FERC Upholds "Just and Reasonable" Standard for Its Review of RMR Contracts On March 23, the Federal Energy Regulatory Commission (FERC) ruled in favor of the Connecticut Municipal Electric Energy Cooperative (CMEEC) and others by holding that the Commission will be bound to the "just and reasonable" standard for contract changes to "reliability must run" (RMR) contracts, instead of the higher "public interest" standard. FERC based its ruling on the fact that RMR contracts have broad applicability to markets and market participants. The decision is positive for public power systems in New England, and could well be beneficial for consumer interests nationally.
The proceeding concerned a proposed, unexecuted RMR agreement between Bridgeport Energy LLC and ISO-New England that was the subject of a settlement among several parties, including Bridgeport, the ISO, the Connecticut DPUC and the Connecticut OCC. CMEEC and the Connecticut AG did not sign the settlement and opposed, among other things, the part of the settlement that would require complaints by non-signatories to the agreement and the Commission to meet the higher "public interest" standard in order for the contract to be changed. CMEEC argued that the "just and reasonable" standard should apply to such challenges, including as to eligibility. In making this claim, CMEEC noted that Bridgeport's receipt, beginning in December 2006, of capacity "transition payments" might render it ineligible for an RMR agreement.
FERC determined that the Commission could not bind itself to the "public interest" standard, because, unlike in bi-lateral contracts between a single seller and a single buyer, RMR contracts between a generator and the ISO affect "have wide applicability to the market and to market participants." Therefore, Bridgeport and the ISO will be required to remove that provision of the settlement agreement.
In a concurrence/dissent, Commissioner Suedeen Kelly drove home the need for FERC to retain the "just and reasonable" standard. "The order states that market participants that pay for the reliability services provided under the RMR agreements are broader in number than the single entity that executes the agreements (here, ISO-NE). Thus, the party that executes RMR agreements is not the party that will pay for the reliability service provided under those agreements. I would add that ISO-NE, as the system operator, clearly has an incentive to ensure that power is available to ensure grid stability and reliability, but it may not have the same incentive or ability as the purchaser in a wholesale power contract to bargain for low prices when contracting for reliability service."
NE public power has consistently told Members of Congress and FERC that consumers are not well served by the fact that there is no requirement that ISO-NE ensure reliability at the lowest reasonable price. Commissioner Kelly's statement indicates that she understands this point clearly.
Dicks Introduces Sense of Congress on Climate
On March 21st, Rep. Norm Dicks (D-WA) introduced a "Sense of the Congress" resolution which states that Congress should enact "a mandatory national program to slow, stop and reverse emissions of greenhouse gases." The resolution, which has 21 cosponsors, including Reps. McGovern and Olver from Massachusetts, states that the accumulation of greenhouse gases in the atmosphere is causing average temperatures to rise, "at a rate outside the range of natural variability and are posing a substantial risk of rising sea-levels, altered patterns of atmospheric and oceanic circulation, and increased frequency and severity of floods and droughts." The resolution also argues that a mandatory, market-based cap on emissions will not harm the economy, but will encourage action "by other nations that are major trading partners and key contributors to global emissions."
This language is identical to what the Senate adopted in the last Congress and what Rep. Dicks tried unsuccessfully to have attached to the FY07 Interior Appropriations bill.
The resolution is unlikely to speed up debate or increase the chances of climate change legislation being passed more quickly, but it demonstrates that the Democrats are serious about working on this issue and will continue to pursue it.
European Commissioner Upset with U.S. over Lack of Cooperation
According to press reports on April 2, the top environmental official of the European Union (EU) blasted the U.S. for its policy toward climate change, as the EU begins work on the latest report by the United Nations Intergovernmental Panel on Climate Change (IPCC).
Stavros Dimas, the European environment commissioner, said that the EU expects "the United States to cooperate closer and not to continue having a negative attitude in international negotiations." He added that it is essential that the U.S. "move, because otherwise other countries, especially the fast-developing countries, do not have any reason to move."
