To an observer of both, there are some irresistible parallels between the fiasco called Brexit and the stumbling of the US Mid-Atlantic/Midwest grid operator PJM over climate policy. The deadline is fast approaching for the UK’s long-awaited decision and still there’s no clarity, no plans and no transparency from the policymakers involved. I can’t help but be reminded of another fiasco of a deadline that is fast approaching on US energy plans.
My career in electric power has prepared me to describe the role of the Federal Energy Regulatory Commission (FERC) in promoting or squelching investment, while I have only one college tutorial on British Parliament. Thus I am not equating the issues at stake for Britain and Europe and their £600 billion trade, or the lives affected, with the $10 billion PJM capacity market and its role in judging competition between older, polluting power plants and clean alternatives supported by state laws. By no means am I minimizing the deeply concerning ramifications inherent in the UK’s gridlock on status with the European Union.
With those caveats noted, though, I offer some parallels in the unfortunate circumstances affecting our future health, prosperity and security present in the cases of Brexit and the moves by FERC and PJM to exclude states’ implementation of climate policy.
Brexit: British Prime Minister David Cameron agreed to put to a one-time popular vote the question of UK remaining in the European Union, expecting a “Stay” decision to end the discussion in 2016.
PJM: PJM management proposed to revise its auction and payment for generator capacity, which accounts for reliable power sources. PJM did so without an endorsement from its stakeholders. The proposal would set minimum offer prices for certain resources receiving support from state laws, such as renewable portfolio standards and ignore other subsidies.
In both, the proposal for a dramatic change was at best, only partially explained. As events unfolded, the lack of transparency and confidence in each of these outcomes led to delays and indecision.
Brexit: The June 2016 vote of more than 30 million across the U.K. resulted in a 52 percent-48 percent defeat against “Stay”, and Prime Minister Cameron resigning. There was an immediate economic toll, with an 8 percent decline in the value of the British currency against the dollar.
PJM: FERC commissioners voted 3-2 in June 2018 declaring the PJM capacity market rules unjust and unreasonable, rejected PJM’s proposals, and in a twist ordered PJM to make more dramatic changes that would include “few to no exemptions” for new and existing supplies that receive payments outside of PJM markets. The result was to throw into doubt how investments would be made in any generation in the 13-state PJM region. In simple terms, FERC used the PJM proposal to take a stand against any subsidy, whether it be for renewables, nuclear, or 60 year-old coal plants. No one knows where this will end.
FERC Commissioner Robert Powelson, a Republican appointed by President Donald Trump resigned after the vote. Powelson and two other Commissioners wrote a combined 24 pages of additional opinions on the matter, describing the decision as “a troubling act of hubris”, “aggressive” and “ironic.”
Depth of conflict
Brexit: The Brexit vote revealed significant disagreement over free trade and migration of Europeans under a single passport. EU membership provided (among other things) elimination of the fenced border between Northern Ireland and the Republic of Ireland.
PJM: On the heels of landmark climate science reports, the Trump Administration continued to pursue another bailout for coal plants. PJM’s proposal gave the federal government an alternate means to stifle states’ laws to address air pollution and climate change with renewable and nuclear energy while raising the financial prospects for aging and uneconomic coal plants.
Brexit: Britain obtained two extensions in March and April 2019 to resolve disagreements over the deal with the EU. British Parliament eventually rejected three times the agreement negotiated by the then-new Prime Minister Theresa May.
PJM: PJM secured extensions of deadlines and future auctions. In October 2018 PJM filed only a portion of the modifications that FERC required in June, arguing that trade-offs and further considerations beyond the Commission’s June order are required. That is, PJM declined to fully implement the order to address all subsidies with “few to no exemptions.” FERC’s only guidance in response to PJM has been an order in July 2019 to refrain from holding an auction until new instructions are given.
In both arenas, the first dramatic decision made implementation difficult.
Failed leadership removed
In May of 2019, both Prime Minster Theresa May and PJM CEO Andy Ott resigned their positions. In Parliament, no vote to remove the prime minister was held, but the failure to win a majority vote for the deal on Brexit created no way to continue. At PJM, the backlash and loss of confidence in the management was evident from both frustration with the incomplete market reform, as well as a $400 million financial flub and subsequent investigation.
Disarray in governance
With deadlines for Brexit approaching, and the PJM power plant owners starting to look at cash flow if there’s a continued delay in PJM running its capacity market, the pressure is on for PJM’s 65 million consumers, utilities, generators and service territory.
Brexit: The British prime minister is now Boris Johnson, and he has lost the first four votes he asked for Parliament to approve. Contributing to this bad result was the defection of one Conservative party member, ending the majority Johnson held; Johnson expelling 20 dissenters from his party, and his own brother resigning from government.
PJM: In the US, PJM has an interim CEO and all parties are watching FERC. The three remaining commissioners (of the five that FERC is supposed to have) have added drama. In order of appearance, Commissioner McNamee declining to vote on federal regulatory decisions an astounding 160 times but has not revealed a conflict of interest or other explanation, conflicting Administration factions lobbied to deter the appointment of additional commissioners, and this month, Commissioner Glick made a transparent revelation that the Trump Ethics Pledge was misinterpreted by the FERC Office of General Counsel and has been unevenly applied. At present, FERC does not have a quorum of commissioners eligible to vote on the PJM capacity market changes. If there were a vote, the request for review, and then court appeals, would certainly follow.
Mess of their own creation
This is really awful to watch. In the case of both Brexit and PJM, the institutions are walking themselves into their own demise. To take extreme positions, and to declare certainty of one’s views, might make sense over a beer, or at a football game. But to carry the responsibilities that these characters have been given with such lack of circumspection, intolerance for critique, and ill-preparation for surprise outcomes is just dangerous.
I’ll leave the Brexit recommendations to someone more steeped in that world. But for PJM: The new management has to find a path between the old state-protected generation in rate-base and the new state-procurements of carbon-free energy. At FERC, we need Commissioner McNamee to reveal the conflicts of interests that are keeping him from voting, and to be open about the waivers that allow him to select whom from among his past employers his votes are affecting. We need a return to competent staff appointments, balanced commissioner nominations, and respect for the business of the American people. How many times can PJM override states before states say, “We no longer want to be a part of this?”