Media Statements & Speeches
Commissioner Richard Glick Statement
December 20, 2018
Docket No. ER18-1639-000
Dissent regarding Constellation Mystic Power, LLC
Today’s order marks the fourth time in six months that the Commission has addressed “fuel security” in New England. I continue to believe that, in the first order, the Commission took the region down a deeply misguided path when it prematurely seized control of the fuel-security debate by finding ISO-NE’s tariff unjust and unreasonable on the ground that it did not give the ISO the authority to bail out resources that the ISO believes might, under the most conservative assumptions, be needed several years in the future.1 That decision short-circuited what could have otherwise been a productive debate about how to ensure that New England remains fuel-secure.2 That decision also further confined the fuel-security debate to options available under the Federal Power Act (FPA), even though it was evident at the time that the FPA is an inadequate vehicle for addressing many of the factors that go into fuel security.
I also dissented from the second fuel security order, which set Mystic’s proposed cost-of-service agreement for an expedited hearing.3 That order— issued just a week after the first order—proved the folly of the Commission’s decision to co-opt the New England fuel security debate and force it within the confines of the FPA. The record revealed that ISO-NE’s actual “fuel security” goal was to bail out the Everett LNG import facility, but to do so under the guise of the FPA. I explained that bailing out an LNG import facility under a statute enacted to regulate the wholesale sale and transmission of electricity was not only bad policy, but also a novel—and questionable—application of the Commission’s statutory authority. 4 Indeed, that approach created exactly the kind of uncertainty one might think the Commission would want to avoid if it took the long-term fuel security of the region seriously.
Notwithstanding those concerns, I supported the third fuel security order, which approved ISO-NE’s proposal to create a short-lived mechanism for retaining a generating resource5 that may be needed for fuel security while the ISO develops a market-based approaching to valuing fuel-secure attributes.6 Although I reiterated my conviction that the Commission erred in finding the ISO’s existing tariff unjust and unreasonable, I concluded that the ISO’s filing fell within the range of just and reasonable rates created by the FPA.7 In other words, I concluded that, although it was not the best outcome, and still should not have been required in the first place, it would suffice for a couple of years while the region worked on a better approach.8
With today’s order, my underlying concerns about the Commission’s approach have now come to fruition. As explained below, the Commission is attempting to use the FPA to bail out an LNG import facility—certainly not the type of facility that Congress had in mind when it gave the Commission authority to regulate the wholesale sale and transmission of electricity. To provide a plausible jurisdictional hook for its actions, the Commission is also bailing out 1,700 MW of gas-fired generation, all at a price tag that will cost consumers hundreds of millions of dollars. I continue to believe that, had the Commission convened a process to examine fuel security in New England more holistically, the region might well have produced a solution that is more effective, less costly, and on far firmer legal footing.
I dissent from today’s order because I believe that the Commission cannot and should not use its authority over wholesale sales of electricity to bail out an LNG import facility. Section 205 of the Federal Power Act authorizes the Commission to ensure that “‘[a]ll rates and charges made, demanded, or received by any public utility for or in connection with’ interstate wholesale [electric] sales” as well as “‘all rules and regulations affecting or pertaining to such rates or charges’” are just and reasonable.9 The Supreme Court, however, has explained that a literal reading of the statute “could extend FERC’s power to some surprising places,” including the “inputs” used to produce electricity, such as “steel, fuel, and labor.”10 Accordingly, the Court concluded that the Commission’s jurisdiction under section 205 extends only to rules or practices that “directly affect the wholesale rate.”11
Today’s order is inconsistent with that standard. The Commission concludes that it can use the FPA to bail out an LNG import facility simply because that LNG import facility has an undefined and unexplained “extremely close relationship” to the Mystic facility.12 Relying entirely on that amorphous relationship, the Commission gives itself the authority to set the cost-of-service rate for a free-standing LNG import facility. Indeed, the Commission proceeds to determine not only the rules and regulations governing all of the Everett LNG import facility’s costs, including its fixed costs, but also rules and regulations regarding that facility’s sales to local distribution companies—i.e., third parties with no involvement in the electricity sector.13 The only connection that those local sales of natural gas have to the wholesale sales subject to the Commission’s jurisdiction is that they involve the same source of LNG.14 I fail to see how that connection provides the type of “direct effect” that the Court required in EPSA.
