Volts podcast: Rep. Sean Casten on Hot FERC Summer

In this episode, Rep. Sean Casten (D-Il.), the House Democrats’
resident clean-energy expert, discusses the importance of the
Federal Energy Regulatory Commission, the influence it has over
US decarbonization, and the urgent need for Biden to appoint a
new commissioner. We also get into our favorite FERC orders!


Full transcript of Volts podcast featuring Rep. Sean Casten, July
28, 2021


(PDF version)


David Roberts:


Greetings. Welcome to the Volts Podcast. I am your host, David
Roberts.


As Volts subscribers are well aware, the fastest way to
decarbonize the US economy is through clean electrification —
decarbonizing the electricity sector and shifting energy use in
other sectors like transportation and buildings over to
electricity.


How can the federal government help that process along? Most
control over power utilities and markets lies at the state level.
There's only one federal agency with real jurisdiction over
electricity: the Federal Energy Regulatory Commission, or FERC.


FERC is not an agency people many people follow, or even know
about — in fact, in the Volts household, it has become a kind of
jokey shorthand for "the boring stuff dad writes about."


But it could play a key role in implementing Biden's climate
agenda. And it has come to a crucial crossroads.


FERC has five commissioners. Currently, three are Republicans,
but one of them, Neil Chatterjee, came to the end of his term on
June 30. He has agreed to stay on temporarily because Biden,
somewhat inexplicably, has yet to formally nominate anyone to
replace him. Until he does, and the Senate confirms, the
commission will not have a Democratic majority and won’t be able
to get anything big done.


That’s unfortunate, because FERC has lots of big decisions to
make — about transmission, electricity rates, and markets — with
potentially transformative consequences. But the agency moves
slowly, with rulemakings taking months or years, and it only has
three and a half years to get everything done. Biden needs to get
someone in that seat.


Enter Rep. Sean Casten. The Democrat from Illinois' 6th District,
which includes wide swaths of the western suburbs of Chicago, is
trying to draw attention to FERC and the importance of a bold and
climate-minded new commissioner. He’s leading a communications
campaign called "Hot FERC Summer," a twist on Megan Thee
Stallion's "Hot Girl Summer." (Hey, nobody said getting eyes on
FERC was easy.)


Casten, a member of the House Select Committee on the
Climate Crisis, recently delivered a floor speech filled with
Stallion-related puns of varying cheesiness, calling on Biden and
Dems to nominate and approve a new commissioner quickly. He has
also co-authored bills on transmission siting and ratemaking that
clarify and reinforce FERC's obligation to take climate change
into account in its decisions.


I have known Sean since the 2010s, when he was the CEO of a waste
heat recovery company called Recycled Energy Development. His
long experience in the clean energy industry informed some sharp
analysis, and he occasionally wrote guest posts for my blog at
Grist, the environmental news site I worked for at the
time. 


As you can imagine, it was a delight to see him win a seat in
Congress in 2018, bringing his deep energy expertise to a body
that has often lacked it. I was excited to geek out with him
about FERC and the state of congressional energy politics.


Rep. Sean Casten, welcome to Volts!


Rep. Sean Casten: 


So happy to be here, David. 


David Roberts:


Sean, I knew you back when you reached the pinnacle of your
career: I'm talking, of course, about when you were writing guest
blog posts for me at Grist. 


Rep. Sean Casten:


Really, it's been downhill for both of us since we left
Grist. 


David Roberts: 


Suffice to say, you know more about energy than the average bear;
probably considerably more, I would say, than the average
congressperson. So before we get to FERC: When you got to
Congress, would you say that the average clean-energy literacy of
your colleagues in Congress was higher or lower than you expected
going in? 


Rep. Sean Casten:


Oh, that's the kind of question that could get me in trouble for
throwing people under the bus, but let me maybe offer one of the
best pieces of wisdom I got on getting sworn in. Jamie Raskin,
who of course everybody knows now because of his work on
impeachment, is just a wonderfully kind and decent person. And he
said to me, when I was just sworn in and trying to figure out the
ropes of this place, he said, “This is a job that makes you very
broad, but it's very hard to have the time to get deep. And if
you want to know how to get things done, ask people why they
first ran, because that's a really good shorthand way to find out
where people are deep. If you really want to do something on
healthcare policy or criminal justice, it'll help to know who
those are.” 


So I've tried to follow that policy. I've asked around, and I
will tell you that I have not met a lot of people who said, “I
ran because I care about energy policy” — which is not a
criticism, because they did run for other reasons, and they have
depth in other areas. But historically, energy policy is not the
kind of thing that pollsters say, “the voters demand somebody who
really appreciates the nuances of obligation-to-serve and
ratemaking proceedings,” right?


So yes, it's lonely. It's just not a way that people typically
get into Congress.


David Roberts:


Well, all of the sudden, these issues are on the front burner,
and everybody in Congress is expected to know a bunch of stuff
about them. Have you found that people are open to being
educated? Is there a crash education process happening?


Rep. Sean Casten:


There is and there isn’t. It's interesting, I find that energy
policy is a lot like foreign policy in the sense that most voters
don't care, but we [Congressfolk] make decisions that are really
impactful. So it becomes an area where members are very
deferential to staff.


I am as well; I don't claim to be an expert on, you know, the
situation going on in Afghanistan right now. But I trust that
there are staff on the Foreign Affairs Committee, and their job
is to understand that.


So yes, members are receptive. But what's hard on issues like
energy policy is that the job of a congressional staff person is
to figure out how to get done what is politically possible; the
job of a staff person is not to move the Overton window. It’s
hard to get members who are confident enough in their own skills
to really try to push the envelope on energy policy.


David Roberts:


Let's talk about FERC, the Federal Energy Regulatory Commission.
Whenever I tell people I'm writing about FERC, the eye glaze is
almost instant. So maybe just tell us, why should ordinary people
care about FERC?


Rep. Sean Casten:


The way you stop people's eyes from glazing over with FERC is you
couple your conversation with a picture of Megan Thee Stallion
and some hip-hop lyrics. I've found this week that is a very
effective way to keep people engaged.


