has had to fight to make that idea a central tenet in its decision making, beginning with the critical idea (incubated in New England) that efforts to reduce electricity demand should be compensated in markets just like resources that generate power.  Application of the pay-for-performance principle has meant that new technologies that flourished in a small pilot market here in New England can spread across the nation – opening doors for electricity storage systems that will revolutionize the way we generate and use energy.

The biggest single effort that FERC has undertaken during the Wellinghoff era is almost certainly the Order 1000 initiative. Order 1000 mandated thoughtful regional planning of the electricity system across the nation and consideration of public policies, like state renewable energy standards and greenhouse gas reduction mandates, in electricity system planning and infrastructure decisions, among other systemic reforms.  This mammoth effort to reshape the current national electricity system is still in progress but should pave the way for significant progress in managing the energy system transformation and transition beginning to unfold around us.

The departure of Jon Wellinghoff from FERC does not have to mean the end of progress on all of these fronts.  FERC has maintained a collegial and effective decision making process that cuts across party lines (which is a pretty stunning thing to say in 2013 about any institution with a mix of Commissioners from the two main political parties).  Very often its decisions are unanimous or feature a very focused and specific dissent from one or two Commissioners disagreeing with some specific aspect of the decision but accepting much of what the majority are doing and saying.

This uniquely effective institution will maintain its balance and continue to make progress if Ron Binz, the nominee proposed by President Obama to take over as Commissioner and Chairman of FERC, is confirmed by the Senate.  Mr. Binz is accustomed to working across party lines as he comes from the quintessentially “purple” state of Colorado where he had a solid record as a consumer advocate, chair of the state utility commission and energy expert and innovator.

We are in a time of change and challenge: coal plants are retiring and the United States shows signs of finally getting serious about using energy efficiently while reaping the power of the wind and the sun.  Such times call for steady leadership at the essential Federal energy regulatory body.  That is what Jon Wellinghoff has shown – and it is what Ron Binz can provide going forward.

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