On October 31, 2018, FERC Chairman Neil Chatterjee submitted comments (“October 31 Comments”) on the U.S. Environmental Protection Agency’s (“EPA”) proposed rule, the Affordable Clean Energy rule (“ACE Rule”).  If approved, the ACE Rule would implement new regulations for states to develop plans to reduce Greenhouse Gas (“GHG”) emissions from certain existing Electric Utility Generating Units.  Chairman Chatterjee’s comments generally supported the ACE Rule.

The EPA proposed the ACE Rule as a replacement to the EPA’s first GHG reduction rule, the Clean Power Plan (“CPP”).  The EPA proposed to repeal the CPP on October 16, 2017, on the grounds that the CPP exceeded its legal authority.  The EPA has stated that it intends for the proposed ACE Rule to correct the legal flaws present in the CPP, namely the balance between federal and state responsibilities in the CPP implementation.  Chairman Chatterjee submitted the October 31 Comments to provide his feedback, as FERC’s Chairman, on the ACE Rule.

Prior to the adoption of the CPP on August 3, 2015, FERC staff held four public technical conferences to assess impacts of the CPP from the perspectives of various stakeholders (i.e., state utility commissions, regulated entities, and public interest organizations).  After the CPP was adopted, FERC Staff prepared a White Paper on Guidance Principles for Clean Power Plan Modeling in AD16-14 to assist transmission planning entities in analyzing the CPP and associated compliance plans.  FERC halted any further contribution on implementation of the CPP, however, after the CPP was held in abeyance by the U.S. Supreme Court in February 2016.  In his October 31 Comments, Chairman Chatterjee addressed the proposal to repeal the CPP and, in doing so, stated that he was offering the EPA the benefit of the information FERC had previously gathered from its assessment of the CPP.  Chairman Chatterjee stated that while FERC staff has not conducted a full analysis of the ACE Rule’s impact on the bulk-power system, the ACE Rule appears to correct some of the CPP deficiencies, including those pertaining to grid reliability.  Chairman Chatterjee also addressed several concerns with the CPP as originally proposed, in the event that it is implemented in the future.  First, Chairman Chatterjee addressed significant changes in the power sector occurring since the CPP’s adoption in 2015 that may cause unintended consequences if the CPP were implemented.  According to the Department of Energy’s (“DOE”) Staff Report on Electricity Markets and Reliability, there have been significant retirements of baseload coal and nuclear units since 2010 due to low natural gas prices, wholesale competition, low customer demand growth, regulation-driven cost increases, and the growth of renewable resources.  Chairman Chatterjee advised the EPA that these consequences may be unintentionally exacerbated should the CPP be implemented.  Second, Chairman Chatterjee discussed FERC’s rulemaking proceeding in which it is evaluating the resilience of the bulk-power system, independent of the EPA’s and DOE’s own evaluations.  Chairman Chatterjee explained that the purpose of FERC’s proceeding, initiated in 2018, is to examine electric grid resiliency and the effect of state subsidies on the long-term viability of generation capacity markets, which involve complex and difficult issues that may be challenged by the CPP.  Finally, Chairman Chatterjee argued that the CPP as originally proposed may cause the EPA to deviate from its clear delegated authority under the Clean Air Act in a manner that would affect FERC’s exercise of its statutory authority under the Federal Power Act.

Chairman Chatterjee clarified that he was offering his comments as FERC’s Chairman,  and not as a reflection of FERC’s views.  A copy of Chairman Chatterjee’s comments is available here.  The text of the ACE Rule is available here.