NRECA CEO Jim Matheson: FERC Directives Threaten Co-op Innovation

NRECA CEO Jim Matheson speaks at the 16th annual State of the Energy Industry Forum at the National Press Club in Washington, D.C. (Photo By: Denny Gainer/NRECA)

Two recent orders issued by the Federal Energy Regulatory Commission threaten electric cooperatives’ ability to innovate, NRECA CEO Jim Matheson said Thursday at the 16th annual State of the Energy Industry Forum.

The first order directs PJM—the nation’s largest wholesale competitive electricity market—to adopt a new design for capacity markets that creates a broad minimum offer price rule that applies to most new capacity investments by co-ops. The result, Matheson said, is that co-ops that invest in new generation, storage, efficiency or other resources to meet their members’ future needs may not get credit toward meeting their share of the region’s needs.

PJM, not the co-ops, would decide the price for them to offer any new resources into PJM’s annual capacity market auction. If the price of a co-op’s power resource is too high to clear the market, the co-op would have to pay PJM for duplicate energy capacity.

“Capacity comes from a resource that offers other values besides just capacity,” Matheson said during a speech at the National Press Club in Washington. “A portfolio of resources can help manage a range of risks, meet environmental goals, ensure system reliability and resilience, support a community and more. The Regional Transmission Organizations’ markets don’t recognize any of those values.”

The second FERC order integrates energy storage technologies, such as batteries, into wholesale markets. NRECA strongly supports storage but believes the FERC order goes too far by mandating that state and local regulators allow storage on local distribution facilities and behind the retail meter to be aggregated by third parties into the regional markets.

“The goal of electric cooperatives is to integrate storage into the system in a way that optimizes the value of that investment,” Matheson said at the event, which was hosted by the United States Energy Association. “If third parties can cherry-pick those investments solely for their wholesale market values, it undercuts co-op programs and undercuts the potential for broader system values.”

He said NRECA hopes FERC “will do the right thing” on a rehearing of the issue by granting states and co-ops local control over storage.

Matheson stressed the importance of flexibility when elected officials or regulators develop policy.

“Such an approach will maintain energy diversity for electric co-ops, protect reliability and resiliency, and minimize undue economic impact for consumers,” he said. “And it’s going to encourage more innovation.”

Co-ops need to have the ability to respond to unique regional and local factors to “meet the energy needs of their communities in the best way.”

Matheson also reviewed the success that electric cooperatives had last month in passing key policy priorities as part of the 2020 budget package, which included the RURAL Act. That legislation preserved the tax-exempt status of not-for-profit co-ops when they accept government grants to restore power after natural disasters or bring broadband service to rural areas.

He said NRECA’s legislative and regulatory priorities for 2020 include challenging the FERC orders, reforming the National Environmental Policy Act, improving the accuracy of broadband data and mapping, securing more broadband funds, passing comprehensive energy legislation, reforming the Endangered Species Act and changing tax policy to allow not-for-profit co-ops to more directly participate in the benefits of tax incentives.

Erin Kelly is a staff writer at NRECA.