The Full Transcript
Elizabeth Wason: Welcome to the Policy Leadership Series Podcast from Resources for the Future (RFF). In every episode, leading global decision makers speak to RFF President and CEO Richard G. Newell about big environmental and energy policy issues.
In this episode, Richard speaks to Allison Clements, who recently started her five-year term as a commissioner of FERC, the Federal Energy Regulatory Commission. Their conversation took place on January 25.
Richard G. Newell: Thanks so much for joining us.
Allison Clements: Thanks for having me, Richard.
Richard G. Newell: Absolutely. I'd like to start by discussing your professional experiences leading up to FERC. Your career in the energy sector spans two decades. You've worked on the electric grid and related issues with utilities, independent power producers, developers, lenders, nonprofits, and philanthropies—a really broad experience that you bring to FERC. How have these experiences shaped your views, and how might they further inform and guide your goals as a FERC commissioner?
Allison Clements: Sure, I did do a lot of different things in my career leading up to this current role. And part of that is because of the era we're in as an energy sector, and that is the transformation and the transition I came in.
The transition's been going on for a really long time. It started speeding up at the moment I was getting my professional legs under me. As an attorney in private practice, I was anxious to get on the front end of the transition in a world where law firms, consulting firms, banks, other types of equity shops, and the energy companies were not yet leaning in, if you will, to the transition piece. And so, after getting my grounding at law firms, I realized I wanted to go look at this from a policy perspective—a systems perspective.
I had this luxury, really, of being at the Natural Resources Defense Council for a decade, where, after spending some time as the organization's general council, I moved over back to my roots in energy regulatory law. I got the chance to say—not as a market participant, not as a particular state regulator or interest group—it was really okay if we want this to work.
If we want this energy transition to work, and we're looking at FERC, which is the federal agency responsible for economics—the economic regulator of all electric systems, as well as gas responsibility responsibilities—you've got to figure out how we make this fair and how we protect customers in the process. So, that's the path I took.
I left the energy field only because I moved out to Utah for six years, and the commute was rough, but then I did have the chance to do my own consulting work and work in philanthropy. Again, it was just another perch from which to look at this energy transition and say, “How do we facilitate this responsibly as quickly as we can, but continue to protect customers and reliability in the process?” Because it doesn't work. otherwise.
I never thought I would be a FERC commissioner. I think because of the time of the transition, when I started making decisions about my career, I assumed I would be shutting off doors that were state regulated. Of course, the world changes a lot in 20 years, and here we are. I feel really lucky to have a chance to be in this role for now.
Richard G. Newell: Thanks so much for sharing that. And that does give us some additional perspective on what you bring to your time as commissioner. So, tell us a little bit about your time at the commission—what it's been like so far given your background and depth of experience. I'd be interested to know whether or not what you've experienced has surprised you. And maybe give us a sense of what a typical day in the life of a FERC commissioner looks like, if you don't mind sharing an example.
Allison Clements: Sure. Well, starting any job in COVID is weird. I finally started coming into the office just to make sure this was all real—that I'm actually a commissioner—even though the agency is still closed. So, it makes for a different kickoff to the role, but I'd say no day is typical.
We spend a lot of time in the weeds in our decision making process. There's five commissioners. Because a lot of political attention gets put on the agency these days, we often say that 80 percent —(don't quote me on that percentage) of what we decide is unanimous. There are a lot of just nitty-gritty rate-design issues, whether it be for a natural gas pipeline, a transmission line, an oil pipeline. And that takes a good amount of time.
We get to spend the rest of the time how we like. I've got priorities that for me (I'm lucky) align with Chairman Glick’s priorities right now, in that the commission is spending a lot of time on them, and I have a chance to lean in. Right now, some of those include transmission and interconnection policy, which many of you are aware we’ve got a big proceeding open on; also, natural gas pipeline application review and how we might reform that, to update it to reflect the realities today.
We might get into this more, but another priority is just thinking of the ways that the impacts of climate change are impacting the systems, such that we hurry up and ensure we have the reliability standards in place—the planning mechanisms in place that are equipped to handle the challenges coming our way and that will increasingly come our way.
Richard G. Newell: I think you've started to jump into this a bit, but give us a sense—which I think you've started to do—of your goals as commissioner. What goals maybe you set for yourself and your time in the commission, which obviously also relates to the kind of the commission and where the commission overall is headed.