We can get to that, but look, stipulate a couple things. Number
one, we have to get to zero carbon way faster than anybody is
even talking about in the most ambitious world right now. Number
two, as you've so eloquently explained, it's really hard to see
how we do that without “electrifying everything.” 


If that's going to happen … let's just talk about the
transportation sector: the transportation sector uses about as
much primary energy as the electric sector uses today. So if we
were just going to electrify the entire transportation sector, we
need to build about as much electricity generation as we already
have, and then build a whole lot of wires to connect that new
generation that's going to be in different places — because it's
going to be where the sun and the wind and the renewable
resources are, not where the coal seams are — up to loads in new
places along highways and homes and apartment buildings. And
that's just for the transportation sector. 


The Department of Energy has no meaningful jurisdiction over
those questions of generator siting, generator installation,
generator permitting, transmission siting, the markets that
regulate and give people an incentive to deploy capital. The EPA
doesn't really have a lot of jurisdiction over that; they have
some on the environmental side. Department of Transportation
doesn't really have much jurisdiction over that.


FERC does. And so, if we are going to do what's necessary on
climate, FERC is really the only agency that has the tools
necessary to do what is environmentally necessary, even though
it's not an environmental agency. That's why you should care.


David Roberts:


Yeah, it's the only piece of the federal government that gets
directly at electrification. I'm not sure people really
understand that. 


Before we jump into some of the substantive issues FERC is
wrestling with, the big thing going on with FERC right now has to
do with commissioners. There are five commissioners on FERC; by
statute, two of them have to be from the minority party, and
three can be from the majority party. It's been a long time since
there were three Democrats, but it might happen soon. What's the
state of play there?


Rep. Sean Casten:


Yeah, hugely important. McConnell largely stonewalled Obama's
[FERC] appointments, so it's been not as effective as it could be
for a long time (like most things McConnell touches).


Chairman Chatterjee — well, I should say former Chairman
Chatterjee, now Chairman Glick; he was the chairman before Glick
was elevated — his term expired in June. So technically he's off;
he is agreeing to stick around until the new nominee comes in. I
actually get along pretty well with Chatterjee; he and I have
spent a fair amount of time together, in spite of the fact that
he started his career as an energy aide to Mr. McConnell and
comes from the coal belt. I think he's been more forward-thinking
than a lot of people thought he would. But he still is not, by
his nature, going to lean in on some of the transformational
issues in the power sector. 


So with him gone, the president has the opportunity to appoint
someone; there are several names being thrown out that have been
vetted. I'm very long on rumors of the status of that process.
But what I can say factually is that the Biden administration, as
we talk right now, has not affirmatively put one of those names
forward. And therefore the Senate has not started confirmation
hearings.


That really needs to accelerate, because until they've got a 3-2
majority, they can't initiate the hearings; until they've
initiated the hearings, they can't do the ANOPRs — the
announcements of proposed rulemakings — for public comment; until
they do those, they can't do the orders; and until they do the
orders, the markets are not going to start responding to the ways
that they might change these structures. We don't have a lot of
time.


David Roberts:


Yes, those things take a lot of time.


Rep. Sean Casten:


Yeah. So it just needs to go right away. I'm quite certain that
if the White House wanted to, they could twist arms and put some
pressure to make that process move a little faster. I'm also
quite aware that they have a lot of things on their plate, and
they can't do all of them. So I'm hoping it'll come quick. But
it's already not as quick as I'd like it to be.


David Roberts:


Well, speaking of rumors, do you have any theories about the lack
of urgency here? Because presumably there are staffers up there
who appreciate that FERC is the only route to a lot of President
Biden’s goals. Do you think they're just not paying attention? Or
do you think something else is going on? 


Rep. Sean Casten:


I'd be purely speculating, but I think it’s probably not
unreasonable to conclude that it's related to how this
conversation started. It is not just your listeners whose eyes
glaze over when we talk about the importance of the Federal
Energy Regulatory Commission.


So there's not been a tremendous amount of political pressure to
expedite this, as much as there has with, say: we need to get new
FTC staff appointed so that we can talk about what we're going to
do with social media companies and antitrust; we need to get an
attorney general to reconcile with the issues of the Trump
administration and the horrible things going on with white
supremacy in this country.


Those are really important issues too. But those have tended to
attract a bit more political attention than this particular
agency.


David Roberts:


I have also heard rumors that there's some talk of the FERC
nominee being used as a kind of bargaining chip to get centrist
or moderate Senate votes for this reconciliation bill. Do you
know anything about what's going on in the Senate behind the
scenes on that?


Rep. Sean Casten: 


I am not familiar with that specific rumor; that doesn't sound
implausible. I think it is safe to say that anything meaningful
we are going to do on climate is not going to be done in a
bipartisan basis. I wish that wasn't true. It's tragic. But the
way that our Democratic and Republican seats in Congress are
distributed right now more or less tracks to the way that the
energy-producing regions and energy-consuming regions of the
country are distributed. And so anything that a functioning FERC
would do to accelerate the deployment of lower-cost technologies
— which also, by the way, is the deployment of cleaner
technologies — implicitly is going to create a huge wealth
transfer from energy producers to energy consumers, and
therefore, from the empty, depopulated red parts of the country
to the concentrated, populated blue parts of the country. 


I don't think it's intentional that the parties have aligned that
way. But it means that it's very hard to … you know, I've said to
some of my colleagues across the aisle that if your district
loses $100, and mine gains $1,000, I can understand why we're
both not going to yell, “Kumbaya, we've created $900 of value for
the American people!”


So yes, I think those who would prioritize bipartisanship in this
moment — you can insert any name you would like into that box —
do not overlap very well with those who prioritize the urgency of
climate action.


David Roberts:


Well said. OK, speaking of the issues that FERC has its hands on,
let's start with transmission. Transmission used to be a rather
sleepy topic that not a lot of people cared about, but all of the
sudden it's hot, it's in the news, everybody's talking about it.
FERC has an open docket on transmission right now that they're
getting ready to launch into, which everyone's very excited about
… for some values of “everyone” …


Rep: Sean Casten:


Once a philosopher, always a philosopher. I can hear you
describing those Venn diagrams. 


David Roberts:


So what is wrong with transmission and what can FERC do to fix
it? I know you have a bill specifically about FERC and
transmission, but I'm also interested in what FERC can do on
transmission without a clarifying bill, and what it really needs
a bill from Congress for.