The fact that Exelon, which owns Mystic, is also purchasing the Everett LNG import facility does nothing to bolster the Commission’s theory of jurisdiction.15 The bottom line is that the Commission is attempting to regulate the costs incurred and sales made by a non-jurisdictional facility—a legal defect that cannot be cured by bringing that non-jurisdictional facility under the same corporate parent as a jurisdictional one. All Exelon’s purchase of the Everett LNG import facility achieves is to highlight what Commissioner Powelson aptly described as “an unprecedented exercise of market power.”16
Equally concerning is the fact that the Commission’s theory of jurisdiction lacks any principled limits. The Commission appears to conclude that, because Mystic can currently be supplied only by the Everett LNG import facility, any cost needed to support that facility is within the Commission’s jurisdiction. It should go without saying that this thinking would extend FERC’s power to some “surprising places.”17 Indeed, as noted, today’s order regulates not just the inputs to the Mystic facility (e.g., the cost of natural gas), but also the inputs to those inputs, including the operations, maintenance, and fixed costs of the Everett LNG import facility, its sales to gas distribution companies, and even the incentives regarding how and when it accepts international shipments of LNG.18
Although it is true that the costs of the Everett LNG import facility will, in turn, eventually affect the costs that go into Mystic’s production of wholesale electricity, “‘an agency may not bootstrap itself into an area in which it has no jurisdiction.’”19 The Commission’s apparent belief that it can regulate an LNG import facility because the costs of that facility will affect the costs of an electric generation facility is simply too attenuated basis for exercising jurisdiction under the FPA. Taken to its logical conclusion, the Commission’s jurisdictional theory would sanction using the FPA to require a generator to cover the cost of financing a natural gas pipeline or even the cost of operating a Russian LNG export facility.20 The Commission’s theory is, in other words, precisely the type of “hyperliteral reading” of section 205 that the Supreme Court explicitly rejected in EPSA.21
A more reasonable construction of the Commission’s jurisdiction would be to limit its reach to the entities that can or actually do participate directly in the wholesale market for electricity. This provides the “sufficiently close relationship to the wholesale sale [of electricity]” that I believe is required to invoke Commission jurisdiction.22
Unfortunately for the majority, this construction will not achieve the its stated goals in this proceeding. As noted, the record indicates that the region’s supposed fuel security need is not actually the Mystic facility, but rather the Everett LNG import facility, which provides an additional source of natural gas during periods when the region’s natural gas pipeline capacity is fully utilized. 23 Although the Mystic facility provides the most direct means of burning that gas to produce electricity, it is not itself needed to maintain the reliability of the electricity grid. It may ultimately be that the Commission lacks any authority to achieve its goal of bailing out the Everett LNG Facility. But, if so, that is the result of Congress’s statutory design and beyond our control to alter.24
On a broader level, the jurisdictional puzzle in which the Commission now finds itself only reinforces the fundamental mistake that the Commission made in rushing to seize control of the debate over fuel security in New England and dictate a particular outcome. That outcome, “[i]ndividual, ad hoc contracts with particular resources whose retirement might, under the most conservative assumptions, create a fuel security concern[,] is no way to address a region’s long-term fuel security.”25 That is particularly true here, where the purported problem that the ISO is actually attempting to solve involves sources of fuel, not particular generation resources. The Commission—and all stakeholders save for Exelon—would have been far better served had the Commission taken a measured approach that provided the region time to examine more effective solutions, including new transmission facilities, gas demand response, and other options for addressing directly the source of the ISO’s concerns. Each successive step that the Commission takes in this direction only entrenches a misguided solution—one that customers will be left financing for many years to come.
For these reasons, I respectfully dissent.
- 1 ISO New England Inc., 164 FERC ¶ 61,003, at 3 (2018) (Glick, Comm’r, dissenting); see also Constellation Mystic Power, LLC, 164 FERC ¶ 61,022, at 4-5 (2018) (Powelson, Comm’r, dissenting) (discussing a suite of potentially more cost-effective approaches to fuel security in New England and decrying the fact that “no one is considering these options because ISO New England, Exelon, and now the Commission, all agree that Mystic – or something similar – is necessary in the short-term”).
- 2 ISO New England Inc., 164 FERC ¶ 61,003 at 3-4 (Glick, Comm’r, dissenting).
- 3 Constellation Mystic Power, LLC, 164 FERC ¶ 61,022 at 1 (Glick, Comm’r, dissenting).
- 4 Id. at 2-3.
- 5 ISO-NE, Transmission, Markets and Services Tariff § III.18.104.22.168.5A (discussing the “Fuel Security Reliability Review” as it applies to an “Existing Generating Capacity Resource,”); id. § I.2.2 (defining an “Existing Generating Capacity Resource” as “a type of resource participating in the Forward Capacity Market”).
- 6 ISO New England Inc., 165 FERC ¶ 61,202 (2018) (Glick, Comm’r, concurring).
- 7 Id. at 1-2; see also Emera Maine v. FERC, 854 F.3d 9, 23 (D.C. Cir. 2017) (explaining that the FPA creates a “‘broad’ range of potentially just and reasonable” rates”).