A meeting at the European Commission began on April 2 to discuss the second part of what will be a four-part series released by the IPCC. A "summary for policymakers" will be available on Friday, April 6. According to Michael Oppenheimer from Princeton, the next section, to be publicly released on April 14th, will draw from the previous section and will include information so that governments will know where standards of living for "their citizens may be headed this century."
The third section, due to be released on May 4, will explore strategies for reducing greenhouse gas emissions to mitigate global warming.
Heat trapping gases have increased by 16 percent since 1990 in the U.S. according to Dimas. The 27 members of the EU have cut their emissions to the 8 percent level dictated by the Kyoto Protocol and have agreed to further reduce them by 20% by 2020. Dimas also encouraged the Australian government to act, as 80 percent of its population would support it.
China to Begin Discussion to Cut CO2 Emissions
In a surprising move, the Chinese government announced on Thursday, March 29, that next month it will begin discussing a system to cut carbon dioxide emissions. On April 24, the government will release its plan, which will include an assessment of emissions, something which could take three years to finish. China will soon surpass the United States as the world's largest greenhouse gas emitter. This news may make Congressional Republicans more willing to work on cap-and-trade legislation, as one of their chief arguments against such as system has been that U.S. action to reduce emissions would be undermined by China's lack of a comparable program.
Supreme Court Rules on EPA Case
On Monday, April 2, the Supreme Court ruled that the Environmental Protection Agency (EPA) has the authority and must consider regulating greenhouse gases (GHG) from automobiles. The Court, in a 5-4 ruling, argued that the EPA violated the Clean Air Act by declining to "regulate new-vehicle emissions standards to control the pollutants that scientists say contribute to global warming." This is the first time the Supreme Court has considered legal questions related to the regulation of greenhouse gases. This ruling will likely increase pressure on Congress to legislate to control GHG emissions.
Immediately following the announcement of the Court's decision, Rep. John Dingell (D-MI), Chairman of the House Energy and Commerce Committee, released a statement saying that, "While I still believe Congress did not intend for the Clean Air Act to regulate greenhouse gases, the Supreme Court has made its decision and the matter is now settled." Dingell added that the decision provides another reason "why Congress must enact, and the President must sign, comprehensive climate change legislation." Dingell was Committee Chairman at the time and instrumental in drafting the Clean Air Act amendments of 1990.
The Senate plans to call EPA officials before the Environment and Public Works Committee to discern how they will handle the Court's decision.
The Court's ruling will likely also put pressure on the Bush administration to compromise with Congressional Democrats who are currently drafting climate change legislation.
Water Treatment Costs Will Rise
Sewers will overflow and costs will soar for water treatment facilities in New England due to climate change, according to a draft report by the Environmental Protection Agency (EPA). The report adds that water utilities should invest in upgrades to treatment plants and sewers to prepare for a stormy future. Predictions suggest that in the future, more frequent storms will result in 62 more sewer overflows per year than originally anticipated.
Senate Plans to Redesign Renewable Tax Credits
The Senate Finance Committee is currently in the process of developing an energy tax package, with the hopes of adding it to a climate change or farm bill reauthorization package should one move later this spring. The renewable energy Production Tax Credit (PTC), along with other energy tax incentives included in the Energy Policy Act of 2005, are being examined by the committee for ways to redesign them so energy developers can get new projects online. With regard to the PTC, the redesign will entail an extension of the tax credit, as well as the combination of PTCs with other policies which will help stimulate transmission investment.
At a Senate Finance hearing on March 29, utility and renewable energy industry officials argued that the placed-in-service requirement, which obligates developers to have their plants on-line during a two-year window before the production tax credit expires, is not effective for geothermal and biomass facilities, since they have longer planning horizons. One suggestion put forward by MidAmerican is, instead of an "all or nothing" requirement date, to modify the PTC so that utilities with facilities under construction (but not yet in-service) during the time period could opt-in and then receive essentially a prorated portion of the credit.
The renewable energy industry is also advocating for Congress to extend the PTC to five or even 10 years, as opposed to the historical two to three year extensions. A Senate source said that legislators also support extending the credit for ten years, but it the difficulty will be finding the money to fund it.