Rep: Sean Casten:


Let me take them in reverse order, because I think there's two
problems with transmission. The first is that it is really,
really hard to get a transmission project permitted in a timely
fashion. And that is the result of the fact that there is no
controlling agency for a transmission project. If you want to
build a wire to connect the wind in Iowa to the electric loads in
Chicago, every time that wire crosses a town line, a county line,
a state line, you've got a different group of people who can
object — as compared to natural gas, where you can have a single
controlling agency, where everybody who might object can still
weigh in, but they can only weigh in to one agency, and you
adjudicate these all at once. 


That has made transmission virtually impossible to site in this
country and is why for the last 20 years, the way that we've
built power plants — pre the broad deployment of renewables — was
to find where there was an existing interconnection and then run
a gas pipe to that point to build a combined cycle plant at that
node. Because it was easier to permit the gas. 


FERC can't really fix that; that needs to be fixed statutorily.
The Biden White House and a number of us in Congress have been
talking about creating a single Office of Transmission Planning
that would have that authority. It’s really important, because
then you would give certainty to people who want to build either
generation projects that need transmission or the transmission to
bring it to load.


Like I said, FERC can’t solve that; we can and should,
legislatively.


David Roberts:


Yeah, that's the Federal Power Act, I think it was? Back in the
20s, 1920 I think —


Rep. Sean Casten:


1935, I think, was the Federal Power Act.


David Roberts:


Specifically gave FERC that oversight of natural gas pipelines,
and just through its silence, didn't give it control over
transmission. So the idea here would just be an addition to the
Federal Power Act saying FERC also has control over this, right?
I mean, is it that simple?


Rep. Sean Casten:


I think so, although I'm just an engineer, so I'm not going to
quote you on the legal ways to solve that. I'll defer to smart
energy staff on that one. But yes, conceptually, you're exactly
right. 


The second problem is one that I think FERC does have the
authority to address. And it's the classic problem of regulatory
capture. There's a huge governance problem at all the regional
independent system operators [ISOs] and regional transmission
organizations [RTOs], which is that their membership is a
function of their market participants. So wherever you live,
think of the big utilities in your state, the big transmission
companies: they're the members of those organizations.


And those entities, more often than not, make most of their money
during a few hours of the year when there's a real congestion
situation. Electric markets are actually extremely efficient most
of the time, which means that it's really hard to make a profit
most of the time. And when you get congestion on nodes, that's
where the big money comes in. And so they have a very strong
economic disinterest in market efficiency. 


So that has historically made it really hard to connect
transmission that would have the practical effect of taking
excess generation out of one part of the grid that's got too much
load and moving it to a place that's congested on a little node
down below. You look around the country, Maine has always had way
too much generation, southeast Connecticut has always been way
too constrained. No matter how long we try to fix that, it's
like, why are we not getting that fixed? In California, you've
got times … well, where you are David, up in the Northwest, BPA
is dumping excess power, because they have more wind and hydro
than they know what to do with, even while California is short,
but you can't get a wire that's run down there. 


And those are solved by making sure that we bolster the
interregional connections on the grid, which is what this bill —
that's really Senator Heinrich, I should give all credit, has
been really leading this, I'm carrying it in the House — but to
make sure that we fix some of those interregional issues, and
really direct FERC to do it, because the pressure from the RTOs
and ISOs is going to be to resist that. 


I think they have that authority. I think there's some debate
over whether they have enough authority to deal with some of the
cost-allocation questions. If your utility was to build a
transmission wire to bring power down to northern California,
should you pay for that or should northern California pay for
that or how should you divide that? Those are tricky issues. So
some of the cost allocation comes in, but I think FERC has the
ability to do that.


But the problems derive from the governance issues, which is more
an issue of, are you willing to flex the authority you have? If
not, do you need authority that you haven't currently been
provided?


David Roberts:


So what would that authority look like? If you have RTOs that are
benefiting from congestion and you propose a line that's going to
reduce congestion, the RTO is going to push back against you.
What exactly does it mean for FERC to exercise authority there?
Just to insist that someone build it?


Rep. Sean Casten:


Well, at the risk of having an overly naive view of politics, I
don't see any problem with utilities advocating for their
interests. And I don't see any problem with the regulator
listening to those interests. The challenge is, what do you do
when another set of interests is not in the room, or not as
strong, and how do you make sure that their voice is heard? And
that's just as true for, in our example, the beneficiaries in
California vs. Seattle as it is for the beneficiaries who are not
yet born and who are going to benefit in the future. 


I think a good, enlightened, public-prioritizing regulator is
going to do that. And there are certainly plenty of examples of
people who fit that description. I think of someone like Louis
Brandeis on the Supreme Court. You can have the other kind of
regulator as well.


So I think some of what Congress can do is essentially mandate
good behavior — which I wish, in some philosophical sense, we
didn't have to do. But by mandating good behavior, we will ensure
that good behavior happens.


I do think, having said that, that if we get a good new
commissioner to take this third spot, we will have a majority of
well-behaving commissioners.


David Roberts:


One of the big problems is cost allocation. Right now, costs get
allocated to the power generators who want to use the new line,
despite benefits being spread out widely over the whole area that
the transmission line covers. How do you see cutting that Gordian
knot? Does your bill address cost allocation?


Rep. Sean Casten:


We do address some of it. Kathy Castor has a bill that more
explicitly addresses cost allocation. Ours is more getting FERC
to acknowledge that when they do those cost-allocation formulas,
there's also a benefit allocation. There are benefits that go
beyond things that are thought of in a very strict Milton
Friedman “all that matters is the price of power in the next
hour” kind of conversation. 


For example, we had a power plant in northern Indiana recently —
it was a coal plant that was totally uneconomic, didn't make any
sense to run as a source of energy, but was providing some really
critical power-factor stabilization roles. That's one of these
ancillary services that's not very well factored into retail
markets, but the grid needs.


So they came up with this really interesting approach of saying
OK, we'll shut down the boiler, we'll turn the generator into a
motor spinning backwards, and we'll use that motor just to do
power-factor correction. And that will spread that benefit around
the grid, so that we still get the benefit of this thing
providing reactive power, even though it's not providing
power. 


