FERC Appointment Critical to Setting Market-Driven Energy Policy

FERC Appointment Critical to Setting Market-Driven Energy Policy
AP Photo/Evan Vucci, file

 

On the campaign trail and in office, President Trump claims to support using domestic energy resources to restore America’s strength. In the immediate future, the president has an important chance to further that cause by filling a crucial vacancy on the Federal Energy Regulatory Commission (FERC) following the unfortunate passing of Republican Commissioner Kevin McIntyre. The White House is vetting candidates for the position, which represents a pivotal vote on a FERC that is now divided 2-2 along ideological lines.

Why is filling the open FERC seat with the right person so significant? Because the commission is among the most influential policy-making bodies when it comes to shaping the overall trajectory of America’s energy sector. That’s why it is critical that whoever President Trump appoints as our newest commissioner recognizes and prioritizes sound market policy.

Here are three fact-based, market-driven principles that should guide the outlook of the new appointee:

First, picking winners and losers in the energy market through regulatory intervention is a disservice to both energy customers and taxpayers. This means opposing the wrongheaded push for a $34 billion rescue of uncompetitive coal and nuclear power plants in the name of national security, a plot uncovered by a leaked Department of Energy memo last year. This type of intervention not only wastes taxpayer dollars, but stifles prosperity and hurts energy development by tipping the scales away from true competition. Those are strong reasons why FERC commissioners, including McIntyre, have already unanimously rejected such a plan.

The market has already decided against coal, with reports showing coal customers moving away from coal for a variety of reasons, including cost, consumer demand, and environmental concerns. Federal data, in fact, shows that coal consumption has now fallen to its lowest level since 1979 and is expected to continue free falling. In one of America’s largest electric regions, the PJM Interconnection, coal-fired power was down 5% in 2018 while its competitor, natural gas, was producing 19% more electricity. Given these market realities, the last thing federal regulators should do is mandate more of a power source that the market has rejected.

That point leads to a second core principal that should be embraced by the next FERC appointee: the U.S. must fully recognize the value of natural gas. Aided by new technology and a wealth of proven reserves, natural gas is now responsible for a staggering 3 million jobs in the U.S., spurring capital investment of an estimated $1.9 trillion over two decades. Part of that investment is due to the fact that, unlike coal, natural gas has applications far beyond electricity production, including uses for the industrial, residential, commercial, and transportation sectors.

This should call into question views recently expressed by former Missouri utility regulator Terry Jarrett, who argues that fuel constraints and price spikes should make us skeptical about natural gas. Instead of propping up coal, as Jarrett suggests, the better approach is to invest in  natural gas pipelines.

Domestic pipeline projects pump billions into the economy. A single project, Mariner East 2 which spans Pennsylvania, created 9,500 jobs annually and represented an estimated $9.1 billion investment during its six-year construction. More gas pipelines means more customer savings, as much as $1,200 by 2020 according to a recent report. Cost savings and low environmental impact are why the Economic Research Organization at the University of Hawaii coined gas pipelines “a cleaner fossil fuel.” Once FERC fully recognizes the value of natural gas pipelines, they can serve as drivers for big consumer savings.

In the same vein, the next FERC appointee should endorse a third principle: realizing America’s energy potential means building more LNG export terminals. The U.S. can help meet international trade demand for natural gas in places like China and India, but we must green light more LNG export terminals. As of December, FERC has 70 outstanding LNG export terminal applications awaiting review. Clearing roadblocks to these large-scale critical infrastructure projects will inject capital into local communities, bolster tax revenue, and allow the United States to fully pursue energy diversity. The US has huge resources of natural gas available for development.

Clearly, the president’s appointment to FERC is an important one. Hopefully, the next commissioner will embrace a free energy market, granting energy companies the freedom to operate, innovate, and collaborate in a way that best serves customers and our nation’s pursuit of energy diversity. Nominating a new FERC commissioner that prioritizes fairness and energy security will make good on the president’s desire for affordable, reliable American energy for decades to come.

Guy F. Caruso is a former head of the U.S. Energy Information Administration.

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