Wellinghoff: Texas Needn't Fret Over Climate Rules

Jon Wellinghoff, chairman of the Federal Energy Regulatory Commission
Jon Wellinghoff, chairman of the Federal Energy Regulatory Commission

During this legislative session, Texas lawmakers are debating several proposals with major implications for the state’s power grid. So the Tribune asked an expert to weigh in.

Jon Wellinghoff, who served as chairman of the Federal Energy Regulatory Commission (FERC) from 2009 to 2013, sat down with the Tribune this week at the Energy Thought Summit in Austin.

Wellinghoff is now an attorney with the firm Stoel Rives. He consults on energy policy internationally and represents a variety of companies, including those dealing in renewable energy, data analytics and energy storage. He talked with the Tribune about what looming federal climate regulations mean for Texas, whether the state should link its grid to others and how to encourage more Texans to incentivize energy conservation. 

The following is an edited and condensed transcript of the interview.

TT: We’ve been interested in President Obama’s “Clean Power Plan” and its implications for Texas. We’ve talked a lot about how forced carbon cuts might shift the state’s energy portfolio, but less about what it means for transmitting that energy across the grid.

 

Wellinghoff: I think Texas is in pretty good shape. Wind energy makes up more than 10 percent of the state’s capacity, and in certain conditions, that goes up to 40 percent. And you’ve been able to operate it very well. You’ve got some great people at ERCOT who use sophisticated forecasting algorithms to look at that variability of wind resources and ensure that it can be integrated into the system. Also, because Texas has this very robust retail system – and a competitive one – you’re getting more interesting products put into that market. As resources change, those retail providers will come up with some very creative ideas. Compared to most states, Texas will do very well.

TT: There is a lot of handwringing about the proposal, making some wonder whether Texas will refuse to follow the rules. Its Republican leadership doesn’t like much that comes from the EPA. Some officials suggest it will destroy our competitive wholesale markets. But you disagree?

Wellinghoff: I think both the competitive wholesale and retail markets will, in fact, handle these changes and handle them in creative ways. It’s not that the Clean Power Plan will destroy the markets. But because of the markets, it will succeed.

TT: Texas’ setup is pretty rare. Looking across the country, it’s just Texas and Hawaii that have their own electric grids, and for the most part that isolates us from other energy markets. Texans seem to like it that way.

Wellinghoff: I think Texas ought to consider, though, becoming more strongly interconnected with the rest of the United States – perhaps like the [planned] Tres Amigas project in New Mexico [intended to link eastern, western and Texas interconnections]. Texas could benefit, because it does have tremendous resources – like wind. At times, Texas can’t use all of it, and it could be sold other places. I’m sure there are times when the wind in Oklahoma and Kansas may not be completely marketable there and could be sold in Texas. The diversity we have across this country is a benefit. At times, Texas is losing some of the advantages of that diversity. 

TT: Legislation here – Senate Bill  933 – would require Texas regulators to approve any new grid interconnections. Right now, if I’m correct, only FERC must sign off, so some want to ensure Texans have a say.

Wellinghoff: That’s correct.

TT: Some lawmakers fear that connecting with other grids would somehow put us at the whims of other markets, and we’d lose control over our island. But you see it as a benefit?

 

Wellinghoff: When I looked at average wholesale prices a couple of years ago, those in the Eastern Interconnection and Western Interconnection were lower than Texas. Everybody in Texas could potentially benefit from that scenario. It’s always been a mystery to me why, for a matter of convention and politics, you wouldn’t want to do the more efficient thing.

TT: I’m also following a legislative effort to boost demand response [when utilities reward customers for powering down air conditioners, heaters or pool pumps or other electricity guzzlers when demand peaks]. It is so underutilized here, and our energy use so often spikes in the hot summers.

Wellinghoff: Yes, I think Texas could double or triple how much it saves through demand response fairly easily.

TT: Advocates want regulators to find a way to incorporate demand response into Texas' wholesale electricity market – basically allowing for bids on energy savings.

Wellinghoff: Yes, I think demand response should be incorporated into the wholesale markets. Demand response can provide services very well, and in some cases even better than traditional generators. The generators are very much opposed to it, but it’s good for consumers in two ways: It allows them to participate and get money for that. And then by doing that, it lowers wholesale prices for everybody.

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