But that was a really interesting, creative solution that was
done because the people involved were pretty smart and pretty
innovative. But you wouldn't necessarily get there in a normal
FERC proceeding, even if you had a transmission line that was
providing some of those benefits.


David Roberts:


That's an extremely expensive way to provide spinning mass, isn’t
it.


Rep. Sean Casten:


Well, actually, like in that particular case, the whole plant was
already built. So it was actually kind of neat that you took this
thing and said, instead of shutting down this coal plant and
losing the jobs, we're still going to get the benefit from a
pollution perspective of shutting down the coal plant, but we're
gonna keep this existing asset running and keep some of the
talent here. So it was probably a much cheaper way to provide
that service than anybody else could. At any rate, I'm getting
way down in the details now.


David Roberts:


FERC, by statute, is supposed to ensure just and reasonable
electricity rates. So these big IOUs have to come to FERC and
justify their rates. And one of the fights going back years now
is whether climate damages should be taken into consideration
when considering what counts as just and reasonable rates. You
have a piece of legislation that explicitly tells FERC to do
that. Can FERC do a little bit of that without legislation? And
what exactly does your legislation specify that it do?


Rep. Sean Casten:


I would argue that FERC absolutely has this authority, and again,
it's a question of, “let's make sure they also have an obligation
to do it” stapled to it.


There's two pieces of why this bill is necessary. The bill is the
Energy PRICE Act. PRICE is an acronym that stands for something;
I forget what it is [Prices Require Including Climate
Externalities]. But what it does is remind FERC that, number one,
the 1935 Federal Power Act said rates must be just and
reasonable; number two, in FPC (the name of FERC at the time) vs.
Sierra Pacific in 1956, the Supreme Court ruled that the
commission must ensure the protection of public interests; and
number three, in 2009, the EPA endangerment finding — that I know
is one of your favorite rulings — said that rates must take into
account current and future generations.


So with those three decisions in tandem, you have an affirmative
obligation on FERC to set rates that take into account the costs
and consequences of climate change and effectively set up markets
that for all practical purposes build in a carbon price in some
fashion. 


Now, that's the negative reason, protecting from a cost. There is
an even more urgent positive reason for this, which is that every
clean electricity generator effectively eats its investment
thesis. By that I mean, you build these generators — whether it's
a nuclear plant, a solar plant, geothermal, whatever you want —
because you think you are going to make money, because you
operate at a lower cost than the grid currently sits. You then
put a source of power into those markets that is lowering the
cost in those markets, because you've knocked off whatever was
the higher marginal cost generator that would have operated but
for you being there. 


So over time, particularly in the markets that have really
embraced deregulation, you've seen electric markets get cleaner
and cheaper, to the point that you now have — and again, it's
what I alluded to in the Pacific Northwest — a lot of hours where
the power price is negative, because there's so much hydro and
wind on the system, and they don't know how to turn it off. That
then creates a circumstance where, as clean energy succeeds, you
lose the incentive to build any generator, because the value of
electricity gets to be too low.


I mean, think about how awesome that is, right? The whole theory
that it's too expensive to care about the environment is exactly
wrong. It's too cheap. 


Now what happens with FERC, who is tasked with an obligation to
maintain consistent, reliable power? What do you do in response
to that? I think the legislative and judicial history is pretty
clear. What you do is provide a differential incentive to bring
on the generation that is cleaner.


So you get there through the same means, but you get there
because you have to prevent these technologies from eating their
investment thesis. It’s a strange thing to talk about with the
solar and wind industry that seems to be booming right now, but
that's what the nuclear industry is already going through. Those
plants were built, and now they're not making enough money to
justify their five-year refueling cost. They're having to shut
down because they can't make enough money.


Now we're having a political conversation: Should the taxpayers
provide a subsidy to these nuclear plants to keep running because
FERC failed to fix a problem that, I would submit, you could see
coming?


David Roberts:


There's been a lot written about this lately, the declining
marginal value of new clean energy as it comes online. So your
idea is, instead of taxpayers subsidizing clean generators, FERC
should in some way penalize dirty generators with a price, by
forcing them to pay for their carbon emissions?


Rep. Sean Casten:


Oh, I prefer to call it a carrot to the good guys than a stick to
the bad guys. But yes, they should ensure that there are
incentives to build new generation that are consistent with
nondiscriminatory pricing that does not adversely affect current
or future generations. Will that be bad for coal? You betcha.


David Roberts:


This might be getting slightly too much in the weeds, but this
issue of declining marginal value: you're chasing a receding
target, right? You can do differential rates, and that will punt
the problem down the road a little bit, but doesn't it just come
back unless you're constantly escalating?


Rep. Sean Casten:


I guess it's a question that's much bigger than the energy
industry. We've regulated all of our markets in this country for
30, 40 years on the assumption that as long as consumer price is
falling, everything else must be good. So we outsourced huge
swaths of manufacturing, because if we could have a country that
is cool with child labor manufacture our dishwasher, as long as
the cost of the dishwasher is cheaper, we'll do it. We've hit the
limits of that as an operating philosophy, I think. 


I don't mean to duck your question; I think it's a valid
question. But there are a broader set of societal values that are
not always encapsulated in consumer price, and it just so happens
that in electricity markets, we're on the verge  of hitting
the limit, where if we don't answer that right, we're gonna lose
our access to power. But it's the same dynamic playing out in a
lot of other sectors.


David Roberts:


So what you're delicately trying to say is that maybe pushing
electricity rates lower and lower and lower and lower is not the
north star here; there might even be good public reasons to raise
rates to pay for those benefits.


Rep. Sean Casten:


I’d put it slightly differently: if I can build an asset that is
going to clean the air and create wealth for society, let's make
sure we have a regulatory structure that ensures that that wealth
is equitably allocated between consumers, investors, and the
public at large, and doesn't disproportionately accrue to one of
those groups. We are making the pie bigger. We just have to make
sure we divide the pie appropriately.


David Roberts:


A lot of people involved in clean energy have a lot of complaints
about IOUs [investor owned utilities]: the way they make rates,
the way they plan. Could FERC, under this “just and reasonable”
banner, force IOUs to — instead of using planning models based on
the last 10 years, which is standard practice — use
forward-looking models, since things are changing very fast
now? 


