On November 29 and 30, 2011, the Federal Energy Regulatory Commission (“FERC” or the “Commission”) held a Commissioner-led Technical Conference on electric reliability issues.  Of note, the Commission devoted an entire day of the conference to the impact of the EPA’s regulations on electric reliability. The conference produced an active discussion and debate among FERC Commissioners, EPA leadership, industry leaders, and state regulators about whether EPA’s new power plant rules will degrade electric reliability and what, if anything, FERC should be doing to evaluate and mitigate those risks. A copy of prepared testimony submitted by all panelists is available here.

The first day of the conference was devoted to NERC activities and processes.  At the November 29 session, there were two panels, entitled: (1) Identifying Priorities for NERC Activities; and (2) Incorporating Lessons Learned into a More Reliable Grid.  Participants on Panel 1 were asked to provide general views on “how NERC’s prioritization tool has been working” and address specific issues related to the NERC compliance and enforcement process.   Panelists on Panel 2 were asked to address how “lessons learned” are incorporated into NERC priorities, including lessons from events analysis and how those get disseminated to industry.  Further, panelists on Panel 2 were asked if there is a “feedback loop” into the Reliability Standards development process to locate gaps in the process.

The November 30 session was dedicated to the EPA discussion and consisted of two panels.  The first panel, Panel 3, included “Presentations and Discussion on the Current State of Processes for Identifying Unit-Specific Local or Regional Reliability Issues in Response to Final EPA Regulations.”  Panelists were asked to give details about their local and regional processes to identify unit-specific reliability issues in connection with final EPA environmental requirements.  Panelists were also asked for details surrounding proposed exemption processes and whether they supported exemption processes identified by the RTOs or other entities in comments to the EPA.  The second panel, Panel 4, was titled “Discussion on multi-jurisdictional processes.”  Panelists were asked how they coordinate processes like state integrated resource planning with reliability requirements and the “safety valve proposal.”  They were also asked about what role the Commission or the Department of Energy (“DOE”) should play in reliability solutions due to retirements.

The EPA-related sessions produced a sometimes spirited debate on what has become a controversial issue – whether FERC has done enough to study the reliability impact of the EPA rules and what role FERC should play in communicating reliability risks to EPA.  EPA Assistant Administrator Gina McCarthy began the session with prepared remarks, in which she reiterated the public health concerns driving the EPA rules and pledged that, “the lights will not go out in the future as a result of EPA rules.” 

Kicking off the subsequent panel discussion, NERC’s Mark Lauby presented the results of NERC’s most recent annual reliability assessment, which predicted a significant amount of generation retirements as a result of the EPA rules.  Lauby also voiced concern over the reliability impacts of taking down large portions of the nation’s coal fleet for retrofits: “NERC is concerned about the risk to reliability from retrofitting by 2015, environmental controls in over 500 units, representing over 250 gigawatts of capacity driven by the utility air toxics rule,” Lauby said.

In the panel discussions, industry representatives, including regional transmission organizations (“RTOs”), utilities, NERC, and state regulatory commissions, debated whether the EPA rules would degrade electric reliability and what role FERC should play. 

Chairman Wellinghoff argued that he sees no significant role for FERC, arguing that “planning authorities… had generally indicated that they are able to step up and address these issues.”  Commissioner LaFleur noted that “while the panelists disagree on some things, maybe we would say disagree on most things, I believe they all agree that coordination and flexibility will be needed.”  Commissioner Moeller voiced significant concerns about the reliability impacts of the EPA rules and suggested that “generators should not have to choose between violating reliability standards and clean air standards.”  Commissioner Norris remarked that he is “sufficiently satisfied that the reliability of the electric grid can be adequately maintained as compliance with EPA regulations is achieved.”  (Commissioner Spitzer did not participate.)

The day after the conference, the DOE and EPA jointly presented a new DOE report entitled, Resource Adequacy Implications of Forthcoming EPA Air Quality Regulations, which argues that the EPA’s Cross-State Air Pollution Rule (“CSAPR”) and the Mercury and Air Toxics Standards (“MATS”) will not affect grid reliability.