Rich Glick, in his first wide-ranging interview since denied a second term at the Federal Energy Regulatory Commission by Senator Joe Manchin of West Virginia, discusses the need for building out the transmission grid and for reforms to wholesale power markets to better accommodate the evolving resource mix toward more renewable, intermittent resources. Competitive wholesale power market reforms also are needed to address increasing climate-induced stresses on reliability, the former FERC chairman said.
"I think that some of the markets around the country, the markets operated by the RTOs and ISOs around the country, certainly need to be reformed in a way to address the change in the resource mix that we are seeing, the different challenges that we see associated with those changes, and just, again, extreme weather," Glick said.
Glick appeared to indicate surprise that FERC's proposed "relatively minor change" to federal right of first refusal, or ROFR, provisions in a closely watched transmission rulemaking engendered such opposition. "There was a lot of attention paid to that provision. But I think it underscored in many ways – hid the bigger problem that I think Order 1000 left, which is guiding or directing utilities towards (building) the wrong types of transmission in order to avoid the competitive bidding process."
However his former colleagues at FERC resolve the ROFR issue, he said the "concept behind competition, including in transmission, is a good one and I think will prove valuable to consumers."
Asked if the 1935 Federal Power Act provides the best platform for the transition to a 21st century clean-energy grid and economy, Glick said the nearly century-old law could stand to be revisited by Congress. When Congress acted in 1935 the line between state and federal jurisdiction was "pretty clear," he said. "But over time, the line has gotten much more blurry," in large part because of the advent of distributed generation and demand response, "which FERC has acted to encourage over the last decade or so. And that's caused some friction between the state regulators and between FERC." But given politics he suggested any changes to the 87-year-old law are unlikely.
Glick, who as an adviser to the late Sen. Dale Bumpers, D-Ark., in the 1990s wrote proposed legislation to require electricity competition at retail nationally, also doesn't see much prospect politically for improving the abysmal state of electricity competition for retail consumers outside of Texas. "Competition can be helpful but it's an idea I don't – I wouldn't say its time has come and gone, but it's an idea that certainly is not – there's not a lot of focus on that in most states around the country these days."
The retail competition bill he drafted for Bumpers also would have required competitive regional wholesale power markets throughout the country. Asked if FERC should use its authority to require RTO or ISO markets everywhere, he noted that the West and Southeast are the only remaining areas without some form of an organized regional market. Interested parties in the West are increasingly coalescing around the establishment of enhanced market regionalization, Glick said, noting the region's increasing acceptance of market regionalization is being driven by the need to better integrate the region's vast and far-flung renewable energy resources and respond to climate change. However, he held out little prospect for improving grid regionalization in the Southeast.
"I think FERC arguably has the authority, but I think it's – I'm not entirely sure the commission is going to be anytime soon focused on the Southeast. So I think it's better at this point to focus efforts to encourage greater regional efforts including RTO development in the West, where there's there seems to be some momentum f
Rich Glick, in his first wide-ranging interview since denied a second term at the Federal Energy Regulatory Commission by Senator Joe Manchin of West Virginia, discusses the need for building out the transmission grid and for reforms to wholesale power markets to better accommodate the evolving resource mix toward more renewable, intermittent resources. Competitive wholesale power market reforms also are needed to address increasing climate-induced stresses on reliability, the former FERC chairman said.
"I think that some of the markets around the country, the markets operated by the RTOs and ISOs around the country, certainly need to be reformed in a way to address the change in the resource mix that we are seeing, the different challenges that we see associated with those changes, and just, again, extreme weather," Glick said.
Glick appeared to indicate surprise that FERC's proposed "relatively minor change" to federal right of first refusal, or ROFR, provisions in a closely watched transmission rulemaking engendered such opposition. "There was a lot of attention paid to that provision. But I think it underscored in many ways – hid the bigger problem that I think Order 1000 left, which is guiding or directing utilities towards (building) the wrong types of transmission in order to avoid the competitive bidding process."
However his former colleagues at FERC resolve the ROFR issue, he said the "concept behind competition, including in transmission, is a good one and I think will prove valuable to consumers."
Asked if the 1935 Federal Power Act provides the best platform for the transition to a 21st century clean-energy grid and economy, Glick said the nearly century-old law could stand to be revisited by Congress. When Congress acted in 1935 the line between state and federal jurisdiction was "pretty clear," he said. "But over time, the line has gotten much more blurry," in large part because of the advent of distributed generation and demand response, "which FERC has acted to encourage over the last decade or so. And that's caused some friction between the state regulators and between FERC." But given politics he suggested any changes to the 87-year-old law are unlikely.
