Independence and financial acumen urged for new FERC commissioner

Published on July 12, 2018 by Hil Anderson

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One of the attributes of President Donald Trump’s eventual nominee to replace Robert Powelson on the Federal Energy Regulatory Commission (FERC) should be an appreciation for the nuts and bolts of financing pipelines and powerlines, witnesses urged a Senate committee July 12.

The administration will be nominating a new commissioner to fill Powelson’s seat sometime in the near future, and the four witnesses appearing before the Senate Energy & Natural Resources Committee expressed hope that the White House and Capitol Hill would name someone with a solid financial background who would be sensitive to the risks and rewards that investors and ratepayers face in the development of energy infrastructure.

“I have long advocated that the commission members should include some seasoned economists and (energy) industry engineers, and not just lawyers – as much as I love lawyers,” said James Hoecker, a former FERC chairman who is now senior counsel for the Washington law firm Husch Blackwell, LLP. “Those diverse skills have served the commission well in the past.”

Hoecker was one of a pair of former FERC chairmen who fielded a wide range of questions at the full-committee hearing, which was called to examine the overall expansion of the interstate pipeline and high-voltage power transmission grid. The hearing became more timely after Powelson announced in late June that he would step down in August to become the president and CEO of the National Association of Water Companies.

The other former FERC chairman on the panel, Joseph Kelliher, cautioned against political ideologues in favor of principled independents who would work to compromise with fellow commissioners, but not duck criticism for making the right call. “I hope the administration will nominate someone who is independent and who will take criticism for the correct decision and will also try to work toward compromise, but dissent when necessary,” said Kelliher, executive vice president of Federal Regulatory Affairs at NextEra Energy Inc.

Powelson, who was appointed by Trump last summer, spent about a year on the job after a 10-year career with the Pennsylvania Public Utility Commission. A replacement has not yet been nominated, and the committee members will have a level of input on who the White House nominates for the position.

Powelson had a high level of experience in the regulatory arena, but the witnesses at the hearing said tempering such experience with awareness of how infrastructure projects are funded by the private sector would be a highly desirable trait for the companies and utilities that will actually pay for projects aimed at increasing the flow of gas and electricity to locales where it is needed.

“It would be of benefit to have people who understand capital markets, and how we raise equity and how we raise debt,” said J. Curtis Moffatt, vice president and general counsel of pipeline giant Kinder Morgan, Inc. “We have to focus on someone who is less of a politician and more on people who understand capital markets and the forming of capital.”

While building out the nation’s energy infrastructure is recognized, to varying degrees, as a high policy priority, the approval process for projects which runs through FERC has been chided in some quarters as inefficient, murky, overly long and easily bogged down by opposition by landowners, local communities and environmentalists. The consensus of the witnesses, however, was that things actually work as smoothly as can be expected with delays coming more from other federal agencies and state governments.

Such delays can translate into uncertainty and headwinds for investors, who often must front millions of dollars in planning and construction before seeing a dime in return.

The witnesses concurred that electricity demand would continue to grow, and investors were chomping at the bit to put up the funds needed to expand energy infrastructure. FERC, they said, played a key role in moving these projects along while the costs of construction and natural gas were low enough to justify the expenditures. “FERC needs to be bolder in exercising their lead-agency capability,” Moffatt said, adding: “And the administration needs to be supportive of the entire process.”

Moreover, preventing a necessary and profitable project from becoming bogged down in legal and political quibbling is where a diverse and focused FERC comes in, making the path clearer and more certain for the financial community. “If you have been doing this for a long time, you understand that there are capital-market consequences to the optics of (FERC) decisions,” said James Murchie, president, founder and CEO of Energy Income Partners, LLC.