Or, second part of the question, could FERC force them to
consider resilience — which is a big thing now, people are losing
power because of wildfires, because of cold snaps — in rates?
What's the limit of FERC being able to kind of kick IOUs in the
butt and make them move into the 21st century?


Rep. Sean Casten:


I don't know that I have a precise answer, just because IOUs are
so different in one part of the country than another. Some states
have embraced deregulation, where the IOU is really just the
last-mile distribution company; other states still have fully
vertically integrated monopolies, that own everything from the
power plant through the transmission to the wire. And in all
cases, you have some very clear jurisdictional limits between
what FERC can do and what the states can do. Generally speaking,
the monopoly franchise is issued by the state. And so FERC can
impact markets, can impact interstate transmission of power,
which the courts have deemed a federally germane conversation.
But a lot of the IOU regulation planning is really more at the
state PUC level. 


My all-time favorite FERC order — I'm sure you have yours — is
888. 888 was the one that really started to deregulate the power
sector back in the early 90s. The reason I like it so much is
because for the first time in the history of our country, we told
the electric sector that you could make money by building the
lowest marginal cost asset, instead of saying you make money by
building capital that will be built into rate base.


Within 10 years, the nuclear fleet went from 60 percent to 90
percent capacity factor, because all of a sudden, every utility
said, “I've got this asset that's really cheap to run, I should
run that asset more often.” We built a ton of combined cycle
generation, natural gas, that was almost twice as efficient as
the generation it replaced, because utilities said, wait a
minute, if I can make money by having an asset that burns less
fuel per megawatt hour, let me build more of those. Within about
15 years, the grid went from emitting 1,300 pounds of CO2 per
megawatt hour to 900. All while rates were falling. 


I tell that long story because that order was implemented very
differently in different parts of the country, much like many
issues of our day. If you live in the Southeast, you effectively
operate under a very different set of federal rules than if you
live in the Northeast.


The question you're asking, about how they could enforce more
holistic planning tools on the IOUs — wouldn't it be nice to have
a FERC hearing that asks, what are the lessons learned now from
this 25-year-old order? How can we take the best practices that
were implemented in some parts of the country and accelerate
their movement into other parts of the country that were
resistant at the time because they feared something that didn't
come to pass?


David Roberts:


This segues perfectly into one of my other questions. The
Southeast famously did not deregulate its electricity markets,
and is still very much run by vertically integrated monopoly
utilities, which own the power plants and the power lines and
deliver the power. Now there's what I would characterize as a
half-assed movement proposing a regional quasi-market called
SEEM. I forget what it stands for [Southeast Energy Exchange
Market]. Do you think FERC can or should force the Southeast to
deregulate, form a wholesale market, form a regional transmission
organization, and follow the rest of the country in
restructuring? Is that something it can do? And do you think it
should do so?


Rep. Sean Casten:


As someone who cares deeply about climate change and thinks that
a properly designed market is the single best tool to address it:
absolutely, yes. I also think it's entirely possible and not
uncommon to do an improperly designed market. So the details
matter, but yes, directionally, I'd love to see them do it.


David Roberts:


Speaking of intransigent regions of the country, one hot topic of
conversation lately is about Texas-based ERCOT: they famously
have created an RTO, a regional transmission organization, that
only applies to Texas, thereby escaping FERC jurisdiction,
because they don't ship power over state lines. And they are not
shy about saying that's why they did it.


But they had this cold snap, a bunch of people died, a bunch of
people lost power. And now we've just had a study a couple of
days ago that said ERCOT could have, among other things, saved
about a billion dollars during that cold snap if it had just been
interconnected with surrounding states. Is there any way for the
federal government to force ERCOT to interconnect? Or will Texas
basically have to make that decision on its own?


Rep. Sean Casten:


It's worth pointing out: we use ERCOT and Texas as synonymous,
but El Paso is a part of Texas, it just isn't a part of ERCOT.
And El Paso had the same weather, they had the same utilities,
they had the same generator maintenance — and they didn't lose
power, because they were connected elsewhere. Oklahoma is also a
lot like Texas: they had the same weather, they didn’t lose
power.


When I said to one of my colleagues, who shall remain nameless,
from the allegedly great state of Texas, “will you be advocating
to interconnect to the grid?” there was a pause and the response
was, “Well, we still are Texas.”


You've got the perennial discussion about state vs. federal
rights, and as you and I have had many conversations about, how
much of our frontier mythology is based on … I want you to build
the railroad, build the electricity, build the broadband, and
then get out of here, because I'm just an independent cowboy.


David Roberts:


“Thanks for all that, but don't try to tell me how to use
it.” 


Rep. Sean Casten:


Yes, exactly. 


David Roberts:


Well, I try these days to think, what would Republicans do? And
they don't seem to particularly care about these divisions of
jurisdiction or whatever; they just care about their goals, and
whatever tools they have to achieve their goals. So do you want
FERC to try to browbeat Texas into this, or pass some rules that
would penalize Texas for not doing it? 


Rep. Sean Casten:


I guess I'm not smart enough to know exactly what those tools are
and how sharp they are. I do think, and part of the reason why
I'm so bullish on FERC, is that there's this huge tension between
being pro-market and being pro-business. And FERC at its best, in
setting up these markets, has been pro-market. 


In all that story I told you about FERC order 888, most of the
companies that built those gas plants went bankrupt; the plants
are still running, but they designed the market so efficiently
that people actually didn't make the money they thought they were
going to make because the benefit flowed to the consumers. That's
a very pro-market approach.


As long as FERC does that — subject to what I said before about,
let's make sure that we allocate the wealth through the system so
that people aren’t choosing between consumer prices and
bankruptcy — we're going to have good outcomes. 


But your comment about where are the Republicans on this: the
Republicans — this isn't every Republican, but by and large — are
a pro-business but anti-market party.


David Roberts:


Yes. I love that way of putting it. I don't think that's widely
appreciated, the distinction you're making.


Rep. Sean Casten:


And to be fair, a lot of Democrats are not really pro-market
either, right?


David Roberts:


Not many entities or people in the world are pro-market when the
rubber meets the roads. They are pro their own interests. And
markets are devastating to business interests, quite often.