Glick, who as an adviser to the late Sen. Dale Bumpers, D-Ark., in the 1990s wrote proposed legislation to require electricity competition at retail nationally, also doesn't see much prospect politically for improving the abysmal state of electricity competition for retail consumers outside of Texas. "Competition can be helpful but it's an idea I don't – I wouldn't say its time has come and gone, but it's an idea that certainly is not – there's not a lot of focus on that in most states around the country these days."
The retail competition bill he drafted for Bumpers also would have required competitive regional wholesale power markets throughout the country. Asked if FERC should use its authority to require RTO or ISO markets everywhere, he noted that the West and Southeast are the only remaining areas without some form of an organized regional market. Interested parties in the West are increasingly coalescing around the establishment of enhanced market regionalization, Glick said, noting the region's increasing acceptance of market regionalization is being driven by the need to better integrate the region's vast and far-flung renewable energy resources and respond to climate change. However, he held out little prospect for improving grid regionalization in the Southeast.
"I think FERC arguably has the authority, but I think it's – I'm not entirely sure the commission is going to be anytime soon focused on the Southeast. So I think it's better at this point to focus efforts to encourage greater regional efforts including RTO development in the West, where there's there seems to be some momentum f
EMP S3E9 Rich Glick, former Federal Energy Regulatory Commission chairman
(transcript edited for clarity )
EMP: Welcome to the Energy Markets Podcast. I'm your host, Bryan Lee. And our guest today, I'm absolutely delighted to say, is Rich Glick, who until the 117th Congress adjourned early this January was chairman of the Federal Energy Regulatory Commission. Rich, thanks for coming on the podcast.
RG: Thanks for having me, Bryan.
EMP: Now, I think most of our listeners know that your departure from the commission with the expiration of the prior session of Congress was not by choice. President Biden had nominated you for a second term, but Senator Joe Manchin had other ideas. He refused to advance your nomination out of committee, I guess largely because he was upset about a decision to factor climate change into the review process for FERC certification of natural gas pipelines? What does it say about our political system that you were defenestrated as FERC’s chairman by a senator who is totally financially vested in the coal business and fossil fuels because you proposed considering climate change in the pipeline certification process?
RG: Well, first of all, I'd have to look up the word defenestrated. But secondly, I have a sense what it means. But secondly, I think it's not as straightforward as you described it. Yes, Senator Manchin wasn't particularly happy with the approach the commission was taking on the siting of natural gas pipelines in response to several court decisions, D.C. circuit opinions, related to other orders that the commission had issued. And it's true that Chairman Manchin had expressed some frustration there. But I think the frustration he had was broader than that, and not necessarily with FERC. There were other issues that he had with the president, President Biden in particular, things he had said at that particular moment in time related to coal mines and offshore drilling and so on. And so, I think, you know, I don't want to put words in Senator Manchin’s mouth and I would certainly encourage you to check with him but I think he was frustrated with the Biden administration's approach to energy and, in a sense, I got caught up, my nomination got caught up in that.
EMP: Okay. But, you know, your experience is only the most recent. Former President Trump removed Neil Chatterjee as chairman because he had the temerity to suggest considering incorporating climate emission externalities as part of the wholesale power market price setting process. And the George W. Bush administration threw Pat Wood under the bus, along with his pro-markets agenda, due to utility and fossil fuel opposition. FERC is supposed to be an independent regulator. Then it should be independent. Why is there no outrage about this?
RG: So I mean, you ask a very good question. You're exactly right. There are a set of independent agencies, including FERC, which are structured in such a way as to not necessarily – are not supposed to be subject to political influence in terms of decision making and so on. I think generally that that has been true for FERC and it's true for other agencies, but the but the way the system is set up, the President has the ability to nominate people to serve on at FERC for instance, and obviously the Senate must confirm and so that's part of the political process. And secondly, at least at FERC, the president has the authority to designate who the chair is and to remove that, the chair designation at any time. Otherwise, the president can't get rid of a commissioner but could certainly change who the chair is on a moment's notice. So the political process is involved and, you know, I think, from my perspective, I tried not to think about that. I just, I tried to go ahead and do my job and let the chips fall where they may and, yeah, I didn't get confirmed for a second term, but I'm honored to have had five years and I hopefully we did some good during the five years that I was there.
EMP: Well, it has a chilling effect, doesn't it, on the decision making of agencies when they know that influential, powerful members of Congress are going to be opposed to something that is ordinarily in the public interest? They're not going to advance that, are they?
