NARUC chief sees resurgence of states’ rights energy policy under Trump

NARUC’s annual winter meeting in Washington is Powelson’s first major policy gathering since he was voted to lead the group last November. He hails from the Keystone State, where he serves as commissioner of the Pennsylvania Public Utility Commission.

As president of NARUC, he will now be spending the majority of his time at the group’s headquarters in Washington, D.C., where he has already been working with President Trump’s transition teams on priorities and what the states want to see happen in the first 100 days of the new administration.

Powelson sat down with the Washington Examiner ahead of NARUC’s winter meeting, on Feb. 12-15, to discuss the states’ policy priorities and his ideas about how states should share equal footing with Washington in developing a 21st-century national energy policy.

Washington Examiner: What is your outlook on the policy road ahead coming from a big natural gas-producing state?

Powelson: Obviously, from the Pennsylvania perspective with the development of the Marcellus [shale] and a lot of states, something like 25-plus states, maybe higher, states that have renewable portfolio standards since the mid-2000s. So, you look at the states and it’s been said time and time again that states have been the energy incubation labs in lieu of a national energy policy.

And so, a new administration comes in and lays down a marker that says, “Look, we’re going to build things, we’re going to site things, and we’re going to do it very efficiently and we’re not going to have a command-and-control [Environmental Protection Agency], [Department of Energy] or Army Corps of Engineers.” And so I think there is a great deal of respect for states’ rights … and I think it strikes a balance.

States can’t do everything on their own, and hence the need for what I call cooperative federalism. And that can be seen in projects … like nuclear waste storage, new nuclear development, carbon capture storage, renewable integration and build out. And so there is opportunity for the states to cooperate with the federal government.

Cyber is another big area where states are trying to build capacities within their own agencies, whether it’s fusion centers or state public utility commissions. We take a lot of our direction there from the federal government and we build a lot of our capacity through federal agencies.

Washington Examiner: Within the last few days, the Federal Energy Regulatory Commission, which state commissions take a lot of direction from, has been knocked out of commission because of a lack of a quorum on the five-member panel after the unexpected resignation of Chairman Norman Bay. What are your concerns there? Is that going to be a problem?

Powelson: Absolutely. I mean, here’s an independent federal agency that has tremendous regulatory bandwidth, whether it’s pipeline siting, setting [return on equity] and tariff structures for transmission or monitoring wholesale market transactions. I could not think of any federal agency that connects with what they do and what they touch.

It needs to be fully staffed because without a quorum, FERC will shut down, we know that. And that’s not good for states, and that’s not good for overall energy infrastructure and energy policy.

Washington Examiner: This is coming amid the NARUC winter meetings in Washington, and there will be FERC officials and others there. What will the atmosphere there be, given some of the uncertainty?

Powelson: There is a lot of excitement going into the winter meetings. We have Congressman Greg Walden [R-Ore.], who reached out to us and said he wanted to roll out his agenda for the Energy and Commerce Committee. Wow. We have Congressman Bill Schuster, chairman of the [Transportation and Infrastructure Committee] joining us from my home state.

Walden and Schuster alone, you’re going to see the conversation around infrastructure, and part of that being energy infrastructure. So, having them both there I think creates a little bit of a euphoria and excitement.

Washington Examiner: The Clean Power Plan was halted nearly almost exactly one year ago by the Supreme Court. I’ve noticed that the climate regulations for power plants are not a top item as they have been in prior years, and that the collaboration between the major state groups to deal with those rules has been quiet. Why is that?

Powelson: I think we’ve taken a hiatus on Clean Power Plan because a big part of that is going to be obviously driven by a new Supreme Court justice.

I come from a state where we are seeing tremendous reductions in the market-based decarbonization that is taking place in my state because of new state-of-the-art combined cycle gas plants that are driven by Marcellus, and the ramp up and integration of renewables because of renewable portfolio standards. So, a lot of solar and wind investment, and then you couple that with nuclear power.

At a NARUC level, I think everyone is going to say, “What does the new makeup of the Supreme Court look like and what it comes back to? What is the appetite at the EPA?” I think I know the answer. But I’ve been wrong before.

Washington Examiner: Trump’s transition advisers are saying the president is looking at cutting the EPA’s staff in half. What are your thoughts on that?