Rep. Sean Casten:


I've yet to meet the person who comes into my office and says,
“Hey, Mr. Congressman, I've got this problem: it's too hard for
my competitors to succeed.”


David Roberts:


“We need to open this playing field. I need more competitors.”
Yes, exactly.


Rep. Sean Casten:


“What can I do to make more transparency of information and lower
the barriers to entry and exit, consistent with the principles of
Adam Smith?” You never hear that.


David Roberts:


Yeah, not a lot of lobbyists for that perspective. 


While we're still in the states-rights things — and this may also
be slightly too nerdy for anyone to care about — this question of
where FERC jurisdiction ends and where state jurisdiction begins
has been a hot topic among FERC nerds lately. Because some of the
things FERC did with its regional markets via the MOPR, which I'm
not even going to attempt to explain here, basically had the
effect of setting regional market prices such that they cancel
out state climate policies.


That obviously is outrageous to clean-energy advocates, and it
also seems like a real imposition on states’ power of movement
and jurisdiction. Do you have any general thoughts on where the
right line is between FERC and the states? It seems a little
arbitrary these days, with electricity markets being so
regionalized and so national even.


Rep. Sean Casten:


At the risk of sounding like a cop-out: I think, at some level,
the blessing and the curse of our form of government is that
we're not very precise about that answer. And it moves around a
bit from time to time. And there are times when we think to
ourselves, boy, thank goodness we have these state laboratories
of democracy to lean in where the federal government isn't:
witness California emission standards.


There are other times where it's hugely regrettable that we don't
have the federal government with some authority to step in:
witness voting rights.


And, yes, there's a big issue. Because I've spoken to him, I know
that Chairman Glick is thinking a lot about how to structure
markets to not step on state renewable-energy standards and other
incentives they may have had in place, and to factor those in.
But those standards exist in no small part because the federal
government failed to act and the states stepped up. 


This is moving into a totally different realm, but if we were by
some magical event to come to agreement on a federal economy-wide
carbon-pricing structure tomorrow, we'd have this huge problem
that the states have already done it in a bunch of places. You've
got AB32 in California, RGGI, and you have a bunch of private
players that have entered into long-term contracts with an
expectation that those contracts would be honored to the terms of
those agreements.


So for all practical purposes, it is impossible right now to
write a federal carbon-pricing structure that doesn't have tons
of carve outs around the country. Which means a disharmonious
standard when you cross the border from, let's say, California
into Nevada, where, by the way, trucks and cars and powerlines
cross all the time. We’d have these inter-state border-adjustment
agreements or something to figure out.


It's a cop out on your answer, because I think, on balance, I
like our federal system of government. But it's a very
issue-by-issue answer.


David Roberts:


Much like you rarely meet people who advocate for markets as
such, you rarely meet people with a strictly principled answer to
this question. It very much depends on, well, what's the issue? I
mostly care about my issue, not these abstract questions.


Rep. Sean Casten:


As an interesting aside, when we first put NAFTA together, Mexico
was essentially forced to come into compliance with our electric
regulatory structure. But Mexico doesn't have nearly as strong a
culture of states rights. So in Mexico, you can do things that
seem completely magical and dreamy, where you can build a power
plant in one part of Mexico that's optimized to the local
resource — maybe it's a waste heat recovery project, like I was
doing in a prior life, or a solar plant — but if that power
source exceeds the local load, you can just dump it onto the grid
and then enter into a purely financial agreement with someone on
the other side of the country, who would happily take your excess
power, and just agree to financially settle with them as long as
there's a transmission corridor that connects. 


That's actually fairly consistent with FERC-level rules, but
inconsistent with the ways that different states and regions have
interpreted those rules within the United States. So the degrees
of freedom and flexibility you have to optimize the system — so
that locally you're saying, how do I make the maximum amount of
valuable energy from this resource at this location, and then
just figure out how to deal with the financial matters separately
— we have those tools, just our states’ rights get in the way.


So we have a model to our south of what we might be with a
stronger federal structure, but for the fact that they don't
quite have as robust a legal system as we have.


David Roberts:


Here's another puzzler for you: Some recent studies have shown
that in aggregate, distributed energy resources — generators or
energy storage that's on the distribution system, not on the
transmission system — have huge effects on the national economy
and electricity system, but are sort of intrinsically local. So I
wonder, is there anything FERC can do regarding distributed
energy resources? It seems like an awkward interface.


Rep. Sean Casten:


Well, by recent studies, I assume you mean ones from 1992 or so,
because this was true as long as I was … 


David Roberts:


Right, you were in the business of distributed energy resources!


Rep. Sean Casten:


Yeah, and it drove me crazy. I've lost track of how many times we
optimized a generator to a local load, knowing full well that
that was not optimized to the region, but we couldn't get paid to
optimize for the region. So we were leaving value on the table,
and in some cases, working against value because of the way that
the rules were wrong.


As long as we're going with cool FERC orders, there’s FERC 2222.
(FERC has this interesting thing where they always pick very
memorable numbers for their most impactful rules.)


David Roberts:


Are they totally arbitrary? Are they just picking those numbers
out of the air for funsies?


Rep. Sean Casten:


I actually don't know the process, but I have been told that they
do reserve palindromic or interesting numbers for good orders.


David Roberts:


And people call them boring.


Rep. Sean Casten:


Bringin’ sexy back.


But 2222 is a fairly recent order that says you can sell demand
services [in wholesale energy markets]. In other words, if I'm a
generator, I provide energy, which is the megawatt hours that you
get out of your socket. And then I provide capacity, which is the
ability to be there on a moment's notice if you need me, even if
I'm not running.


What 2222 said was, there's a whole lot of capacity value created
by these local distributed resources. If you enter into an
agreement that says, sure, I can tolerate an extra five degrees —
if you pay me for it, I'll shut my air conditioner off; to, let
me install more efficient light bulbs that will cut the load
down; to, let me put a generator on my premises that will
displace load. 


All those things in aggregate are not only as valuable as the
generator that's sitting there, able to suddenly provide new
load, but objectively more valuable, because the generator that's
100 miles out of town may lose 20-40 percent of its output on a
hot peak day by the time it gets into your house. If you can
curtail load at your house, a megawatt of load reduction might be
worth 1.2, 1.4 megawatts of capacity on the system. 