So, what new directions would you like to see the commission head in as well—your personal goals and also for the commission as a whole?
Allison Clements: Sure. Five years is not a long time for a term. My term, actually—I started a year after the clock started ticking. For all five of us, we're five individual commissioners with our own set of perspectives. Regardless of what political party we come from, we have different priorities. We share a lot; we also have things we want to emphasize, or not put in that bucket of things that we're going to try and cross off our list during our terms. So, I came in thinking, “Gosh, there's so much to do. We need a modern grid. We need to facilitate the grid of the future.” And then quickly, you have to start choosing between, “Well, should we try and start this docket or this docket?”
I will say one thing that is surprising, to your previous question: The staff at the commission are tremendous. Their collective expertise is—I always knew it would be strong. That's what this agency does. It's really impressive. They have so many hours in a day. And they're only able to prioritize some set of things, and the way that a non-chair commissioner tries to influence those things—you know, we each also have our own perspective on how we try and get that done.
So with all of that said, to me it's just catching up these rules. We have a transmission grid that was in large part designed—not built, but designed—over a hundred years ago, right? The basics of it haven't changed. You look back to times of significant investment in the electrical grid, and it came in for moments over generations when we built up the grid, but a lot of it is 50-plus years old. And the way that these really specific rules about how resources interconnect; what the requirements are for that interconnection; who pays for which part of the interconnection; what the reliability standard means for resources that are […] instead of conventional resources or traditional resources that hooked up. All of these things are a little bit out of date. And for 20 years, the commission has slowly but surely been trying to take pieces of it and update the roles, so they work. They don't have to do the same for every resource type, but they need to be fair. There's just a long list—transmission is at the top of it—of those types of things that need to get done.
The other issue priority besides transmission is on this idea that yes, we are economic regulators. And yes, our job is to, on the electric side, “ensure just and reasonable rights and avoid undue discrimination” (which is a mouthful), and we have a similar responsibility on the natural gas side. But the decisions we make impact people, and they increasingly impact people.
When you think about starting with these laws and applying the facts to the law, when you're making any given decision—in my mind, raising up the issues of equity for people needs to be part of how this agency successfully regulates on a going-forward basis.
Richard G. Newell: Yeah, that's really helpful. You brought up the energy transition earlier. I want to bring us back to that. So, turning to FERC's role in the energy transition and focusing on decisions that you expect to see coming over the course of this next year, what do you see coming in terms of key decisions by FERC on the energy system—whether it's the grid or natural gas or oil infrastructure—over the course of this year?
Allison Clements: That's a great question. To put a fine point on the transmission piece, we are going to take action, hopefully coming out of a broad record that stakeholders have engaged on over the last year. What reforms relative to transmission-system planning, interconnection, and cost allocation are required to continue to ensure that the system works fairly and is paid for from a fair perspective. I think that we will see action on that in the near term—in the coming months, that's going to be an important place for stakeholder engagement.
And it's important to say that there are lots of energy-transition, climate-related, clean-energy-related things that filter into the actions that the commission takes. But our job is to facilitate low-cost, affordable delivery of electricity. And part of reforming transmission is because we have a set of low-cost resources in the form of wind and solar that are far from where people live.
If we make smart investments in transmission infrastructure, we can deliver those resources. So, the total cost of transmission, plus generation of electricity delivered to customers, is global overall. That's the goal. All of those other things come into play, because that's where the market is going, and we need to keep our system caught up with the market. Otherwise, I also think you'll see action coming out of the commission on what we call our “certification policy statement,” which is the policy that has guided the commission in considering applications for new interstate gas pipelines—as well as, related to that, the way that we consider requests for LNG facilities, which has a different statutory standard for review. I think you'll see action on that, as well.
Richard G. Newell: One of the things that you just brought up, and one of the areas of interest—and I think it's fair to say considerable debate—is FERC's role in natural gas infrastructure permitting. Give us a sense of some of the key issues that you see FERC grappling with in terms of accounting for greenhouse gas emissions in natural gas infrastructure permitting. And also related to that: Do you see a potential role for the social cost of greenhouse gases and monetizing those impacts? There's physical emissions, and then there's potential monetization of that. What are you thinking about there?