- 8 Cf. Petal Gas Storage, L.L.C. v. FERC, 496 F.3d 695, 703 (D.C. Cir. 2007) (“FERC is not required to choose the best solution, only a reasonable one.”).
- 9 FERC v. Elec. Power Supply Ass’n, 136 S. Ct. 760, 773 (2016), as revised (Jan. 28, 2016) (EPSA) (quoting 16 U.S.C. § 824d(a) (2012)).
- 10 Id at 775.
- 11 Id.; see also id. (“As we have explained in addressing similar terms like ‘relating to’ or ‘in connection with,’ a non-hyperliteral reading is needed to prevent the statute from assuming near-infinite breadth.”).
- 12 Constellation Mystic Power, LLC, 165 FERC ¶ 61,267, at P 106 (2018). In grasping for precedent to support its theory of jurisdiction, the Commission cites to the same cases it relied upon in its July 13 order summarily deciding the jurisdictional question. Id. n.230. As I explained in my dissent from that order, those cases are inapt. See Constellation Mystic Power, LLC, 164 FERC ¶ 61,022 at 3 n.7 (Glick, Comm’r, dissenting).
- 13 See, e.g., Constellation Mystic Power, LLC, 165 FERC ¶ 61,267 at PP 106-107, 133-136, 163-164.
- 14 Although not determinative in interpreting the FPA, it is notable that the Commission appears to lacks authority to regulate these sales of natural gas even under the NGA because they are “first sales” excluded from Commission regulation by Natural Gas Policy Act, 15 U.S.C. § 3301(21)(A) (2018). Distrigas of Mass. LLC, 124 FERC ¶ 61,039, at PP 15-18 (2008); see Initial Brief of NextEra Energy Resources, LLC & FirstLight Power Resources, Inc at 30 n.103. Regulating natural gas transactions under the FPA that are precluded from Commission regulation under the NGA should, at the very least, cause the Commission to take a harder look at its jurisdictional than it has to date.
- 15 Constellation Mystic Power, LLC, 164 FERC ¶ 61,022 at P 21.
- 16 Id. at 5 (Powelson, Comm’r, dissenting).
- 17 EPSA, 136 S. Ct. at 775.
- 18 See supra note 13.
- 19 Adams Fruit Co. v. Barrett, 494 U.S. 638, 650 (1990) (quoting Fed. Maritime Comm’n v. Seatrain Lines, Inc., 411 U.S. 726, 745 (1973)).
- 20 Constellation Mystic Power, LLC, 164 FERC ¶ 61,022 at 3 n.6 (Glick, Comm’r, dissenting) (citing Jon Chesto, Russian LNG is unloaded in Everett; the supplier (but not gas) faces US sanctions, Boston Globe (Jan. 30, 2018), https://www.bostonglobe.com/ business/2018/01/29/tanker-unloads-lng-everett-terminal-that-contains-russian-gas/rewj1wKjajaKtLp79irzTI/story.html (“A giant tanker of liquefied natural gas that unloaded at the Distrigas terminal in Everett over the past two days included fuel from a plant in Siberia owned by a Russian company under US sanctions.”)).
- 21 EPSA, 136 S. Ct. at 775.
- 22 Constellation Mystic Power, LLC, 164 FERC ¶ 61,022 at 3 (Glick, Comm’r, dissenting).
- 23 Potomac Economics Comments, ER18-1509-000, at 4-9. Indeed, ISO-NE’s expert witness recognizes that the supposed fuel security benefit of the Mystic facility is entirely due to its use of LNG. In other words, it is the access to LNG, not the Mystic facility, that is valuable for ISO-NE. The Commission’s only response is a single line about potential load shedding, which references a deterministic analysis that fails to explain its underlying assumption that the Everett LNG import facility would not operate in a significantly different manner without Mystic. Constellation Mystic Power, LLC, 165 FERC ¶ 61,267 at P 8. Relying on the Everett LNG import facility’s historical injections when Mystic was in service as a baseline for how it would operate without Mystic, its largest customer, is misleading. However, even using those flawed assumptions, ISO-NE’s own analysis suggests that the Everett LNG import facility can increase its LNG injections and avoid load shedding. See Brandien Testimony at 43.
24 Atl. City Elec. Co. v. FERC, 295 F.3d 1, 8 (D.C. Cir. 2002) (“As a federal agency, FERC is a ‘creature of statute’ . . . . In the absence of statutory authorization for its act, an agency’s ‘action is plainly contrary to law and cannot stand.’” (quoting Michigan v. EPA, 268 F.3d 1075, 1081 (D.C. Cir. 2001)).
- 25 ISO New England Inc., 165 FERC ¶ 61,202 at 2 (Glick, Comm’r, concurring).
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