Power to the People is a column by Donald M. Kreis, New Hampshire’s Consumer Advocate. Kreis and his staff of four represent the interests of residential utility customers before the NH Public Utilities Commission and elsewhere.
By Donald M. Kreis, Power to the People
James Danly deserves to be a celebrity in New Hampshire. This column aims to make it so.
Since early in 2020, Danly has served as a member of the Federal Energy Regulatory Commission (FERC). As federal agencies go, FERC is somewhat obscure.
Even more obscure: the Minimum Offer Price Rule (MOPR) of ISO New England’s forward capacity market (FCM). ISO New England is the nonprofit that runs the region’s bulk power transmission system and administers the markets by which electricity is traded at wholesale.
The FCM is one such market; its purpose is to determine what we pay the region’s generators just for showing up (as opposed to actually producing electricity). Generators need the money — $2.2 billion last year — because payments for actual electricity are not enough to keep them in business. And if they go out of business, our lights will go out.
Every New England state except New Hampshire is subsidizing generation facilities that don’t rely on fossil fuel or nuclear fission. The MOPR is designed to make sure those subsidized resources don’t depress the price of capacity, at the expense of those legacy generators that use natural gas or nuclear fuel.
But, on May 27, by a vote of 4 to 1, FERC approved a proposal to phase out the MOPR. The lone dissenting voice: Commissioner James Danly.
“This scheme will fail,” warned Danly in his dissenting opinion. He noted that FERC during the Biden era is discouraging the development of new natural gas pipelines. That, in combination with MOPR repeal, leaves New England “severely exposed,” Danly warned.
“With every day that passes, with every pipeline that is delayed, and with every order that undermines the price signals in the markets, we come closer to a disaster,” Danly added. “And when it happens, my colleagues will have presided over a predictable, avoidable, and catastrophic failure.”
What we have here is a very public fight between Danly and FERC’s Chairman, Richard Glick. It is worth noting that Danly is a Republican originally appointed by the previous administration. Glick, a Democrat, was just renominated by President Biden and must win Senate confirmation to keep his job.
In his written concurrence, Chairman Glick takes Danly to task for pursuing “nullification” of state policies intended to promote the development of wind and solar power. “There can be no winners in a regulatory civil war between FERC and the states,” wrote Glick.
“Chairman Glick says that I am ‘prone to hyperbole, when I warn that blackouts are the likely outcome of the majority’s misguided policies to prop up renewables at the expense of competitive markets and existing fossil resources,” Danly fired back, citing an article in the trade press. “Chairman Glick appears to be confusing ‘hyperbole’ with ‘reality.’ California and Texas have already experienced blackouts. Over two-thirds of the nation faces elevated reliability risk this summer.”
I’ve saved the best for last. Here’s why Danly deserves to be a New Hampshire celebrity.
New Hampshire was the dog that didn’t bark in the proceeding that led to the FERC decision. We took no position as a state in the FERC docket. Prior to that, when the matter came before NEPOOL (the stakeholder advisory body to ISO New England) I abstained – effectively a vote to keep the MOPR, but without overtly opposing other states’ ratepayer advocates who supported MOPR repeal.
Danly took note of the Granite State’s silence, rather pointedly in fact. Yes, he buried his criticism in a long footnote, but he used some strong language.
First, he didn’t just state that New Hampshire took no position. Danly said that the Granite State “failed to oppose” the MOPR repeal proposal. He promised that FERC would assure that federally regulated wholesale rates would be “just and reasonable,” as required by statute, adding that “no amount of state acquiescence (or, as in this case, partial acquiescence) can overcome that obligation.”
Then he reminded New Hampshire that it is free to quit ISO New England altogether and, essentially, take back the responsibility for assuring the reliability of our state’s electricity grid. And Danly pointedly quoted subsection 8 of section 3 of the New Hampshire Revised Statutes Annotated (RSA).
In case you have forgotten what RSA 3:8 says, I will follow Commissioner Danly’s lead and recite the provision here in its entirety: “The words ‘Live Free or Die,’ written by General John Stark, July 31, 1809, shall be the official motto of the state.”
Maine flirted with the idea of bailing out of ISO New England about 15 years ago. There were similar rumblings from Connecticut as recently as 2000.
In April of that year, Director Ari Peskoe of the Electricity Law Initiative at Harvard Law School provided a roadmap to the ISO New England exit. Let’s just say the road is a long and winding one.
Whether we head down that road or not, Danly is right: It’s time for New Hampshire to assert itself.
I’m a skeptic when it comes to the steady stream of warnings that New England is on the brink of rolling blackouts because letting big energy conglomerates build more stuff. This is an all-too-familiar lament from ISO New England itself.
Note that in support of his warning, Danly cited blackouts that occurred in California and Texas, as opposed to anything closer to home. The electricity grids in those two states confront vastly different situations than what New England faces; the Texas grid isn’t even federally regulated.
Ergo, New Hampshire should assert itself not as a kind of blackout freakout but because our public policy differs from that of our neighbors. We have no decarbonization goals. We do not require our utilities to sign power purchase agreements with wind or solar generators.
But we have to be careful. Classical economics says a capacity market without a MOPR should lower the market price of capacity, effectively giving us the benefit of resources subsidized by other states. But that, in turn, could lead to what some call “disorderly retirements” – natural gas generators shutting down prematurely, which would push capacity prices back upwards.
In fact, that “disorderly retirement” scenario could eventually lead our neighbors to withdraw their subsidies since they would no longer be needed to keep the wind and solar operations in business. That would make capacity payments expensive indeed for Granite Staters.
So let’s do as Commissioner Danly proposes and emulate the revolutionary war hero John Stark. General Stark had courage, but he also knew the limitations of the forces under his command and he planned his tactics carefully.