Allison Clements: There's a lot there; we can spend the rest of the time on this question.
Under the Natural Gas Act, the commission's responsibility is to consider whether or not a certificate of public convenience and necessity—which is approval for a proposed gas pipeline—is in the public interest. We have a proxy test for whether or not that standard is met and that the needs analysis that the commission goes into. And what happens is the applicant who wants to build the pipeline comes in, and effectively at this point, they show us that they have contracts for offtakers. And if they have contracts for offtakers (this is a mass oversimplification) they typically, historically, have been awarded a certificate. Once that certificate is granted, the pipeline company can then use that certificate to get eminent domain authority to go in and take land to the extent it can’t get to an agreement with landowners to build that pipeline.
The policy that we follow (short of regulations, it’s a policy) stems back from 1999. So, in 1999, hydraulic fracturing for gas was not commercialized. We didn't have this real boom in natural domestic gas production by an order of magnitude. We're still operating under this late-’90s era, where Congress wanted to deregulate parts of the gas industry. We're not in that era anymore. It's a different time, and it's a different place. And the policy statement, in my mind, needs to be modernized. What does that mean? How do we think about whether or not a new pipeline is needed? We have a wholesome record, thanks to stakeholder participation, weighing in on that question. And the commission is thinking about next steps coming out of that.
There's a need determination. If a pipeline is needed, and this is all related, there's a NEPA analysis. And so, there's a question about whether or not greenhouse gas emissions related to pipeline infrastructure development lives in the needs-determination piece. So, in light of changing policies across the country—in light of the market dynamics, demand dynamics for this global commodity—should we be taking those things into account—determining in the first place whether or not we need the pipeline? And then, if we need the pipeline, what does the NEPA analysis include? And of course, the commission’s NEPA regulations are to follow the CEQ regulations.
So, in a lot of ways, we're looking to other branches of government to tell us how to consider and whether to consider greenhouse gas emissions. There's lots more to say about that. It's been controversial, but that's the point we're at right now.
Richard G. Newell: That's really helpful clarification—even for those who follow it—the distinction between the needs analysis and the NEPA work. Just to kind of review that back, it sounds like the place where there's more opportunity and likelihood of change or reform or updating is on the “needs” part, because FERC looks more toward a CEQ and broader federal regulatory guidance around NEPA for that portion. Is that correct?
So, for example, just to focus in: I mentioned this issue about the social cost of greenhouse gases. Is it right to say that would more likely come in the NEPA part, if in fact that was part of broader NEPA guidance? Or could it also come in the “needs” part, if one was taking a societal-need perspective, in addition to a local-offtaker-need perspective?
Allison Clements: Sure. Certainly we have stakeholders commenting on the record to the latter, to the idea that GHG emissions and the use of whether and how to monetize the impacts of GHG emissions should be considered in the needs. That is an open question. The courts have been clear that on the NEPA piece, the commission (at least in some set of circumstances) hasn't fulfilled this responsibility to consider the impact of reasonably foreseeable environmental impacts, which includes GHG emissions. And again, the social cost of carbon is a tool. The government has an interim approach, and you and others are working on what might come from that. The commission finds itself in a place where we need to be making these decisions.
Now, we appreciate these moving pieces in a lot of ways and find ourselves on the forefront (from my perspective) on some of these decisions where the path is not quite important.
Richard G. Newell: That's helpful. So sticking a bit with the interplay of FERC policy and climate policy that may be coming from other parts of government: In April of last year, FERC issued a policy statement clarifying the commission's authority to incorporate carbon prices into wholesale electricity markets where those carbon prices were being determined at the state level. So, do you expect that FERC's policy statement will encourage more states to adopt carbon pricing? And have you seen any significant changes or signs of change coming, in the month since the policy statement was issued?
Allison Clements: I haven't followed the states as closely, but I have been looking at regions like the New York Independent System Operator, where discussions around carbon pricing had taken place at the PJM, which is the Atlantic region having conversations. I know they're happening in other places. To me, that carbon pricing policy statement memorialized what is true, which is, if a region wants to bring to the commission tariff rules—market design rules that incorporate a value, a price, on carbon—the commission can consider that. It hasn't been done, and to be frank, my office hasn't made having those conversations a priority in the near term, relative to thinking about this transmission priority and this gas policy priority. But it remains to be seen whether or not that helps any set of stakeholders—any sort of states in regions to take us up on the invitation to bring it forward.
