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September 18, 2013

Would Ron Binz Tip the Scales at FERC?

September 18, 2013
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At the outset of Ron Binz’s confirmation hearing September 17th Senate Energy and Natural Resources Chairman Ron Wyden defended Binz preemptively against attacks from coal interests. “[The Federal Energy Regulatory Commission] has no authority to regulate coal,” Wyden said. “That means it has no authority to regulate or license coal-burning electric generating plants or authority to tell utilities which fuel to use to generate electricity. Most importantly, it has no authority to impose unjust or unreasonable rates or impose discriminatory or preferential charges on coal or coal-generated electricity. That means no backdoor taxes on coal or coal-generated electricity.”

Given that the Institute for Energy Research has been at the forefront in warning against the hidden taxes imposed by FERC policy, we feel the need to respond to these statements. Simply put, there is indeed a war on coal, and FERC is part of it.

No “Pro-Coal” Chairman Allowed

If Senator Wyden is correct that FERC has no authority to regulate coal, then why would Senate Majority Leader Harry Reid push aside President Obama’s first pick for the job for being “too pro-coal”? FERC Commissioner John Norris is more moderate, sure, but he rejected the “pro-coal” label. Perhaps he meant he is less anti-coal than Binz. About the internal politics surrounding this nomination, Commissioner Norris wrote the following:

Sen. Reid opposed my appointment to become chairman of FERC because I was ‘too pro-coal.’ His chief of staff confirmed that with me and cited to me a vote I made when on the Iowa Utilities Board, upon which they based this claim. I expressed to him that is a total mischaracterization of my record and requested an apology.

Senator Reid’s staff later dismissed Norris’s statements. If there’s no way to be anti-coal at FERC, then why did Majority Leader Reid go out of his way to make sure his hand picked anti-coal guy was nominated to the FERC chairmanship?

No Coal-Neutral Rules Allowed

If Senator Wyden’s characterization of FERC is right, then why is the anti-coal front so obsessed with FERC’s recent rulemakings? See, for example, the Natural Resource Defense Council’s Project for Sustainable FERC Energy Policy, which pushes FERC policies that favor “sustainable” sources of power. What does “sustainable FERC energy policy” even mean if FERC has nothing to do with energy sources?

See also the wind lobby’s infatuation with recent FERC actions: “Federal regulators and grid operators have made substantial progress in how transmission is planned, paid for, and operated. But more can be done.”

Spotlight on FERC’s Transmission Rules

The answer to the questions above is clear—FERC policy does affect resource decisions, if sometimes in nuanced and indirect ways, and FERC is not “resource neutral.” Recent rulemakings like FERC’s Order No. 1000, driven by the current chairman, have dramatically favored remotely-located and intermittent sources of power like wind, at the expense of easy-to-site and reliable sources like coal. FERC accomplished that by socializing the transmission costs of power projects mandated by “public policy,” by which FERC means the various state-level wind power mandates.

As an article from the National Renewable Energy Laboratory put it:

Order 1000 is likely to have a positive impact on renewable energy in two main ways:

  • It requires that transmission plans take into account public policy requirements such as state or federal renewable portfolio standards (RPS).
  • It prescribes principles for regional transmission cost allocations, which assure that benefits and costs are appropriately distributed.

In short, FERC gives a big boost to wind producers and straddles everyone with the costs. One huge consequence is the further undermining of reliable baseload units like coal and nuclear power plants. These units are already closing at alarming rates, which presents a major risk to grid reliability. These effects are hard to fully understand, and we would welcome the opportunity to discuss these matters with Chairman Wyden, who claims to oppose rules that pick winners and losers. FERC also recently sided with “demand response” at the expense of real generation by overpricing demand response in FERC markets.

Spotlight on Binz’s Character

During the hearing Binz claimed that he never spoke with anyone in the White House specifically about how his FERC chairmanship might fit into the President’s broader climate action plan and anti-coal agenda. About his nomination’s timing (coming on the heels of the President’s June 25th climate speech), Binz said, “As far as I’m concerned, that’s a coincidence.”

However, he also admitted to Senator Lisa Murkowski that he was not upfront and honest with her about his involvement with lobbyists and the PR firm hired to help his confirmation. Today he backtracked on his previous statement that he was not directly involved with the PR firm after emails surfaced that plainly show otherwise. At the hearing, Senator Murkowski said that these emails show that Binz essentially tapped “a shadow team of lobbyists and PR experts that have been helping throughout” the process.

Given his conflicting statements, any promise Binz gives now about not having an anti-coal agenda should be taken with a grain of salt. His true colors may only come out with another Freedom of Information Act request.

Conclusion

FERC does have a very clear role in the war on coal, but a lot depends on the chairman. The internal political maneuvering of Majority Leader Harry Reid suggests that the FERC chairman may have powers we don’t fully understand yet. On the other hand, FERC has already demonstrated its ability to favor one set of industries over another, as it did with Order No. 1000 in benefitting far-away renewables at the expense of coal and other reliable energy sources. Going forward, everyone who cares about the future of coal should keep the pressure on FERC nominees and reject any nominee that is hand picked for his anti-coal views.


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