Carl Pechman, an economist at FERC, the Federal Energy Regulatory Commission, spoke today at SolarTech's Solar Leadership Summit in San Jose, California.

He noted that FERC was "a really sleepy agency for many years." But his presentation and the recent actions of FERC showed that the agency is anything but sleepy these days.

Greentech Media's recent coverage shows that FERC realizes the changes occurring in the electrical grid. FERC Chairman Jon Wellinghoff spoke last month on the need for flexible electricity pricing and consumer energy awareness. We covered FERC Commissioner Philip D. Moeller speaking on the need for energy storage on the electrical grid last year. It seems that the commissioners at FERC 'get it' and realize that the grid is transforming and that they must be involved in regulating this shift.

Pechman spoke on what it is that FERC does as well as its current, future, and long-term views on the U.S. market.

"FERC is a creature of statute," which:

  • Regulates with a focus on interstate commerce and electricity is a form of interstate commerce. Its authority does not extend to Alaska, Hawaii, or Texas.
  • Reviews market behavior, reliability, rates and market design
  • Approves tariffs, rates, and energy facilities

But its fundamental first principle is to ensure "just and reasonable rates" which are "not unduly discriminatory or preferential." Pechman noted that "within the agency there's a real hesitance to put the finger on the scale of any particular tech."

FERC acts with an open process of generic rule-making on broad policy issues. Pechman cited these FERC orders as milestones that have led change in the utility industry:

  • Order no. 888 (1996) -- Promoting Wholesale Competition Through Open Access Non-discriminatory Transmission Services by Public Utilities; Recovery of Stranded Costs by Public Utilities and Transmitting Utilities
  • Order no. 890 (2007) -- To remedy opportunities for undue discrimination in transmission.  
  • Order no. 1000 (2011) -- Reforms the Commission’s electric transmission planning and cost allocation requirements for public utility transmission providers. 

How is FERC changing the structure of the market?

  • Competitive generation started with Order 888
  • Enabling the smart grid
  • Integration of renewables
  • Better integration of customers and demand response
  • Transmission cost of allocation and planning

Creating the 21st Century Grid

Pechman noted that for most of the grid's existence, "The customer was considered load and the idea of the utility was to serve load." But now "[w]e're getting a very different idea of what the customer is. [...] The customer is not just load but potentially power production and storage and able to respond to the system."