RG: Well, it didn't have a chilling effect on me. I mean, I, you know, I, I, well, I felt like I needed to just take the facts of each circumstance and apply the law to those facts and vote however I voted on the various orders that we issued. And, you know, yes, people in Congress react. Some were happy with some of the orders we issued. Some were not happy, and certainly Congress has an oversight role and we had to appear on a number of occasions both before the House Energy and Commerce Committee and the Senate Energy Committee to testify on those actions. But I never said to myself, well if I do this, I'm going to lose the chair. If I do this, I'm going to keep the chair. Or if I do this, I won't get confirmed the next time. I don't think that's the way, that's the appropriate approach to being a commissioner. And I would say, the vast majority of folks that I served with and folks that I observed before I got to FERC, I think, do the job the same way.
EMP: The goal of the podcast is to identify the best policies that will allow the necessary transition to a clean-energy economy at least cost to consumers. Do you have any insight into what policies would be best to adopt in terms of allowing the clean-energy transition at least cost?
RG: I do. I would also add I think there should be one other element of that guidance that you just outlined, that is the least cost and also to ensure reliable access to energy, whether it be electricity or something else. And I think that's what we talked about at FERC for every time we focused on a major issue, a major policy initiative. But to answer your question more directly, I think, first, I think one of the issues that I think needs to be addressed and I know FERC is in the process of addressing it is the issue of how do we get more and the right type of electric transmission built in this country both to facilitate the access to remotely located renewable resources. We have the best renewable resources in the world here in the United States. Most of them are located either offshore or even onshore are located in very remote areas, far from load. So you need to build up the grid for that. We also need to be need to build out the grid to ensure promote or increase reliable electric service. As we're seeing with extreme weather scenarios that have been occurring much more frequently over the last several years and they’re expected to get worse as time goes on. The reliability of electric service is being challenged on a more frequent basis. And so I think the grid needs to be built out to address that problem as well.
EMP: Are those the two magic bullets? Are those going to get us there?
RG: Two magic bullets being electric more electric transmission, is that going to get us there?
EMP: Yeah.
RG: There are there are other there are other things that need to be done as well. I think that some of the markets around the country, the markets operated by the RTOs and ISOs around the country, certainly need to be reformed in a way to address the change in the resource mix that we are seeing, the different challenges that we see associated with those changes and just, again, extreme weather. I want to bring up extreme weather because I think some of these markets and some of the RTO policies need to be revisited in light of the increased threat of extreme weather.
EMP: And the extreme weather that's stressing the grid is due to climate change.
RG: I believe that to be the case. I don't know if everyone would admit to that. But I think the evidence is – the evidence appears to me to be overwhelming.
EMP: Well, let's stay with the transmission issue for a minute because I saw a headline recently that FERC might be moving to finalize the Notice of Proposed Rulemaking on transmission that had proceeded under your watch. One of the biggest issues involved in there that I can see is something called ROFR, or right of first refusal. Why was that included in the NOPR? Why did you propose a right of first refusal when it countered prior FERC policy?
RG: Bryan, if I could just take one minute to address. I think there are there are two proposed rulemakings at least that were issued when I was still at FERC that remain pending. And I've read that the chairman, Chairman Phillips, has indicated one of those rulemakings may be finalized relatively soon. But the two rulemakings, the first one dealt with transmission planning and cost allocation. Primarily the need to improve the way transmission is planned to address the changes that are going on with regard to the resource mix and the growing demand for cleaner energy and a lot of that is intermittent renewable energy. The second proposed rule dealt with interconnection the interconnection process and primarily as it relates to the need to expedite the current approach to bringing generators onto the grid. Sometimes it takes forever – it takes a long time, takes many years in some cases for a generator to actually get connected to the grid. It's obviously delaying the transition and also causing some issues with regard to reliable electric service. With regard to, it’s a long way of getting around to your question on ROFR but I think it's important to think about some background there. So with regard to ROFR, as you know, in Order 1000, the commission essentially said, if transmission is planned for, is planned on a regional basis and the costs are allocated on a regional basis pursuant to the approach that each regional transmission planning entity takes, then that particular transmission facility would be subject to competitive bidding. And there would be an elimination of at least on the side of the federal right of first refusal for the local utility to build that line. But the problem with the Commission's approach in Order 1000 was that the Commission said, okay, for those projects, we're going to get rid of ROFR, we're going allow for require competitive bidding, but there's a whole other category of transmission that's either planned for and built for reliability purposes, or to reduce congestion for economic purposes which would not that those projects would not have their ROFR rights eliminated. Essentially utilities would still be able to use ROFR, the right of first refusal, to avoid a competitive bidding process. And the problem with that, utilities are obviously in many cases want to build the transmission themselves, don't want to compete for them for those projects. They're going to try to build projects where they have maintained their ROFR rights, and in my opinion, and I think in the opinion of others, what it led to is transmission entities or transmission companies building smaller projects really focused on regional needs and with the changing resource mix in order to avoid having to be subject to competitive bidding. So the commission in the NOPR, I was at FERC, proposed a relatively minor change to the ROFR language saying that if a transmission project was jointly developed between, for instance, the local utility and another entity, that project would retain ROFR status. And so we'll have to see what the commission does on final rulemaking there because it did garner a lot of opposition, there was a lot of attention paid to that provision. But I think it underscored in many ways – hid the bigger problem that I think Order 1000 left, which is guiding or directing utilities, towards the, in many cases the wrong types of transmission in order to avoid the competitive bidding process.
