By Michael McKenna

At their February public meeting, the Federal Energy Regulatory Commission issued a Section 206 petition, which argued that the PJM tariff is unjust or unreasonable (or both, I suppose) because it doesn’t include rules that allow for locating generation sources near or at data centers.

Let me commend FERC for finally engaging on the crucial issue of how we might be able to power the data centers which will be essential to the United States’ efforts to win the artificial intelligence race. Welcome to the fray.

Let me also commend FERC for issuing the equivalent of a vote of no confidence in an organized market. I’m not sure it is the first such vote, but it is definitely the first time that FERC has acknowledged that an organized market may be able to meet the challenge posed by an absolute requirement for the construction of more power and more reliable power in a prompt manner.

The Section 206 issued to PJM is an acknowledgment that the current regulatory model is unlikely to produce the results that the nation needs in this moment; that PJM, as currently configured, is not likely to lead to the building of enough generation in time.

What makes it worse for PJM is that the Commission is not the only one who has lost confidence. In January, in the wake of last Summer’s auction where prices jumped 800%, Governor Shapiro in Pennsylvania decided that PJM needed more generation. Mr. Shapiro warned in a January open letter to PJM that price escalation “threatens to undermine public confidence in PJM as an institution.”

In response to his letter, PJM wrote that it had long warned about potential supply shortfalls during periods of high demand, blaming “state and federal policy decisions that are pushing generators to retire prematurely” and “unprecedented and rapidly growing data center construction.”  In short, the problem was that customers were actually starting to ask for generation from generators.

PJM ultimately energetically argued that that the “market” would take care of the problem. Just kidding. What really happened is that PJM quickly folded and set a price cap for its next two capacity auctions.

The Section 206 petition filed by the Commission is a bit more comprehensive than the back and forth between Governor Shapiro and the hopelessly outmatched PJM. For those of you who think it is liable to be fixed quickly, the Commission’s petition wrapped up with 6 single-spaced pages of questions (39 questions in total) to the world. They varied in complexity from simple questions that can’t be answered (“Please explain whether the existing Tariff rules are sufficient to ensure resource adequacy if increasing numbers of large existing generators choose to co-locate with load.”) to complicated questions that won’t be answered (“Please explain whether or not it would be appropriate to establish an interconnection study outside of PJM’s interconnection queue process for newly interconnecting co-location arrangements . . . “).

We’ve been at this question of data center demand for more than a year now and are just getting around to asking questions that get near the core of the problem, which is, of course, that many places generally, and PJM specifically, appear to have given up completely on building generation, no matter how loud the message from the capacity market gets.

The original sin is, as always, that no one seems to be responsible for reliability. Generators aren’t, otherwise they would be building powerplants. The people who run PJM aren’t; they weren’t elected or appointed by anyone and therefore are not accountable to anyone in particular. The capacity markets are obviously not getting the job done either.

The demand driven by data centers – and the urgency to win the artificial intelligence race now – has exposed the flaws in the slow, sclerotic, self-absorbed system. FERC and its progeny in Valley Forge are completely happy to live in their co-dependent relationship, tossing pieces of paper back and forth to one another.

For the rest of us, though, winning the race to the commanding economic and national security heights of the next three generations is too important to be left to organizations that can’t even decide who might be in charge of system reliability, and whose sense of urgency and clarity results in six pages worth of questions, the answers to which will spawn even more questions and the inevitable litigation.

The system is broken. It is not going to be fixed by pretending that FERC orders get powerplants built.

What we need – and are not likely to get from a FERC-driven process – is some sort of variance or off-ramp to our current approaches that allow builders and their customers to build generation (and buy power) without having to wander through the maze of rules, customs, and folkways embedded in some organized markets.

Until we get something that looks like that, we will continue to struggle with reliability, with costs, and with concerns about our national competitiveness.

Michael McKenna, president of MWR Strategies, advises utilities, merchant generators, and transmission companies. He was deputy director of the White House Office of Legislative Affairs under President Trump. 

This article was originally published by RealClearEnergy and made available via RealClearWire.

From THE DAILY CALLER

Audrey Streb
Contributor

A coalition of Massachusetts climate activist groups sent a letter to government officials on March 18, in response to high utility costs concerning energy bills, though several renewable energy projects in the state have been driving up utility costs in the area for years.

