Former Bush counsel Richard Mroz talks FERC shakeup, carbon pricing

New Project Media sat down with Richard Mroz, Founder and Managing Director at Resolute Strategies, current Board member at the Federal Home Loan Bank of New York, and immediate past president of the New Jersey Board of Public Utilities (NJBPU).

Mroz, who in 2018 was appointed by Energy Secretary Rick Perry to the U.S. Department of Energy Electric Advisory Committee, served under former President George W. Bush, as well as former New Jersey Govs. Chris Christie and Christine Todd Whitman.

Mroz has also served as Chairman of the Critical Infrastructure Committee for the National Association of Regulatory Utility Commissioners (NARUC), President of the Organization of PJM States, Inc. (OPSI), and on the Electric Power Research Institute (EPRI) Advisory Council.  

On 5 November, just one day after the U.S. presidential election, President Donald Trump--who has yet to concede the race to President-elect Joe Biden--demoted Federal Energy Regulatory Commission (FERC) Chairman Neil Chatterjee, replacing him with James Danly, former FERC general counsel and member of the Federalist Society, a conservative and libertarian legal organization.

The reshuffle sent shock waves through the energy community, with many speculating that some of Chatterjee’s clean energy-friendly policy positions may have raised the ire of the President.

“To say I’m proud of what we’ve achieved would be an understatement: from PURPA reform to clearing FERC backlog,” Chatterjee tweeted the day of the FERC shakeup. “From battery storage to Order 2222. From LNG approvals to carbon pricing. Not to mention facing COVID-19. We’ve tackled the biggest energy issues of our time.”

A Republican who once served as an advisor to Senate Majority Leader Mitch McConnell (R-KY), Chatterjee was nominated to the Commission by Trump in 2017 and often toed the party line, backing measures like the Minimum Offer Price Rule (MOPR), which has made it increasingly difficult for renewable energy resources to get onto the grid. 

But Chatterjee also championed clean energy policies like Order 2222, lauded as a way to help distributed energy resources compete on a level playing field, and voted to support FERC’s landmark Order 841, requiring competitive wholesale market operators to facilitate the participation of energy storage.

Currently, there are two vacant seats at the FERC, which could be filled by Trump nominees Mark Christie, Chairman of the Virginia State Corporation Commission, and energy attorney Allison Clements.

“As far as expanding the FERC, that would require an act of the Legislature,” Mroz told New Project Media. “If Democrats get both houses, then Biden could do something like that. I guess if they’re intent enough just like with the Court, they might do it. I hope they don’t. I think that with agencies like that, you usually leave them to do their business. I will really find it problematic if they try to pack the Court. Same thing if they would try to pack a FERC, because if they do control houses in the Legislature, they will have legislative authority to do what they can. Then presumably Democrats would drive a comprehensive agenda and policy and probably legislative requirements to do things in and around renewable energy. And the FERC should, whoever is there, respect that and proceed.”

In direct contrast to Trump, Biden has put forth a progressive clean energy agenda focused on innovation to drive dramatic cost reductions in critical clean energy technologies including battery storage, negative emissions technologies, renewable hydrogen and advanced nuclear, with plans for rapid commercialization.

But with an incoming Biden Administration, some question how more progressive energy policies will align with a Republican-majority FERC under new Commission leadership.

“They probably wouldn't align so clearly at this point; there might be some tussles,” Mroz said. “But what the Biden Administration might want to do is going to be more forward thinking about renewables. Maybe a carbon construct of some sort or pricing or markets, which can be done legislatively. Will they force the issue, or will they do it through legislation? There are ways to do it, there are ways to cooperate and collaborate, but we’ll see whether that happens.”

Is carbon pricing dead?

On the heels of a FERC technical conference on carbon pricing in September, the Commission clarified its jurisdiction over organized wholesale market rules that incorporate a state-determined carbon price. 

In a proposed policy statement, the FERC acknowledged that states are actively seeking to reduce greenhouse gas emissions, noting carbon pricing's emergence as an "important, market-based tool that has wide support across sectors.”

While the FERC has encouraged regional grid operators to consider carbon pricing, Chatterjee also noted that the Commission "is not an environmental regulator” but could be called upon to review proposals that incorporate a carbon price into regional markets. 

“The FERC has always taken a position that they’re agnostic as regards to the fuel source, that it’s about markets,” Mroz said. “Particularly in an energy market it's about what drives a decision, which should be an economic indicator and not so much a requirement of a particular type of generation or fuel. That’s going to be the rub, that’s where there’s going to be a difference of opinion as to whether the federal government can mandate that through other than legislation. And that’s where the argument would be between the Biden Administration on a policy level or a FERC and any of the other agencies and the states.”

But Mroz says states could also push back against rulings like 2222.

“I think a bigger problem is going to be whether the states permit that to happen, because the states look at those issues, particularly around something like Order 2222, as an infringement on states’ rights,” Mroz said. “We saw the same situation with the Clean Power Plan (CPP). The Clean Power Plan was an environmental rule that restricted the states’ rights on resource adequacy for energy production. And I know that well because I was one of the signatories on a certification that went into the multi-state challenge on the Clean Power Plan.”

In 2015, former President Barack Obama unveiled the CPP, which set out to curb carbon emissions from power plants and expand the capacity for zero and low-emitting power sources.

“I think carbon pricing will be a bigger conversation now,” Mroz said. “The reason being what many might think would be the alternative in a Biden Administration-- to require renewables versus natural gas. There will be businesspeople, regardless of their ideology, who say that it doesn't make any sense for the federal government to be forcing and requiring certain fuel types. They will likely say, ‘Let's do something that is market based.’”