EMP: It seemed after the ROFR issue was addressed by FERC a lot of a lot of state activity around ROFR evolved into litigation. And we saw a recent Iowa Supreme Court opinion that rejected ROFR in that state, calling it “crony capitalism.” They called it “quintessentially crony capitalism.” So ROFR in that instance, would not be impacted by the ROFR reasoning before FERC right now?
RG: So there’s a federal ROFR, and there's a state ROFR. The federal right of first refusal and the state right of first refusal, and the Commission in Order 1000 eliminated the federal right of first refusal for utilities to build transmission lines. If again, if the transmission was planned for on a regional basis and costs were allocated associated with that plan. But the states still could adopt their own policies, assuming the courts find that permissible, to give the utility the right to build the project, even if the federal government says, no, you don't have a right to build the project. And that's what's being litigated now in several states. But I think the commission, in my opinion, I think the commission did a lot of good things in Order 1000. But I don't think this was as thought out in terms of the bifurcation between federal ROFR and state ROFR as well as it should have been.
EMP: It’ll be interesting to see what commission decides on that issue. You know, I've heard from several on the podcast, who've been on the podcast, said that competition didn't work and I think that's what you alluded to in that the types of transmission that we need right now aren't getting built because of ROFR. Rather than acceding to the utility’s monopoly interest, wouldn't it be better to find a different way around that gets transmission built despite the utilities’ objections?
RG: Well, there are there are several options and when you say competition didn't work, I assume you mean competition in transmission.
EMP: Yeah, that’s right.
RG: I think it works very well on wholesale energy, for instance. But with regard to transmission, I, there are a couple of options one you could get rid of this distinction in Order 1000 made and require that all of these transmission practices be competitively bid. I think there would be some pushback there that it would take a while to go through the competitive bidding process. And it wouldn't necessarily, in some cases, lead to a better solution. I think that some people might make that argument. On the other hand, other end of the spectrum you can get rid of, you can reestablish the federal ROFR altogether, and get rid of the provision that was an Order 1000. That may not be necessarily in the best interest of consumers. I can tell you from my perspective, the concept behind competition, including in transmission, is a good one. And I think will prove valuable to consumers. But you can't have one leg in and one leg out, essentially, which I think is what the case is now. Because you're setting perverse incentives, I think, and so I think the Commission needs to grapple with that, as time goes forward, whether it be in this rulemaking that it's considering now or another regulatory initiative down the road.
EMP: All right. Well, let's talk a little bit about regional power markets. Should there be organized regional wholesale power markets everywhere in the country?
RG: I think it makes some sense to have either an RTO or an ISO in each region in the country. And maybe I can give the example of the western United States, which is considering this right now. They have the California ISO but outside of that they don't have markets in the rest of the West. And I think the what you lose, the efficiencies you lose by not having an RTO are relatively significant, especially when you're adding a whole bunch of intermittent generation, which the West is today, to address climate change and deal with various state policies and so on. If you don't essentially aggregate the efforts and economize, establish economies of scale, you're going to have some issues with cost. You can have some issues with reliability. And I think that a lot of inefficiencies are built into the system. So I believe that these markets provide a much more efficient approach. They've gotten complicated. They haven't always worked as designed in the past in different parts of different regions of the country. But I think consumers are much better off in those regions that have organized markets than in those regions that don’t.
EMP: Are capacity markets kaput?
