Comment on Shelley Welton, Rethinking Grid Governance for the Climate Change Era

• Date: 01 August 2022
• Author: Casey Roberts

52 ELR 10652 ENVIRONMENTAL LAW REPORTER 8-2022

COMMENT

COMMENT ON SHELLEY WELTON,

RETHINKING GRID GOVERNANCE

FOR THE CLIMATE CHANGE ERA

by Casey Roberts

Casey Roberts is a Senior Attorney at the Sierra Club’s Environmental Law Program.

In Rethinking Grid Governance for the Climate Change

Era, Shelley Welton has incisively described the under-

explored institutional role of regional transmission

organizations (RTOs) in facilitating deca rbonization. As

an attorney who advocates within the RTO stakeholder

process, and before the Federal Energy Regulatory Com-

mission (FERC) and the federal courts, I se e rsthand how

the RTO processes for identifying and addressing emerg-

ing issues can succe ed or be derailed, and the limitations in

FERC’s ability to proactively set these processes and their

outcomes straight. I agree with Welton that RTOs can-

not be trusted to self-govern and that many factors mi litate

against treating them with a lighter hand tha n a run-of-

the-mill utility.¹ But I am more sanguine than Prof. Shelley

Welton that FERC has sucient ability to shape RTO pro-

cesses and outcomes in a manner that protects consumers

and advances decarbonization.

Second, while RTO voting structures unquestionably

favor incumbents, the broader political environment in

which RTOs operate can constrain their worst tendencies.

I describe some of these dynamics and sug gest ways that

states, consumer advocates, and public interest organiza-

tions can shape outcomes while deeper reforms are pursued.

For all of their deciencies, RTOs are a signicant

improvement over the prior holders of Federal Power Act

Section 205 rights—individua l utilities. Consumers have

an inadequate say in RTO decisionmaking processes, but

they have even less of a say in the decisions of a utility

outside of an RTO. And while RTOs may drag their heels

or erect roadblocks to innovative new technologies, it is

undisputable that a non-RTO vertically integrated utility

squelches nea rly all competition from such technologies,

unless the utility itself can develop them and add them to

its rate-base. While RTOs are a signicant improvement,

they present considerable untapped potential.

1. Shelley Welton, Rethinking Grid Governance for the Climate Change Era, 109

C. L. R. 209, 257 (2021).

I. FERC’s Ability to Shape RTO Tariffs

Is Substantial

Professor Welton notes that following the U.S. Court of

Appeals for the District of Columbia (D.C.) Circuit’s deci-

sion in NRG Power Marketing, FERC’s ability to modify

an RTO’s Section 205 ling has been signicantly con-

strained, leaving FERC without the ability to impose a

more just and reasonable alternative.² is limitation on

FERC’s authority also, of course, applies where a non-RTO

utility submits changes to its rates under Section 205,³ and

I think the evidence is mi xed as to whether the RTO struc-

ture further diminishes FERC’s authority.

It is true that FERC’s approval of an RTO’s Section

205 ling is sometimes heavily inuenced by the fact that

it was approved by a substantial portion of the RTO’s

membership. In this way, FERC could be understood

to be applying a lighter hand to RTO lings because of

the implicit vetting below. However, at other times, the

existenc e of the stakeholder pr ocess complicates an RTO’s

eort to get its way at FERC. As Professor Welton observes,

some controversial lings actually contravene stakeholder

preferences, which leaves the RTO with the unenviable

task of explaining why it has ignored these preferences.

More broadly, the stakeholder process usually provides an

opportunity for advocates to dissect a nd extract informa-

tion from the RTO about its preferred course of action.

2. Id. at 233-34 (citing NRG Power Mktg. v. FERC, 862 F.3d 108, 114 (D.C.

Cir. 2017)).

3. It is worth considering that FERC may actually have broader authority over

RTO rates than it does over bilateral contracts widely used outside of cen-

tralized RTO markets, given that application of the Mobile-Sierra doctrine

to the latter limits FERC to setting aside rates only if they are clearly con-

trary to the public interest. Tri-State Generation & Transmission Ass’n, 170

FERC ¶ 61,221, at PP 44-46 (2020) (reiterating FERC precedent that the

Mobile-Sierra standard applies only to individualized agreements negotiated

at arms-length, not to generally applicable rates).

4. Welton, supra note 1, at 255.

5. See, e.g., ISO New England, Inc., Order Rejecting Proposed Tari Re-

visions, 173 FERC ¶ 61,106, at P 49 (2020) (nding an ISO-NE rate

proposal unjust and unreasonable because the costs exceeded the benets

based on an impact assessment that ISO-NE had conducted at stakehold-

ers’ request).

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