Powelson: I mean, my governor is going to do a budget address here on Feb. 7 and he’s talking about merging state departments.

And look, I will be the first one to tell you, just from personal experience, between WOTUS [Waters of the U.S. rule] and Clean Power Plan, I think a lot of state regulators on the environmental side and the economic regulator side, [public utility commission] types, we were deeply troubled by just the lack of understanding about each one of our states on how we were going to meet these targets and how the targets were set.

Let me give you the backdrop.

NARUC, being an organization that can bring thought leadership together and facilitate discussion, [former EPA Administrator] Gina McCarthy used NARUC in a very effective way to have these little fireside chats to talk about the design of the Clean Power Plan.

I remember vividly sitting in a room at our summer meeting in Dallas where I said, “Are you aware that Pennsylvania is the second largest nuclear-producer state in the country? I’ve got nuclear plants that have invested in nuclear uprates at the reactor site. I have a statewide energy efficiency program where we are encouraging consumers to do lighting retrofits and install new technologies around home automation, etc. And I’ve got a renewble portfolio standard [requiring utilities to invest in wind and solar]. But you’re setting an adoption target, a benchmark date, that now erodes all the early adoption I’ve done in my state.”

Good point. That was the answer [from EPA]: “Good point. We need to look at that.”

Then you look at states like Pennsylvania that have a higher concentration of coal. We’re the fifth-largest coal production state in the country. And they set forth these regional boiler rate improvement [rules], which if they talked to [the grid operator] PJM they would have known full well that the boiler rate improvement for the Northeast corridor was unattainable.

And then you overlay the whole notion of organized markets and how we dispatch [power plant] generation and how we plan generation, you were getting away from economic dispatch and doing environmental dispatch.

And so, Republican and Democratic public utility commissioners from all different states were pushing back saying, “You’re missing some markers here. And it doesn’t have anything to do with politics. You’re missing basic points that are going to have unintended consequences.”

Hence, three months ago a meeting is called by the White House and the Department of Energy to say, “Oh my God, we have a problem with respect to these nuclear plants.” [The Obama administration] didn’t realize that these nuclear plants that were once viewed as too cheap to meter are getting basically displaced because of shale gas prices and renewable penetration and the federal production tax credit [for wind]. And so we have the perfect storm.

One individual from [the Nuclear Energy Institute] gets up and says, “Thanks for having this meeting seven-and-a-half years too late. We have licenses that are going to sit idle or plant operators that are going to shut down.”

These are all the issues that have a lot of the states in a spot of maybe the market and maybe a state policy is better than some federal climate change scheme that doesn’t recognize the idiosyncrasies of power markets.

I think SCOTUS [the Supreme Court] is looking at that like, “Ah, you might be able to regulate carbon, but the scheme you put forth is one that it kind of looks like you designed the outcome.” Meaning: Don’t do any fossil, we’re going to displace all fossil [power plants] and we’re going to drive an outcome of all renewable investment, i.e. a national renewable portfolio standard.

Members of Congress have said there has been so much controversy, and in my world, in serving on the NARUC water committee, I mean the … water committee issued a resolution denouncing the WOTUS regulation.

Washington Examiner: Was that resolution last year?

Powelson: It was last year. When NARUC speaks, we speak with a unified voice and, obviously, with a states’ rights perspective. And WOTUS, in particular, was another instance where we were saying, “Guys, really?” This is having profound impacts. From a cost-benefit analysis perspective, and the court sided with us, we don’t even think you met the proper … standards.

So, I guess the Clean Power Plan as we know it, I would be shocked if the new administrator doesn’t take a very hard look at this … [especially in light of the Supreme Court stay].

Washington Examiner: Has the administration reached out to NARUC? Are they going to have a presence at the winter meeting in Washington?

Powelson: We have two of the members [of the Trump transition team] coming to the meeting coming to participate in our nuclear waste strategy discussion and overall nuclear power issues.

Washington Examiner: Anyone from the White House joining them?

Powelson: We did invite the president to participate, and we actually have a note in to my colleague in Oklahoma to see if we can get [EPA nominee] Scott Pruitt there.

Washington Examiner: Are there any resolutions that you are sponsoring to go before the NARUC board on what commissioners will seek on lobbying the new administration and Congress?