RG: I don't think they are, I think so. There's the three eastern RTOs, which is New England, New York and PJM, which have mandatory capacity markets, essentially, that's how they do they address capacity issues and resource adequacy issues is through a mandatory market that everyone has to participate in. Then you have MISO that has kind of a hybrid approach, some mandatory but most of it's not mandatory, but there still is a capacity market. And that's a totally different approach to the other three. I think there's been a lot of concern raised about capacity markets, and I think legitimately so. They've gotten very complicated. They've engendered a lot of litigation. And RTOs are, in my opinion, constantly tinkering with the capacity markets, it's not necessarily productive. The problem is, especially in those regions that have mandatory markets right now to address resource adequacy issues, what would you do in the alternative? If you didn't if you didn't have a capacity market just had an energy market, kind of like Texas currently has, ERCOT in Texas, currently has, there's some risk there. Now ERCOT in Texas is, Texas in particular seems to be, at least in some cases, willing to accept that risk. I'm not entirely sure the PJM states or the New England states or New York, for that matter, have that same risk appetite. So unless there's a better approach to addressing resource adequacy, I still think capacity markets will be maintained in some ways, but I think they're going to require significant reform and in part to address some of the issues that have arisen because we're going to be relying much more on intermittent generation. And that raises a whole set of challenges. And there's some issues associated with zero marginal cost generation, how do you deal with that in terms of ensuring that their capacity is adequately compensated for, or adequately valued. So those regions are going to have to take that into account as they move forward. But I'd be shocked if we just got rid of capacity markets altogether.
EMP: Well, the capacity markets issue came to the fore because of a prior FERC’s treatment of state-subsidized resources having an impact in the interstate regional market. In other words, states were adopting subsidies for certain resources. And the commission tried to adjust for that in how the capacity markets were effectuated. And it seems like things have been up in the air ever since. You were very deferential to the states in these issues. You didn't have any concern as chairman or as a commissioner with states subsidizing resources that might impact consumers in another state?
RG: First of all, you're talking about the MOPR, which is the minimum offer price rule, that was at least in existence in the three regions that have mandatory capacity markets, again, New York, PJM, New England. And those minimum offer price rules were originally established to address what they call buyer-side market power. Essentially to say if your utility that owns generation, but also you have, you're also a buyer or consumer you know, you’re buying power in the market. Are you buying capacity in the market to ensure your consumers adequately have adequate access to energy and capacity, then you could potentially have market power and manipulate the price. You might bid in too low, essentially. And so a minimum offer price rule was established to essentially take a look to ensure that those offers that came in from those entities that actually had market power and were in fact buyers were not engaging in some sort of practice, kind of like predatory pricing, right? Somehow, as time went on, concern was raised about state policies that essentially subsidized or encouraged their utilities to develop cleaner energy or maintain existing clean energy such as nuclear power, for instance, right? So the argument was made, well, if those states subsidize those clean energy technologies, that's messing with the market. We need to do something about that because it's going to set the price too low having those subsidies. And my reaction was severalfold. First of all, if you're if your concern is buyer-side market power, how do you penalize a generator that's neither a buyer nor has market power? And so that didn't make sense to me. Secondly, the Federal Power Act is very clear in saying that states and not FERC have the authority to address the resource decision making. So essentially, if the state wants to go 100% coal, or if the state wants to go 100% renewables, or something in between, the state has the ability to do that and FERC can't get involved. The Federal Power Act is very clear about that. So in my opinion, some of the MOPR orders that the Commission issued, primarily when Commissioner Chatterjee was Chairman Chatterjee, were aimed directly at those state subsidies and trying to essentially what they would call level the playing field in my opinion going after those programs to ensure that they weren't successful in transitioning the resource mix. And again, it's not up to FERC to decide whether the state transition is a good one or a bad one. We’re just supposed to resolve the issues that arise including reliability issues that are associated with that. So the commission in my opinion went too far and particularly with the PJM MOPR, which in my opinion was vindictive, in the sense that it was it was written in such a way that the order related to PJM MOPR at FERC went way beyond what PJM had even asked, and it essentially went after those state programs by making it almost impossible for those states or energy or generation projects that were subsidized by the state could even participate in the capacity market. And it led to a lot of problems. Obviously, the States didn't like that because it interfered with their resource decision making process. Consumers didn't like it because it was going to raise costs dramatically. And essentially, I think made the capacity market – especially the PJM capacity market, unworkable or unsustainable, at least in my opinion. So over the last couple of years, the Commission issued several orders that essentially undid that. I think those were the right orders. But, I think the underlying issue, as I mentioned earlier, that the state has the role of deciding the resource mix, the commission, FERC, needs to honor that. And it needs to work around that in terms of the commission's authority over regional markets and not get in the middle on what is the state decision what Congress has told FERC it's the state’s decision and so I think Commission's orders over the last several last couple of years have remedied that but I don't know if there will be an effort in the future if there was a different chair and a different set of commissioners to go back to the old. The old commissioners the old approach to the Chatterjee era, but hopefully it won’t.
EMP: In the same vein of deference to states, we talked about how consumers would be better off if there were regional wholesale power markets, RTO-type markets, everywhere in the country. Should FERC aggressively move in that direction? Should FERC use the authority that I believe the Supreme Court stated FERC has, which is it could assert authority over transmission bundled in state-regulated, monopoly-regulated rates. That was a decision that came out of the litigation over Orders 888 and 889. How deferential should FERC be? Should FERC be more aggressive in trying to establish regional markets as Pat Wood tried to do?