So 2222 provides a way, not so much for you as a homeowner to
participate, but for so-called “load aggregators” to say, let me
put together a whole network of people, and I can now participate
equally with the big generators in these markets, with these
values that I can aggregate from this collection of distributed
resources. It's really cool.


I think we've barely scratched the potential of what we could do
within those markets. It's not a complete set of all the values
that distributed resources can create, but it's certainly a heck
of a first step.


David Roberts:


I wonder, though: 2222 opened up demand-side aggregators to play
in these wholesale markets. But I wonder, as DERs proliferate, if
that's going to be computationally nightmarish. You're going to
go from wholesale markets that have a dozen participants to
wholesale markets that have thousands or tens of thousands. I
wonder if that's the right level of administration, if we don't
need something more like a distribution system operator [DSO],
like they have in the UK, to manage that local complexity and
simplify it before it moves up to the wholesale level. 


Rep. Sean Casten:


You might be right. I haven't thought about that level.


I mean, we do have distribution system managers in the sense that
every region has a load-serving entity. When I ran a utility in
Rochester, NY, I had load-serving entity responsibilities over
that particular node, where I had to know all those things and
manage it. And in your distribution utility, Seattle City Light,
they are a load-serving entity that has those
responsibilities. 


To some degree, the DERs are already there. The question is, do
we know about them. There's so many people doing what I was doing
a decade ago: building the systems out, but not optimizing them
for the grid, optimizing them for the local load.


Every factory that makes a decision to put in a more efficient
motor is having a meaningful effect, in aggregate, on their grid,
but the utility doesn't necessarily know they're there or know
that they have the ability to dispatch in response to a variable
price signal. They don't find that out until they institute a
variable price signal.  


I haven't looked at the latest database, but last time I looked,
there was something like 83,000 megawatts of cogeneration
installed on the [US] grid. The median generator is two
megawatts, and almost none of them are speaking in any kind of a
data or dispatchability to the grid managers. They just turn on
and off in response to local loads.


What that looks like from the perspective of FERC at the highest
level, or the distribution companies at the lowest level, is just
normal variability — not much different from a bunch of people
turning their lights on and off. But because they don't have the
data, they also aren't going out and saying, this would be really
valuable, could I pay them to dispatch according to some larger
value?


David Roberts:


I guess when I envision that kind of detailed local management,
where you're trying to coordinate things so they work at the
local and regional level … I’m just trying to imagine RTOs doing
that, for five different regions they're overseeing, with
thousands of DERs in each of the regions. I'm inclined to think
we need more robust management closer to the distribution level
to keep track. 


Rep. Sean Casten:


The AI robots will take care of it. We’re just going to teach
them.


David Roberts:


I used to have such faith in that. And then I was researching
this article about that, and everybody I talked to said, no, the
robots are not going to do this. There's not going to be the
robots. I was so psyched about the robots. 


We've mostly been talking about electricity, because of course it
is the most important thing in the world and everybody should
know more about it. But FERC also has jurisdiction over [natural
gas] pipelines, and has been quite profligate in the past in
approving pipelines. There's been this heated battle between
Glick, the Democratic commissioner, and Chatterjee, the
Republican commissioner, about whether FERC should take climate
change into account when approving or not approving pipelines.


Are you involved in any legislation regarding that, or do you
have any opinions about what to do about FERC and pipelines?


Rep. Sean Casten:


I'm not hugely involved. Obviously, I feel strongly that FERC
does have the authority and obligation to take climate change
into account in what they approve. What gets a little bit harder
about pipelines vs. electricity, at least to my small brain, are
conversations around, “Should we provide incentives for the
market to meet people's energy needs as cheaply as possible?”
Those easy, black and white, absolutely yes-every-time questions.
Conversations around, “Should we limit people's ability to access
energy in exchange for considerations about other moral issues?”
are a lot grayer.


That's not to say categorically yes or no, but it's harder when
you're saying, if we don't build this pipeline, will you still be
able to keep your house warm in the next cold snap? That’s
different from, when did we get the incentives right to provide
you resources? A lot of times this conversation about pipelines
is those two arguments sailing past each other.


David Roberts:


But if you talk to activists, they'll say these pipeline
companies are not making very plausible cases that they're
necessary, that a lot of these are fly-by-night, debt-heavy
fracking companies that are profiting and not being held to very
tight account. 


Rep. Sean Casten:


I'm not saying those arguments are not sometimes true, I'm just
saying they’re not always true. At some level, energy’s like sex
and drugs: if you want to curtail supply, you've got to curtail
demand. You can't curtail demand by limiting supply, that just
criminalizes supply. So let's invest in efficiency, let's invest
in conservation, let's make homes tighter. But if you say you
can't build a pipeline across the Canadian border, you better be
happy with a lot more port traffic and rail traffic, because as
long as people still want that energy, they're going to find a
way to get it. 


David Roberts:


Enough about FERC. I've kept you a long time, and we probably
talked about FERC more than any two people have a right to.


Rep. Sean Casten:


A fraction of what the planet deserves.


David Roberts:


A fraction of what the planet deserves. Oh, actually, you had a
third bill about FERC; let's mention real quick what that was.


Rep. Sean Casten:


The third one is probably the least interesting. This was a right
to timely rehearings. Frankly, this is what we were saying
before, about how it is appropriate for the IOUs to argue their
case before FERC, but it is not appropriate for the other side
not to be heard. In every utility regulator, state and federal
level, one of the ways you control the process is by limiting the
other side's access to the process. So this is basically just
making sure that when people have disputes, they have some sort
of a cost-effective, time-effective way to make sure that their
case is heard.


David Roberts:


So, to summarize the foregoing: it sounds like you think FERC
already has a lot of the statutory power it needs to implement a
lot of these things, and a lot of it just comes down to kicking
them in the butt to do it — a lot of which sounds like it could
be solved with a sufficiently committed commissioner. In some
sense, that might solve a lot of these problems, just getting
three commissioners on the board who are aimed in the right
direction.


Rep. Sean Casten:


Sing it from the rooftops. 


