Graeme Sloan/Sipa USA via AP Images
The Federal Energy Regulatory Commission, part of the Department of Energy, holds jurisdiction over a wide sector of the energy industry.
Joe Biden ran on perhaps the most expansive climate platform in American history (which isn’t necessarily saying much). The Democratic majority has thus far reneged on this platform, one that helped mobilize voters to deliver these majorities in the first place. The administration has already sacrificed carbon pricing, methane fees, and the Clean Electricity Performance Program, which would have rewarded utilities that transition away from fossil fuels and fined those that stalled. And Build Back Better, the vehicle for any spending on the green transition, is adrift in the Senate.
Biden must turn to regulatory means to make progress. He does have at his disposal a relatively low-profile government agency that intersects with climate: the Federal Energy Regulatory Commission (FERC). The Commission, organized within the Department of Energy, holds jurisdiction over a wide sector of the energy industry, including interstate electricity transmission, hydroelectric project licensing, and natural gas and oil pipeline projects.
Biden has set the goal of a zero-carbon pollution power sector by 2035 and a net-zero emissions economy by 2050. That will require electrifying vehicles and upgrading energy efficiency in buildings. Most important, the goal demands a massive investment in carbon-free electricity generation, transmission, and storage. Long-distance electricity transmission will need to increase by a whopping 60 percent by 2030, and perhaps even triple by 2050 to meet Biden’s objectives.
FERC has the authority to determine how this will happen. Unfortunately, FERC may also be part of the problem.
WITH THE RECENT CONFIRMATION of former D.C. Public Service Commission Chairman Willie Phillips, FERC now has a 3-2 Democratic majority. In theory, this indicates an agency apt to act favorably toward the clean-energy policies Biden touted in his campaign.
But Phillips, who was confirmed unanimously by voice vote in the Senate after smooth hearings, may not exactly be a strident voice for clean-energy reform. Neil Chatterjee, former FERC chairman and energy policy adviser for Mitch McConnell, highlighted Phillips’s potential as an independent operator. “I grimace—and I think he does too—at some of the characterizations that, now there are three Democrats on the commission, that suddenly is going to unlock the Commission’s agenda. I don’t think he’s going to go in there and be some partisan actor.” Chatterjee himself was said to have been pushed out of FERC by President Trump, after he indicated support for considering carbon pricing.
As the Revolving Door Project’s Dorothy Slater illuminates, Phillips’s general inoffensiveness may be less about actual “independence” and more accredited to his pro-corporate past. While on the D.C. Commission, Phillips approved energy giant Exelon’s acquisition of Pepco, increasing its monopoly power and resulting in higher consumer costs.
The acquisition was massively unpopular among local residents and officials, requiring three attempts before squeezing through. But the deal, happening amid Pepco coincidentally donating $25 million to the city, was a large favor to Exelon, a company notorious for relying on fossil fuels and fighting renewables. Slater notes that the deal felt more dubious given Phillips’s membership on the Keystone Policy Center Energy Board, alongside representatives from Exelon, among others.
Phillips’s posture will soon become clear. FERC is set to address a number of issues, including consumer protection from market manipulation, integrating environmental justice and equity into decision-making, and potentially revising natural gas pipeline and regional transmission regulatory regimes. FERC will also be pushing compliance of Order No. 2222, which allows “distributed” energy resources, such as rooftop solar and battery storage projects, to participate in organized wholesale markets. Doing so would lower costs for consumers, provide more grid flexibility, and level the playing field for renewable and nontraditional energy sources.
“I personally believe ten years from now, we may look back at Order No. 2222 and say it was the single most significant act the Commission could have taken to really impact decarbonization and fight climate change,” Chatterjee says.
Nevertheless, even if all three Democrats pursued a climate-friendly agenda, they could only accomplish so much. Under its current structure, FERC is chiefly concerned with ensuring “just and reasonable rates” in wholesale energy transactions. It operates more as a market regulator than anything else; environmental concerns are ancillary to rate maintenance. And if Chatterjee is proven correct about Phillips practically serving as a swing vote, anyone counting on a wholehearted governmental effort against climate change may need to temper their expectations.
Beyond adhering to market-first principles, FERC also sits on one side of the revolving door between government and industry. “The governance of our grid right now is extremely fragmented, and is governed by people who not only do not have an interest in fixing the problems, but are actively thwarting those efforts out of their own economic interests,” Rep. Sean Casten (D-IL), one of the chief congressional advocates for empowering FERC, said in an interview.