RG: So obviously, we're talking about two regions. We’re talking about the Southeast and the West outside of California are really the only two regions that have not established regional markets. I think what's encouraging in the West, is that there seems to be a lot of movement towards that. I think there's a greater recognition that the region needs to work together to address the challenges associated with extreme weather and resource adequacy and the transition that's underway to a cleaner set of energy resources. And so there's been a lot of discussion. SPP is involved in some, some discussions with some utilities and states. The California ISO has had some discussions about expanding and they've obviously developed markets that aren't necessarily RTO markets, but at least are more regional, regionally focused. I think that's a big positive. The Southeast, a little less though. They have developed what they call their SEEM market, but that's a small subsection I think, and I think it doesn't seem like there's a lot of momentum in the Southeast to move to go beyond that at this particular point in time. I would say that, you know, people might disagree, you can make the argument that FERC has the authority as you referenced, as the Supreme Court outlined, in I think it was the New York case a number of years back. But even take the West, which is I think, is a very good example. FERC could, you could argue that FERC could require investor-owned utilities to join RTOs. But I think it's pretty clear FERC doesn't have authority over the Bonneville Power Administration, the Western Area Power Administration, SRP, City of Seattle and a number of other major – Sacramento, for instance, SMUD and a number of major players in the West. And so what you would have is an RTO that FERC could require, but it wouldn't have some of the key players so it wouldn't be a very effective RTO. And the Southeast, again, I think FERC arguably has the authority, but I think it's – I'm not entirely sure the commission is going to be anytime soon focused on the Southeast. So I think it's better at this point focus efforts to encourage greater regional efforts including RTO development in the West, where there's there seems to be some of that momentum for that.
EMP: Okay, well in the meantime, the consumers in the Southeast continue to pay a more than they should.
RG: Well, that’s my opinion, but I think there might be some big players in the Southeast that would disagree with you on that.
EMP: (laughter) Yes, that's true. That's true. Big players who have big influence with powerful members of Congress. Therefore, it's not going to happen. So you and I met back in the 1990s when you were an advisor to Senator Dale Bumpers in the Senate. And you wrote a retail wheeling bill for him. Now. we don't call it retail wheeling anymore. That's kind of an archaic term of reference. But basically, you wrote a bill that would have required retail competition nationally, correct?
RG: So that is correct. I helped the senator draft that legislation. It was in the mid ‘90s. You have to go back and think about the time. There was a lot of momentum, a number of states had moved towards retail competition already and a number of states were actively considering it. And so Senator Bumpers’ view was, if you create a system where some states have retail competition and some don’t in the same region, you're going to have some adverse results. And so his point was at the time it seemed it seemed like it was inevitable and obviously it wasn't because retail competition kind of died out in many, many ways, except for maybe a state like Texas. But at the time, the thought was, you know, let's set the rules on a national basis for everybody to make sure that all consumers can benefit. That bill would have also required RTOs, to your previous question, would have required RTOs to be established throughout the country as well. But things changed quite dramatically, in large part because of what happened in the Western EnergyCcrisis of the late ‘90s, early 2000s, and I think a lot of states went in a different direction because of that.
EMP: I'll never forget the look on your face at the press gaggle after the bill was dropped and Senator Bumpers told reporters that he found the issue about as interesting as watching paint dry.
RG: He did say that and I think that was an accurate description of his view there. But he also felt very strongly about consumers. Arkansas had some experience with multistate utility holding companies where consumers, at least in his view, the consumers didn't end up treated weren't treated properly and so he was very he was always concerned when it came to energy policy, how consumers would end up in terms of any change in policy.
EMP: Well, the humor quotient in Congress went down by about 90% when he retired.
RG: He was, yeah, he was extremely funny. And it was another honor in my life to work and have a chance to work for him for all those years.
EMP: Have you found yourself employing Bumperisms when you were at FERC?
RG: As a matter of fact, I have on occasion. I always tried to attribute them to him because he was obviously much funnier than I am. But one, for example, had to do with transmission when I was talking about cost allocation. He used to say that in speeches that everyone wants to go to heaven but no one wants to die. And I said that struck me as very similar to cost allocation where everyone wants more transmission to be built and they want someone else to pay for it. And I used that line a couple times and got a good laugh.