David Roberts:


Passing bills in Congress has basically become impossible because
of the filibuster, so what do you anticipate happening to these
bills? Do you want to sneak them into the reconciliation bill? Do
you think there is real prospect of getting 10 Republican
senators to care about FERC and vote for a FERC bill? Where do
you see this legislation going?


Rep. Sean Casten:


I wish I had a clear answer. I was chatting with Secretary
Granholm earlier this week and I told her that I feel like us
members of the House spend most of our time peeking out the door,
looking at the other side of the Capitol, waiting to see if the
parliamentarian is going to issue a white or black puff of smoke.


David Roberts:


Just doing your chanting, sacrificing a goat. 


Rep. Sean Casten:


Exactly.


Let's be really clear: get rid of the damn filibuster, it gums up
everything and it stops us from doing our job. It's not what the
founders intended. It's just something you do if you think the
best way to resolve debates is to defer to the will of the
minority, because that's what the filibuster does.


Having said all that, as long as it exists, the way that you pass
things that are supported by bipartisan majorities of the
American people, but are not supported by bipartisan majorities
of the United States Senate, is by jamming them into huge bills
in corners where people aren't paying attention.


David Roberts:


Yes, like the energy bill that passed at the very end of the
previous congressional session, which miraculously had all kinds
of good energy stuff tucked away in it, which survived, as far as
I can tell, entirely because no one was paying attention.


Rep. Sean Casten:


And because it was jammed in with a bunch of other things that
people did like, and said, I'll take a little bit of this with
that. I don't remember that speech by our founders ...


David Roberts:


“Thou shalt jam everything together and hope no one’s paying
attention.”


Rep. Sean Casten:


Exactly. Climate is hard to predict, but let's start with the
positive: we have a White House that is absolutely committed to
doing what's necessary. We have House and Senate leadership that
is committed to doing what's necessary, and therefore is
committed to saying until we have everything we have nothing. So
we will get whatever we can into the bipartisan package, and then
we will look at what's left and try to find a procedural way to
get that into the reconciliation package, so we can generate them
together. 


That process, at least in theory, has the potential to do a whole
lot of good things. What's hard in practice is that, because of
the arcane rules of parliamentarian and the reconciliation
process and the Byrd rule, the things we can do that are subject
to reconciliation are by and large limited to things that require
the expenditure of federal money. And almost everything we're
talking about at FERC is a policy change to unleash private
markets.


So we're in this bizarre case, where if we insist that
Republicans must be at the table, then we are insisting we do not
embrace capitalist free market principles — that we have to
prioritize spending federal dollars to fix these problems.


David Roberts:


That's why all policy these days gets crammed through the tax
code. It’s not because that's the best way to do things, it’s
just the only way to pass things anymore.


Rep. Sean Casten:


I don’t know that I’d be quite that explicit, but that is
certainly part of it.


Secretary Granholm has said that if we're going to electrify
everything, as we must, we need to build 1,100 gigawatts of new
generation. I think she might be a little low. For context, we
currently have 1,000 gigawatts of generation total installed in
the country. Jesse Jenkins over at Princeton has said that once
we build that out, we'll need to spend at least $350 billion in
transmission to connect it up to the grid.


If you figure that the generation is going to cost $1,500-$2,000
a kilowatt, and Jesse's right on the transmission side, that
means we need something like $2-3 trillion just for the electric
sector. We haven't gotten to roads and bridges and ports and EV
charging stations and all the other stuff in the infrastructure
package. 


That's not to say that we can't do it, just that, if we are going
to do what's necessary, we should be working with the private
sector. They have a lot of cash too! They’ve got more than we do,
in fact. So the more we lean on reconciliation, the less we have
the ability to lever private markets and all of that
entrepreneurial zeal that we love in our country, which means
we're not going to do as much as we should.


David Roberts:


Okay, final question, speaking of the reconciliation bill.
Clean-energy wise, climate-wise, what do you think are the top
two or three things that should be prioritized in that bill?


Rep. Sean Casten:


How do I pick my favorites?


At core, making the clean-energy transition we need depends on
building assets, not operating assets, because the assets we will
build will run all the time, because they’re so much more
competitive. The coal industry is dying because it can't compete
economically — and no one ever woke up in the morning and said,
“Given the price of power today, I'm gonna turn off my solar
panel,” right? You just have to get them built.


So I'm focused on those things that will accelerate the
construction of those assets: a well-designed CES.


David Roberts:


A clean electricity standard, requiring utilities to boost their
percentage of clean energy.


Rep. Sean Casten:


Yeah. Senator Smith has a great CES. Designing that well provides
a huge carrot to clean generators — when you're sitting down
saying, “Can I justify this investment?” it goes from “No” to
“Holy smokes, I sure can, because I'm getting paid for this
societal value that I'm creating.” It's going to be key to watch
how that evolves, because it’s being tweaked right now to fit
into a reconciliation process.


David Roberts:


Designing well means, one, to achieve your goals, and two, to
please the parliamentarian wizard — which are not necessarily the
same design constraints.


Rep. Sean Casten:


I'm not even sure they're in the same room. But a well-designed
CES is really important. I'd love to see a proper market for
carbon. But if I have to choose between carrots and sticks, give
me a carrot, and a CES is a carrot.


Also, for obvious reasons, we’re focused on anything we can do to
accelerate the deployment of transmission. We've got a pretty
strong infrastructure bill from the House, the Invest Act, that
has a whole lot of money in it to build out EV charging, to make
sure that EV charging is done equitably, so it's not only
available to people who own their homes and have a garage that
they can put a charger in.


But if you go through and build all that out, we need to make
sure that we've got the wires and generation to meet that
expanded electric load. So transmission and CES would be my big
two.


David Roberts:


I've heard transmission’s having a rough time of it in the
Senate, that there's pushback from Republican senators about some
of the language around transmission in the bill. Do you know
anything about that? 


Rep. Sean Casten:


The subtext behind all of that is energy producers vs. energy
consumers. If you build out transmission, you will make it easier
for more cost-effective sources of power to find a home for their
product.


David Roberts:


Right. Oh, what a system we've built.


Anyway, thank you so much for taking all this time. 


Rep. Sean Casten:


Always a pleasure, David. 


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