POWER January 2022 - 17

LEGAL & REGULATORY
How FERC Can Have
a Positive Impact on
Grid Reliability
Ken Irvin and Terence Healey
A
s the regulator for much of our nation's wholesale electric
and natural gas markets, actions by the Federal Energy
Regulatory Commission (FERC) directly impact the
U.S. economy. The agency's response to events this past year,
such as the near-collapse of the Texas electric grid in mid-February,
and the brazen ransomware attack on Colonial Pipeline
in June, highlights this point. Those events sent price shocks
across the country and laid bare the country's vulnerabilities
regarding energy reliability.
FERC in June announced it would form a task force with
the National Association of Regulatory Utility Commissioners
to explore electric transmission-related issues. No doubt the
agency needs to make essential changes to ensure energy
reliability and safeguard against cyberattack-but how? In
November, FERC took a key step to address those concerns,
publishing a report on findings and recommendations in response
to February's intense winter weather.
The Electric Reliability Council of Texas (ERCOT), the state's
power grid operator, came perilously close to seeing a collapse
of its system during winter storm Uri. Critical black-start
resources-the standby generators essential to recovering
from blackouts-were either inoperable or lacked fuel due to
the severe weather. The gravity of this issue, coupled with the
need to harden energy grids against weather and malevolent
actors, underscores the dire need for FERC to act.
FERC lacks rate jurisdiction in Texas but does maintain authority
with respect to transmission interconnection, reliability
oversight, and manipulation. Richard Glick, the agency's
chairman, has affirmed FERC will support the imposition of
mandatory standards to ensure electric generators are better
prepared when severe weather strikes. With a variety
of steps, FERC can play a meaningful role nationwide in
helping our country enjoy reliable energy services at costeffective
prices.
Identifying and Correcting Deficiencies
To realize this goal, FERC should conduct a comprehensive
audit of the nation's state of energy reliability. The power grid
is mission-critical to national security, and with this top of
mind, FERC and the North American Electric Reliability Corp.
have been digging into events surrounding Uri, looking at key
concerns, and providing recommendations, including revising
mandatory reliability standards to better prevent freezerelated
outages.
A FERC report released in November presses Texas state
agencies and lawmakers to explore how they could enforce
these recommendations, which include weatherization measures,
and exploring how the state could connect to other
neighboring power grids. The report also said if generators
were properly weatherized, 67% of the February 2021 outages
could have been prevented.
January 2022 | POWER
Glick has said the Texas situation " is a wake-up call for all of
us. There was a similar inquiry after Texas experienced extreme
cold weather in 2011, but those recommendations were not
acted on. We can't allow this to happen again. " He added, " I
cannot, and will not, allow this to become yet another report
that serves no purpose other than to gather dust on the shelf. "
Beyond acting on its own recommendations, FERC should
fully harness its opportunity to provide leadership-through
orders, technical conferences, and rulemakings-to expand
existing transmission infrastructure and deploy technologies
to optimize it. New and better interconnection of high-supply
areas to regions of concentrated load is critical to reliable service,
and vital to President Biden's goal of a 100% carbon-free
U.S. power grid by 2035. As an example, New York Gov. Kathy
Hochul recently announced support for two major transmission
lines, including one from Canada, to bring clean energy into
New York City.
Action Needed
A positive development is FERC's advanced notice of proposed
rulemaking proceeding, which asks whether reforms are needed
to improve regional transmission planning, cost allocation,
and generator interconnection procedures. Glick and FERC
Commissioner Allison Clements have made clear the importance
of transmission planning, saying the same old approach
is failing us and threatens to lead " to an inefficient, piecemeal
expansion of the transmission grid that would ultimately be far
more expensive for customers than a more forward-looking,
holistic approach that proactively plans for the transmission
needs of the changing resource mix. "
To facilitate that approach, FERC should intensify its focus on
transmission incentives, and redouble efforts to speed permitting
and eliminate siting roadblocks. Stakeholders are keenly
interested in building infrastructure that facilitates decarbonized
electricity generation, and protects against issues caused
by weather and cyberattacks. Ensuring such investments have
a likelihood of success is key, and FERC should take all steps to
facilitate investment and promote regulatory certainty.
FERC's focus on cybersecurity is equally critical, given our
aging power grid and elements sourced from adversaries that
pose serious threats to national security. FERC is not alone in
this pursuit; bipartisan legislative efforts are also underway to
protect America's electric grid, increase industry investments,
and establish grants to protect utilities not regulated by FERC.
Extreme weather and cyberattacks make clear these are essential
efforts for FERC, which has the statutory authority to be
responsible for the reliability of our bulk power system. It must
fully embrace that responsibility. ■
-Ken Irvin is a partner and co-leader of Sidley's Energy
practice group, based in the firm's Washington, D.C., office.
Terence Healey is a partner in Sidley's Energy
practice group, and is based in the firm's Boston office.
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POWER January 2022

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