EMP: It helps that it's entirely accurate. Well, let's talk about the retail markets in relation to the wholesale markets. Now, I asked you about what sorts of reforms you thought necessary to enable us to get to a 21st century clean-energy economy, a clean-energy grid. Are we going to be able to get there with a Federal Power Act that was written in 1935 and which creates this artificial barrier between the retail and the wholesale markets?
RG: So, again, I think you're getting at an interesting question as to whether the Federal Power Act should be updated. And I don’t think anyone's advocating it be eliminated or repealed, but I think there are some issues about the jurisdictional line. When Congress acted in 1935 to adopt what was I guess Title II of the Federal Power Act, it was pretty clear what was distribution subject to state regulation. What was interstate, for the most part, what was interstate transactions subject to FERC regulation or that time and Federal Power Commission. But over time, the line has gotten much more blurry, in large part because of the advent of distributed generation. In some cases, the participation of distributed generation. I also want to add demand response in that category as well, especially those in the home those technologies in the wholesale market, which FERC has acted to encourage over the last decade or so. And that's caused some friction between the state regulators and between FERC. And so I think there's I'm not sure I have a proposal right now, but I'd say that there seems to make some sense to go back and think, do the lines need to be redrawn somewhat, given the situation that we find ourselves in today.
EMP: I'm wondering whether they should be a line at all. I mean, what other commodity do we give a Get Out of Jail Free card for the Interstate Commerce Clause? I mean, this is the most important commodity in interstate commerce.
RG: Well it is a very important commodity and I would say natural gas might be the other commodity. Given the way the Natural Gas Act bifurcates things, it's a little different than the Federal Power Act. But nonetheless, it does draw a line as well. But I think there's a reasonable argument there. You know, it used to be the saying went that these markets are regional. They're not state markets. They're not national markets, they’re regional markets. And I think they're slowly becoming multiregional markets. So there is an argument for greater involvement of the federal government. But given the line that Congress drew, I think it would have been, it'd be hard to imagine tearing that all up and starting all over again in terms of the divvying up the regulatory responsibility over electricity.
EMP: Well, beginning with Winter Storm Uri in 2021, as you noted, we've had a number of weather-related stresses on the competitive markets, the regional markets. And we've seen a lot of what I would call disinformation about that. When the Texas outage occurred, we had a lot of people come out of the woodwork saying that it was competitive markets were at fault, that it was too much renewable energy on the grid, or some combination thereof. How do we effectively communicate to the public the benefits of these markets when there are actors who are actively trying to engage in disinformation about the benefits of the markets?
RG: Well, it's difficult to do that in large part because, as you know, these are very complex and technical issues that are that are not easily explained in a sentence or two. But I would say that it's important to you know, I would go back to, Winter Storm Uri is probably a good example. Go back and read the report that was prepared by FERC staff and NERC staff, and you'll find a report that I think went into in great detail what the problems were, and made some recommendations about potential solutions to ensure that it doesn't happen the next time. And in that report, it was pretty clear to me that there wasn't, I mean, some people say well, if Texas had a capacity market. Well, there was plenty of capacity. That wasn’t the problem. The problem was there wasn't any energy. Because of natural gas shortages, because of cold weather, because of a whole bunch of other issues. And I think it's important that we that we learn from history as opposed as opposed to just ignoring it. And think there was NERC has done, I think some very preliminary analysis in the aftermath of the Winter Storm Elliott, which was this past Christmas, where they had some issues in the Southeast in particular, and maybe the PJM states as well. And again, it's not the causes aren't necessarily market design issues, although there are some issues with regard to natural gas and electric coordination that I think need to be resolved, but not necessarily shouldn't be blamed. And there's certainly no evidence to blame the fact that we have regional markets, or the fact that regional markets or how the regional markets are organized for the what was the outcome of some very extreme weather and some mistakes that were made along the way.
EMP: Before you were Chairman, there was a proposal forwarded from the Trump administration to FERC. It was a Notice of Proposed Rulemaking that would have basically thrown out some three decades’ worth of bipartisan pro-competition policy at FERC in order to subsidize some coal and nuclear resources of entities that had been major financial supporters of the Trump campaign. Do you want to talk about that? Do you want to, do you want to talk about the merits of it? How the commission ultimately resolved that issue?