Powelson: As we are talking about energy infrastructure, in general, most states will align with, look, we’ve got to do this in a more efficient way. So, things like siting. Things like environmental impact studies. Trying to drive more performance metrics or performance outcomes. Things shouldn’t take two years or three years. And so, the [NARUC] gas committee is looking at that. I know the gas committee is also looking at a better practice for pipeline siting and safety.

We have been very vocal with the transition team about the disconnect that has gone on between NARUC and NARUC member states with PHMSA [the Department of Transportation’s Pipeline and Hazardous Materials and Safety Administration].

PHMSA is another one of those agencies that has really given state gas safety people heartburn. We have passed a resolution calling them out on the lack of training facilities. There is only one training facility in the country, and yet we are all competing for spots in that classroom. We called them out to expand it and work with the states to expand it.

Bottom line: The current training method is a disaster.

And we’ve also recognized that there has been total neglect on the part of PHMSA administrators to engage with NARUC. By way of example, both PHMSA directors [Cynthia] Quarterman and [Therese] Dominguez were invited countless times to NARUC meetings and would not participate.

Washington Examiner: Why is that do you think? They are afraid of the states?

Powelson: It doesn’t have to be a waterboarding session. I give Gina McCarthy credit, she would show up. There would be people under their breath saying, “Good luck with that,” but she worked with NARUC, and said, “Look, I need meetings, I want meetings, I want every commissioner, I want to hear from the states.” And they set up sidebar meetings and she would sit down [with us] … PHMSA never does that. They would never think of doing that.

And so there is a lot of state directors and state commissioners who would really like to see a kinder, more state-focused PHMSA.

Washington Examiner: Are there any other agencies that NARUC is calling out for harboring a similar disconnect with the states?

Powelson: The FCC [Federal Communications Committee] seems to be … [Former] chairman [Tom] Wheeler was obviously an activist chairman. He had addressed NARUC on a few occasions and then before him Julius Genachowski, who wasn’t really readily accessible to NARUC. But Wheeler was.

We are very encouraged with Ajit Pai’s chairmanship. We have had him speak at NARUC. I think he is very respectful of states’ rights. And net neutrality aside for a moment, I think he is one of those people who will listen to states on [payment decisions] … that could increase bandwidth and speed by allowing states to keep those dollars verses redistributing them.

The newest announcement is the NRC. Now, [the Nuclear Regulatory Commission] has traditionally not been very active with NARUC. We would probably be encouraging them in this new year to re-engage with us.

Washington Examiner: Interesting. I don’t remember there being NRC commissioners at previous NARUC meetings, or addressing the group. Is there a policy resolution on re-engaging states with the federal nuclear regulator?

Powelson: No. But as it relates to the Clean Power Plan, we did pass a resolution that’s kind of a direct shot across the EPA’s bow on the value of nuclear. You should take a look at that.

Washington Examiner: The nuclear industry, and I believe the broader utility industry, will be looking to FERC for ways to credit nuclear power plants through the wholesale energy markets it oversees. Is that something NARUC will support?

Powelson: I’m from an organized market. Then you have the bilateral markets, and I think our conversation is who’s best to make these decisions? Is it the state legislatures, or is it the RTO [the regional transmission operator that is overseen by FERC]? In our market, we want the RTO to solve the problem.

I think where we are as state leaders is, I think, it’s best left to RTO when it comes to price formation. That’s kind of where it should be, and then let the FERC do the screening of this passes the litmus test of the Federal Power Act, [and] you’re not disrupting or displacing other power generation resources.

I think you are going to continue to see this subject continue to be debated and discussed.

The other thing about nuclear is, we spend a lot of time on new technologies. There is discussion now of where are we going to go on SMRs, these small modular reactors. And are they commercially viable? What is the Energy Department going to do? How can NARUC member states participate in that conversation?

Washington Examiner: What about clean coal? That is one of the president’s priorities. Are we going to hear from the industry on that during the upcoming sessions?

Powelson: We do have a clean coal committee that was by Brian Caulk, who actually is retiring here from the North Dakota commission. Clean coal is definitely going to be part of the conversation. What I like to say about NARUC when it comes to energy policy, we are all-of-the-above, and all-of-the-below as well.