Six environmental activist organizations, including Sierra Club Massachusetts and HEETlabs, sent the letter to Democratic Gov. Maura Healey and Energy and Environmental Affairs Secretary Rebecca Tepper. The letter included calls for provisions to lower energy bills.

Massachusetts has historically supported several expensive green energy projects that have been found to raise utility costs, including offshore wind farms like Vineyard Wind and the abandoned Cape Wind project. The Bay State plans to achieve net zero greenhouse gas emissions by 2050, a goal also championed by the Biden administration to the tune of $3 trillion.

“The sharp spikes in heating bills throughout the Commonwealth in January and February have been a financial shock and burden to customers,” the letter opens. “This spike has caused real pain and has been seized upon by climate deniers and opponents of clean energy.” (RELATED: One Of America’s Priciest Green Boondoggles May Be Going Offline After Sucking Up Subsidies And Incinerating Birds)

Letter on Gas Price Spikes to Maura Healey by Boston 25 Desk

“In 2023 alone, Massachusetts gas customers were charged $160 million to hook up additional buildings to the gas system, an average cost of nearly $10,000 per new customer for infrastructure that only serves those customers,” the letter continues.

The letter demands quicker action on lowering utility bills, outlining the first step as reducing infrastructure spending unless it is “financially appropriate.”

The document also claims that local “gas companies are charging ratepayers for their lobbying, advertising, and other expenses,” through a “loophole.” It also states that under the “reform the obligation to serve” request that “the 2024 climate law indicated that gas utilities can no longer be compelled to serve customers where alternatives to distributed gas are available.”

The letter included steps to lower energy bills, which prompted critics to point to Sierra Club’s expensive energy policy goals. Sierra Club advocates for 100% clean energy by 2050, according to its website. The Institute for Energy Research writes that it would cost trillions of dollars to enact this goal, citing studies from both Wood Mackenzie and American Action Forum, which estimate that this policy, shared with the Green New Deal, is unrealistic and expensive.

“It’s not fast enough to help with energy burden,” Vick Mohanka, the chapter director for Sierra Club’s Massachusetts chapter, told Boston 25 News. “It’s 100% on our bills and we’re paying more profits on this than other states,” she said.

The chapter dubs its state as “a leader” when it comes to “tackling climate change.” The group’s website reads that “Massachusetts has been rated #1 among all states for energy efficiency four years in a row,” and that the state was “one of the first states to pass aggressive climate change goals.”

Sierra Club Massachusetts did not respond to the DCNF’s request for comment.

We need a multi-trillion dollar investment in the infrastructure necessary to weather and avert climate change, not a bipartisan bill with climate deniers. #NoClimateNoDeal. pic.twitter.com/nDEH2Xxchz

— Sierra Club (@SierraClub) June 23, 2021

“Each year, gas utilities spend more than $1 billion to replace aging methane gas pipelines in Massachusetts, costs that are increasingly passed onto consumers in the form of rising delivery rates, meaning some residents are stuck with a $400+ bill even before they use any gas,” a spokesperson for HEETlabs wrote to the DCNF. “Governor Healey and the Massachusetts State Legislature can lower utility costs consumers by reining in this utility spending.”

The spokesperson also pointed to research from Our World in Data, E & E News, Bloomberg, IRENA, Trading Economics and Nuveen that might indicate that renewable energy is a “safe and sustainable” supply of energy.

 A spokesperson for Healey’s office told Boston 25 News that “energy costs are too high in Massachusetts and Governor Healey is focused on bringing them down.”

“Governor Healey has already taken action to lower people’s bills by $220 million in March and April, and her plan would save nearly $6 billion for electric and gas customers over the next five years,” they continued. “She also agrees that more needs to be done. Governor Healey will be filing legislation in the coming weeks to lower costs further, and she appreciates everyone’s ideas and advocacy on this important issue.”

The Executive Office of Energy and Environmental Affairs and Healey’s office did not respond to the DCNF’s request for comment.

All content created by the Daily Caller News Foundation, an independent and nonpartisan newswire service, is available without charge to any legitimate news publisher that can provide a large audience. All republished articles must include our logo, our reporter’s byline and their DCNF affiliation. For any questions about our guidelines or partnering with us, please contact licensing@dailycallernewsfoundation.org.

Tags :