RG: Yeah, yeah, I like to get involved in campaign contributions (laughter). You can make your decisions about why they did it. But I would say that it was a live issue when I first came to FERC, which was in late November of 2017. It was hotly debated. And there were some issues the administration, which has it has the right to do under the Federal Power Act and the DOE Organization Act, I believe, the administration through DOE made a recommendation for a rulemaking, which as you pointed out, but it essentially constituted a subsidy for generation that had a lot of – generating facilities that have the ability to store energy, whether it be nuclear or coal in particular, on site. And the argument was at the time, well, if we did that, we're going to improve reliability and we weren't having major reliability problems that we didn't have these projects that retire. But the fact is the administration, the Trump administration proposed it, but they didn't provide any evidence to suggest that was the case. And the commission took a look at it. And on a five-zero basis, three Republicans, two Democrats, the commission unanimously rejected the proposal because there just wasn't any evidence that that was a key factor. Are there reliability concerns and going forward as we transition to a cleaner energy future? Absolutely. Is the way to address those reliability concerns to keep more coal on site, or to encourage more coal so as to have on site? I think that's, that that's losing sight of I think what the real concern is, is the need for additional flexibility as we go towards we move towards more intermittent generation. You need to go encourage flexible generation, not necessarily generation just because you have energy stored on site. As we saw during Winter Storm Uri and other extreme weather events over the last five to ten years, many facilities that had all that coal on site still aren't able to operate in extreme cold weather, for instance. So it just again, there just wasn't any evidence that that was going to solve the problem. So we unanimously rejected it.
EMP: So the commission and Congress have for many decades now established competition as the lodestar for electricity and natural gas. Do we have enough competition in electricity markets today?
RG: So, first of all, it's an interesting question, and I think there's – I was on a panel recently, when the question was, what is the future of competition in electricity? And I would say, one, I think there is a future, because as I said before, it's the best way to keep prices low, but it's also the best way to more efficiently manage your system. I think in many cases, it's helped transition from an older, less flexible, less set of efficient generators, older clunkers away essentially and facilitated elimination of those older facilities to transition to newer facilities where maybe gas and renewables or whatever it might be, and the consumers have benefited. I think reliability has benefited as a result. But I think there are a couple of things that you need to have competitive markets, one of which you need to have confidence in those markets, including ensuring that there's no manipulation or entities that have market power aren’t able to use that market power to manipulate or affect the price or the outcome of these markets. And then secondly, something that I've been concerned about over the last several years, is that there's a lot of decisions made about these competitive markets that come before FERC. There's also a lot of litigation. There's a lot of assumptions that are made, whether it be on how you figure out net CONE (cost of new entry) or how your demand curve or whatever it might be. That requires assumptions that are often litigated, and I think in many cases, people's confidence in these markets have waned in large part because of concern with some of the decisions that are made, the proposals that are developed, are developed to address price – meaning to either raise price or lower price as opposed to being the right decision to ensure that the market operates competitively and that consumers end up in the best position. And so I think RTOs are going to have to come to terms with that on a going forward basis to ensure there's more confidence in the outcome of these markets, so that these markets can continue on.
EMP: What about competition at retail?
RG: Well, I think there's some states have competition but it’s not very vigorous, I think in many cases the utilities act as the buyer of last resort and a lot of people just don't want to deal with it or maybe they just resort to the buyer of last resort as opposed to shopping. But I think competition seems pretty active and rigorous and Texas. Awesome. You see when we got to Texas, I was billboards about different offers that were made by different suppliers. And so I you know, competition can be helpful but it's an idea – I wouldn't say its time has come and gone, but it's an idea that certainly is not as – there's not a lot of focus on that in most states around the country these days.
EMP: Well, that's an understatement. Yeah, well, you noticed a difference in the quality of competition in Texas versus the other states. The main difference between Texas and those other states is that Texas has quarantined the utility from the retail market. In other words, as you noted, there's no utility provider of last resort. And antitrust regulators have been telling FERC since, for the last 20-30 years to get the utilities out of generation markets. Is that a problem that we have utilities with one foot in the competitive sphere and one foot in the regulated wires sphere?
RG: Depends on what part of the country you're talking about. There are some regions of the country in which generators, I think primarily due to state action have been, or I should say, the utilities primarily due to state action have been required to divest themselves of their generation, if they’re a wires company for instance. And so, technically, theoretically competition works much better under that model, but I think different regions have different models, in large part due to what the states are comfortable with. And what they’re comfortable with what their utilities are doing. You know, I understand the point that’s being made, that it makes markets more competitive and so on. I'm not entirely sure that's really a role for FERC to require utilities divest themselves of generation. Maybe that's more of a role for the states to determine. And they have in different parts of the country.
EMP: Okay. Well, I've run through my notes here, Rich. I don't know if there's anything else you'd like to discuss for the good of the order before we adjourn?
RG: No, I think that about covers it. I appreciate it. Appreciate you having me on.
EMP: I appreciate your time. And any, any tidbits for our listeners as to your plans for the future?
RG: I would say, stay tuned. I'll hopefully have an announcement to make very soon.
EMP: Rich Glick, former Chairman of the Federal Energy Regulatory Commission. Thank you very much.
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