Today, the U.S. Senate Committee on Energy and Natural Resources held a standing-room only hearing titled “Keeping the lights on — Are we doing enough to ensure the reliability and security of the U.S. electric grid?” While the hearing was organized into two panels focusing on cyber security and physical security, the questioning from the lawmakers focused on physical security, particularly whether tighter controls need to be placed on information concerning critical energy infrastructure and whether the expected retirement of generation resources within the footprint of PJM Interconnection, L.L.C. (PJM) poses reliability concerns.
The first panel included Cheryl LaFleur, acting Federal Energy Regulatory Commission (FERC) chairman; Gerry Cauley, North American Electric Reliability Corporation president and CEO; Sue Kelly, president and CEO of the American Public Power Association; and Colette Honorable, President of the National Association of Regulatory Utility Commissioners (NARUC). The panelists fielded several questions on the response to the April 2013 sniper attack on Pacific Gas & Electric Company’s Metcalf transmission substation and information recently published in the Wall Street Journal concerning the transmission grid’s vulnerability to attack. Both Senator Mary Landrieu (D-LA), Chair of the Committee, and Ranking Member Lisa Murkowski (R-AK) asked LaFleur about FERC’s handling of sensitive infrastructure data, including measures to properly classify documents and ensure a culture of compliance. Murkowski said she would submit interrogatories to FERC concerning the transmission grid vulnerability study that was the subject of the Wall Street Journal’s March 12, 2014 story. LaFleur said she believes that FERC has a culture of compliance, noting that FERC is privy to confidential information every day, and there have not been leaks in the past. However, she affirmed her commitment to a compliance culture that starts at the top and extends to every person within the agency.
The panelists also discussed the measures that have been undertaken since the Metcalf incident to increase awareness among law enforcement and first responders to threats to energy infrastructure. Several lawmakers inquired about the benefits of distributed generation in contributing to overall grid reliability - a benefit that NARUC President Honorable said needs to be balanced against the cost to other consumers and the impact on utilities.
With sometimes spirited questioning from Senators Joseph Manchin (D-WV) and Robert Portman (R-OH), the tail end of the first panel focused on the effect of coal-fired retirements in PJM. In response to questions by Senator Portman about the recent polar vortex, LaFleur affirmed that FERC must consider both reliability and price, and she stated that FERC needs to make sure that the rules for capacity markets are written correctly so that base load capacity “gets what it needs” to remain in service. Portman also expressed his desire for FERC to perform analyses for the Environmental Protection Agency (EPA) concerning the impact of its regulations on generation retirements. Manchin cited the recent statement by American Electric Power Service Corp.’s (AEP) CEO that, during the recent polar vortex, 89 percent of the AEP coal units slated for retirement next year were called upon to keep the lights on. He asked LaFleur whether FERC was picking winners and losers in the energy markets based on fuel source. LaFleur responded that FERC needs to be fuel-neutral, but is guided by reliability considerations.
The second panel continued to concentrate on the effect of retirements in PJM and whether sufficient infrastructure exists for gas-fired resources to perform the baseload function traditionally reserved for coal-fired and nuclear resources. The panelists included: Philip D. Moeller, FERC Commissioner; Michael J. Kormos, executive vice president-operations of PJM; Nicholas Akins, Chairman, President, and CEO, American Electric Power Service Corp.; Thad Hill, President and Chief Operating Officer, Calpine Corp.; Cheryl Roberto, Associate Vice President, Clean Energy, Environmental Defense Fund; and Jim Hunter, Utilities Director of the International Brotherhood of Electrical Workers (IBEW).
The general consensus of the panelists was that timing is critical.While natural gas is plentiful, there are transportation bottlenecks and inadequate infrastructure in areas, such as the Midwest, that have largely been dependent on coal. This infrastructure will take time to construct, while a significant number of coal-fired units will retire with the implementation of environmental regulations in a year. Kormos of PJM stated that the “reliability safety valve” contained in the EPA’s Mercury and Air Toxics Standards (MATS) rule was critical and similar provisions would be very important in future regulations issued by EPA.
Senator Tammy Baldwin (D-WI) asked whether the FERC-jurisdictional capacity markets were performing as needed and whether changes were required, to which Moeller replied that FERC currently is considering these issues, but perhaps a higher value for on-site fuel sources might be necessary. Several questions were posed about the ability of FERC to provide “reliability must-run” (RMR) agreements to retiring units, yet witnesses, such as Hunter, pointed out that, without new legislation, generators operating pursuant to RMR agreements would be exposed to lawsuits and penalties for environmental noncompliance.
Please click here for more information on the hearing.