Episode description

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.