I don’t want to sound like a cliche, but seriously you have states that are nuclear power production states, coal production power states. You have states like Texas that are leading the country on wind integration and then gas. We had a discussion on [natural gas] exports.

Is there going to be a conversation this Congress on a bipartisan energy bill? These are things I think are going to dominate the discussion in the coming months at NARUC.

I think the other thing that we are hearing is I think that PURPA [the Public Utility Regulatory Policies Act of 1978] is an outdated doctrine. We passed a PURPA resolution at our last meeting.

PURPA was passed as a direct result of a national energy crisis [in the 1970s] and natural gas was a scarcity commodity. And here we are today on the cusp of energy independence. And no one can argue with me, PURPA needs to be reformed to reflect the modern energy landscape.

I rolled that idea out at the Edison Electric Institute’s CEO conference a few weeks ago and I received raving applause for bringing it up.

Washington Examiner: What’s the issue with PURPA? It’s too restrictive, and some of the siting processes are difficult, correct?

Powelson: Correct. And again you are going from a scarcity environment to a potential independent environment, and you have new technologies in front of the meter and behind the meter. 1978 never saw what we are seeing today.

They didn’t know what an oxidized fuel cell was. They didn’t know what an SMR was. They didn’t know about all the home automation systems and how on the demand side the new things that are coming to market.

Washington Examiner: So, this is your first winter meeting as president, right?

Powelson: I have been ordained, as we say in the Catholic church.

Washington Examiner: This will be your first full year in Washington?

Powelson: Yeah, [beginning with] the winter meeting.

Washington Examiner: Until next year, right?

Powelson: Until November when a new president is installed.

Washington Examiner: Has anyone from the White House invited you and NARUC to visit with the administration?

Powelson: I hosted with Tom Pyle and our executive committee. We had a conference call, and that was a lead into our transition document that went out. That’s driven a lot of the conversation.

We are early into this. We aren’t even 100 days into this yet. We don’t have full best-strength at the FCC, we don’t have full best-strength at the FERC, the EPA administrator will assume his role here shortly. Rick Perry is getting up to speed and putting his team together [at the Energy Department]. So, I am seeing a scenario by the summer meeting, the invitation will be on the table for them to come and address us.

Washington Examiner: What are you going to bring to the meeting this year?

Powelson: Every NARUC president puts together their agenda or theme together. My three themes are infrastructure, innovation and investment.

The infrastructure piece is, I think we are pretty aligned with the conversation taking place not only on Capitol Hill but at 1600 Pennsylvania Ave.

We are going to talk about pipeline infrastructure, pipeline replacement, siting, getting gas to load centers, new nuclear, all that. And by the way, water infrastructure as well.

And if there is going to be a trillion-dollar-plus infrastructure bill … it’s not just going to be intermodal funding. The energy companies are competing and wanting to compete for those dollars to invest in water systems, and clean technology investment and other dollars they can use to build grid infrastructure and new generation.

The next piece is innovation. There is no normal [energy] customer out there anymore. You have a lot of disruptive competition and technologies coming into the market. It’s not every customer, but more customers are accessing things like the [Google’s] NEST thermostats, utilities are using data analytics to learn more about their customers and commodities and services to customers.

So, we’ve engaged a conversation around innovation.

Then you get into investment. It’s not dollars and cents into the grid. It’s the workforce investment piece that we don’t like to talk about.

It’s a scary statistic of linemen that are 55 years old and retiring. This is real time. It’s only getting worse. And then you overlay that with people returning from Afghanistan and Iraq with chronic unemployment, but a set of workers that have great leadership and skill sets. How can we get the electric, gas, water and telecom leaderships to work with leadership to identify best practices on hiring military.

And so we are taking up that cause as well.

That’s a lot to bite off in a year, but we’ve already launched the two task forces, with Brian Sheehan leading innovation, and then Judith Jagdmann from the Commonwealth of Virginia leading the workforce, military affairs committee.

First session out of the box, we have Chris Crane, chairman and CEO of Exelon, Jack Gerard, the CEO of the American Petroleum Institute, Chris Franklin, the CEO of Aqua American, a large investor-owned water utility. We have the president of the American Gas Association.

I think there is a big buzz around the winter meeting.