Richard G. Newell: Yeah, thanks for that update. So, I want to turn a bit to demand-side resources. In recent years, several FERC orders have reduced barriers for demand-side resources to participate in wholesale markets. What do you see, looking forward, for demand-side resources playing a role in the energy transition? How have past FERC orders enabled the participation of the resources, and is there additional work for FERC to do on this front?
Allison Clements: I'll answer that question first as a FERC commissioner, and then just as someone interested in figuring out the effective way to facilitate this transition.
We do have some compliance filings out before us on one of the actions you're referencing, which is order 2222. So, we can't speak specifically to how that's going, although to say the regions are in the compliance phase of following this set of rules that was designed to remove barriers to participation by demand-side resources in wholesale markets. There's a lot packed into that. Can the commission do more? To my mind, yes. And certainly there's a lot to do on the market side, on the participation body’s resources in regional markets. There's also a lot to do on the planning side.
This is a really tough nut to crack. If you think about planning for a future transmission grid, that is going to be expensive and is going to take buy-in from a lot of people and is going to take the development of new infrastructure, which is hard. Regardless of what kind of infrastructure it is, you're going to impact people in that process.
How do you get all you can get first, out of the demand side? How do you make demand more flexible or take the opportunity when there are transmission investments that could be avoided by more cost-effective demand-side opportunities, like energy efficiency and demand response, and you name it? How do we consider those things effectively? When states have jurisdiction over those resources, in large part, and the commission's jurisdiction over the transmission planning process—they don't really run into each other. It's almost like they stop. Then what do you do with this thing in the middle that we're not quite able to manage? That's something that I spend a good deal of time thinking about.
Outside of that—and this is not necessarily a commission role, so I'll take off my day-job hat for a second—is this fight that maybe is passé at this point, maybe it’s not, between building out utility-scale transmission in the macro grid, or doing it all in a distributed fashion. There still is no study that suggests that one of them can do it alone. It is still a yes-and proposition as far as I can tell. We have to get the system flexibility on the demand side to support the variability of the resources we're trying to bring online. It's really critical. And I think we could—there's an opportunity to make progress with the state and the FERC jurisdictional utilities and regions that care about these issues. I think it's a question for resilience, it's a question for reliability, and it's a question for flexibility to complement what's becoming an increasingly predominant portion of the resources.
Richard G. Newell: Yeah. So much of this—even the different aspects of this—come back to transmission, and you made that connection for us. Again, this has come up a couple times, but I want to dig a little bit deeper. As you stated earlier, Commissioner Clements, expansion of transmission lines that can connect power-resource-rich areas to demand load centers is going to be crucial for the clean energy transition.
As you stated, FERC is currently considering new methods for addressing transmission expansion and allocation of costs associated with that expansion. What types of specific solutions is FERC considering, and how do you see these changes facilitating the energy transition? And I'm sure that there's multiple levels of detail that you could go into here, but at a high level, where do you see some of the key new approaches that could be incorporated by FERC?
Allison Clements: I'm thinking—because we're in the weeds on it right now, I don't want to tip our hats prematurely, as we figure out what some of the answers to the questions you ask are. But, traditionally, you had a backbone transmission system, you needed to interconnect a gas plant or a coal plant or whatever plant, and you hooked it up. The cost of hooking that up, which was sitting relatively close to load—in some cases, unfortunately close to load. —You hooked that up, it gets paid for, and the cost gets passed through to customers.
For now, we’re in a time where, as you said, you've got these resource-rich areas, and you think about the opportunity to build transmission more efficiently, so that a whole bunch of resources know where to go. In a perfect world (and this, again, veers from some FERC jurisdiction), you’d have some sense of where the siting difficulties—from an environmental perspective, from a cultural perspective, from an historical perspective, and any other perspective—you’d have some sense of how to build transmission that avoids (to the extent possible) those issues, and then draws people to it.
If you can build the transmission in the Bipartisan Infrastructure Law—DOE has reviewed authority related to the corridor development—is that something that regions can do on their own, appreciating that that is a way to save costs for customers? That's a very high-level idea that I think, in concept, is a great idea. The people who are looking to build the transmission get to build it, it’s efficient, so that the cost of developing resources around it is lower than it might be other places, picking high-productivity areas, et cetera, et cetera—so, that's one area.
