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Binz There, Done That? Obama FERC Nominee Likely to Stay The Course on Renewables, But Changes in Regulatory Policy May Be In the Offing

July 02, 2013 posted by Eric Christensen

On June 27, President Obama nominated Ron Binz to replace Jon Wellinghoff as Chairman of the Federal Energy Regulatory Commission ("FERC"). Mr. Binz's track record as Chair of the Colorado Public Utilities Commission suggests that his priorities will be very similar to Chairman Wellinghoff's. That is, we can expect FERC will continue to pursue policies favoring the deployment and integration of renewable energy resources and the construction of high-voltage transmission facilities to support delivery of utility-scale renewables. Mr. Binz's more recent experience as an industry consultant suggests, in addition, that he may focus on the fundamentals of the regulatory system and how the regulatory system can be rationalized in the face of rapid technological change in the industry. Mr. Binz is a long-time energy industry professional, but it is likely that the policies he advocated during his four-year tenure as Chairman of the Colorado PUC will dominate the political headlines during his nomination process. In that capacity, he helped broker a compromise with Xcel Energy, Inc. to shutter coal-fired generation and promoted action on climate change, renewable portfolio standards, and other policies designed to promote renewable energy and transition away from traditional fossil sources. Given the Obama Administration's recent focus on climate change, and its long-time emphasis on promoting renewable energy, it is not surprising to see a FERC nominee with these priorities. Mr. Binz's recent work as a utility industry consultant, however, suggest that he may be more than just a stay-the-course nominee. He has argued that a confluence of factors, including slowing electricity demand, rapid technological change, and pressures to decarbonize the electricity sector, may make the next couple of decades "the most uncertain, complex and risky period" in the history of the industry. In a presentation to WECC, Mr. Binz noted that the industry is expected to invest $2 trillion by 2030, a far higher rate of investment than has occurred in recent years. The key question for regulators, he asserts, is "How do we ensure that $2 trillion is spent wisely?" To respond to these problems, Mr. Binz advocates a new model of "risk-aware regulation," which is explained at some length in this paper published by Ceres, a sustainability think-tank. Fundamentally, risk-aware regulation takes into account the risks of industry investments, as well as their costs, and aims to encouraging cost-effective innovation. In addition to risk-aware regulation, Mr. Binz has advocated other significant regulatory initiatives. For example, in a recent paper in Electricity Policy, in addition to promoting a risk-aware regulatory model, he argues that new regulatory models that recognize the fundamental changes in the utility industry must be developed to "enable industry transformation;" and that reforms in wholesale markets, including both the "organized" RTO/ISO markets and the "unorganized" markets such as those here in the Pacific Northwest, should occur. Ultimately, Mr. Binz proposes a "Grand Bargain," in which the traditional case-by-case approach to utility rate increases is replaced by a negotiated regulatory construct producing "a thorough regulatory regime that would address a broad set of issues in a consistent manner." Mr. Binz's recent work, in short, demonstrates that he has thought deeply about the unprecedented challenges facing the electric industry and has some definite ideas about reforms to the regulatory system that are necessary to address these challenges. Hence, if Mr. Binz is confirmed, the changes he brings to FERC may go well beyond the current debates about integration of renewable resources and expansion of transmission investment. If you have any questions about the FERC, the Binz nomination, the utility industry, renewable energy development, or electric transmission, please contact a member of GTH's Energy, Telecommunications, and Utilities practice group.