Beyond adhering to market-first principles, FERC also sits on one side of the revolving door between government and industry.
Phillips’s background is part of a much larger pattern, wherein FERC commissioners come from, or proceed to work for, the same companies they supposedly “independently” regulate. Almost all of FERC’s former commissioners have gone on to energy companies, or law and consultancy firms that assist them. Between mid-2010 and 2016, the Commission met with large energy company representatives at least 93 times, while meeting with environmental and public-interest groups just 17 times. FERC staff have admitted financial holdings in energy companies, including Exelon and Pepco, the very companies involved in the unpopular acquisition Phillips voted for.
The consequences of this corporate influence can be seen in several ways. FERC has approved hundreds of pipelines, seldom denying approval, while granting projects eminent domain and thus near-immunity from being stopped. It has approved unnecessary pipelines that leave consumers, rather than private shareholders, accountable for the cost, greenlit projects that ignore clear violations, and dismissed stark disapproval of projects from elected officials, environmental regulators, and thousands of everyday people.
FERC, LIKE OTHER AGENCIES, is also inhibited by federalism. On one hand, FERC-ordained projects have been able to steamroll through local protests, fortified by protections like eminent domain. On the other hand, FERC faces particularly staunch legal resistance from corporate interests when seeking to protect consumers or the environment. And the commissioners themselves are subject to the same politicians who have obstructed climate legislation on the national level. Commissioners must maintain approval from the likes of Sen. Joe Manchin (D-WV), who has reaped millions of dollars from coal companies he himself founded.
So, this is a crisis of both bad governance and bad policy. FERC addresses issues specifically related to the environment’s welfare, but statutorily has limited purview over protecting it. And commissioners face job insecurity should they choose to wholly pursue that jurisdiction.
Rep. Casten is hoping to not only bring more awareness to FERC (most notably through his #HotFERCSummer campaign), but also take on some of its insufficiencies so it serves the public, rather than the select few. “I’m really deathly afraid of our complete failure to act on climate,” Casten says, “and our complete failure as a country to make the link between our environmental policy and energy policy.”
Casten has co-introduced numerous bills seeking to strengthen FERC. One provision would force FERC to more quickly respond to requests for rehearing orders on any of its decisions; another would require FERC to issue a rule on interregional transmission planning, ensuring projects provide benefits that go beyond reliability and affordability—including carbon emission reductions.
His most consequential bill, the Energy PRICE Act, would direct FERC to oblige utilities to account for greenhouse gas emissions when setting rates. This would more directly grant FERC the ability to account for the environment. Activists, supported by Sens. Bernie Sanders and Elizabeth Warren, have gone even further, lobbying for FERC to be transformed into the Federal Renewable Energy Commission.
THIS IS NOT TO SAY THAT FERC is a total failure. It has certainly stepped in to protect consumers and the environment before. Some commissioners have done much to push the envelope. And recent developments are encouraging: Order No. 2222, an openness to modify rules to prevent utilities from passing on lobbying expenses to ratepayers, the establishment of an Office of Public Participation. FERC has warmed to the idea that they indeed can consider the impact of a project’s emissions. The bipartisan infrastructure bill opens the door for FERC to have as much ability to site electrical transmission lines as they do natural gas pipelines, which would allow the necessary transport of excess renewable generation.
The question is whether these are the rare exceptions, or a preview of what’s to come. The stakes are so high—more than 4 in 10 people in America live in a county affected by climate disasters—that more aggressive policy action is a societal imperative.
Of course, taking on climate change is not the responsibility of FERC alone. Its ability to support an energy transition could be empowered by a stronger legislative response, including substantial funding for renewable development. But FERC will need more of a clear mandate as well. Agencies carrying out compliance are still accountable to whatever their own mandates are; until FERC is statutorily obliged to care for the environment, it will have that much more leeway to avoid doing so.
Chatterjee approved numerous pipeline projects while serving as commissioner. When responding to anti-pipeline protesters, he said that while he empathized with their frustrations, “the reality is to change the process, there have to be statutory changes” through Congress.
The point is that “independent” agencies cannot simply be counted on to carry out the agenda of the president at the time—that would make them definitionally not independent. Instead, the stakes are about reimagining a government in which no matter who is appointed to agencies like FERC, the welfare of the environment, and all the living beings that rely on it, is no longer deemed secondary to the market.