And then, who pays for all of this? Who pays for all of this when you're in a new world where—I think 10 or 12 years ago, when the commission issued our last big transmission rule, Order 1000—public policies really were the driver of clean energy resources, but we're a decade more later, and now it's just economics.
The cheapest resources also are the variable resources, or in some combination are variable resources and batteries. So, it's no longer a question just about which state pays for which state's public policies. It's, How do we pay for low-cost delivery of electricity? Because those are the resources that are coming online and provide the opportunity. You can't cabinet all in the context of public policies. It's no longer there. We've gone well beyond that with market dynamics, utility commitments, corporate commitments, customer demand, and et cetera. That's what we're trying to do this time. We're trying to get it right with being fair, but still not missing out on the opportunity for customers.
Elizabeth Wason: Each episode of RFF’s Policy Leadership Series Podcast is made possible by listeners like you. This series provides thoughtful conversations with leading experts to better connect and inform our community on the latest environmental and economics issues. And you can help us. By supporting RFF, you join us in our mission to improve environmental, energy, and natural resource decisions through impartial economics research and policy engagement. Learn more about contributing to RFF today by visiting rff.org/support.
Richard G. Newell: One of the things that you mentioned is the Bipartisan Infrastructure Law. Is that affecting in any way FERC decisionmaking? Obviously, that's putting in place new resources and perhaps encouraging deployment of transition with incentives. Does that in any way affect FERC decisionmaking?
Allison Clements: Yes. So lots of caveats—I mean, in some ways, it's TBD, right? The Department of Energy put out a notice of intent or inquiry related to some things that are transmission. Questions are out there about—and I look forward to engaging and understanding better—how a national transmission planning study might filter into interregional or regional plants for jurisdictional transition planning or not. You know—is that outside of that context, and same with the conversation around corridors. There's a lot of things there—a lot of opportunity for appropriate interaction between the agency processes and to ensure that they're talking to each other. There's also new authority—refreshed backstop siting authority, for example—which was if the state denies the certificate public convenience necessity for a transmission line, that the commission has a path to approving it.
I have said—and I've heard my colleagues say similar things—that that authority is not the end-all be-all. In fact, it's something we're all kind of letting sit for a minute because that's not how we're going to get to yes on building cost-effective transmission in this once-in-a-generation need to make a significant investment in our electric grid. We get to yes by working with states toward outcomes that they think makes sense and that they buy into as well as all other stakeholders, including customers.
One thing the commission has done is establish a FERC mainly led task force, where we've got representatives from 10 states and all five FERC commissioners together. We've had one meeting so far on planning. We're having another meeting coming up in February. It's an open public meeting, where I hope we put some of these intangible issues and sticky issues on the table outside of contested proceedings, so that we don't have to say, “Oh, but we've got this authority over here to make decisions.” Yes. That will arise, those times will come, but let's figure out a way that we have a path forward on transmission planning that people can buy into before we have to get to that authority.
Richard G. Newell: Yeah. I actually have an audience question that's directly relevant herem so I'll just read it: What responsibility should FERC have for locating new transmission lines, and what should remain with the states? (I guess there's a “should,” but there's also—I guess—a “does.”
What responsibility does FERC have—or authority, for that matter? You actually brought up not only FERC as a federal body and states, but also you brought up regional, which kind of lies between the two. Maybe say a little bit about that?
Allison Clements: Sure. So you've got FERC, and then you've got these regional transmission organizations, which utilities have gotten together and—voluntarily or by direction from their states—joined together their systems and said, “Let's have one independent party run this portion of the grid independently.” Those are ISO in New England, NYISOin New York, PJM in New Jersey and the Mid-Atlantic, and there's a few more—SPP and MISO and CAISO, and, of course, Texas.
States have authority for the siting of transmission. That has always been the division. The commission's authority over ensuring just and reasonable rights for transmission and avoiding discrimination includes within it, as has evolved over time, the authority to require regional transmission planning—utilities that own transmission to work together, either within those independent regions that I mentioned, or in the places where they don't exist—just utility to utility, to come up with a regional plan. And so that, by definition—having that authority overlaps in ways with the state's authority to approve the siting of new transmission. To my mind,
