For two straight years, severe storms have left millions of customers without power. In February 2021, Winter Storm Uri’s record snowfall and cold temperatures led to extended power outages when demand for electricity spiked at the same time as un-weatherized power plants failed to generate as much energy as expected. In December 2022, an Arctic cold front swept across the country, leaving another two million customers in the dark.
At the same time, the U.S. has been entering a new “electric era,” electrifying many sectors—including the transportation and heating sectors—while simultaneously transitioning the grid itself to be powered by clean energy technologies. But the regulators responsible for overseeing bulk power system reliability, led by the North American Electric Reliability Corporation (NERC), may not be adapting as quickly as needed.
New resources and new challenges demand new approaches to grid reliability, argue Kleinman Center and Carey Law Professor Shelley Welton and her coauthors, Joshua Macey of the University of Chicago Law School and Hannah Wiseman of Penn State Law. In a forthcoming paper, Welton and her coauthors suggest that NERC’s existing model of reliability governance may be insufficient to meet the evolving challenges facing the U.S. electric grid. They also propose a suite of reforms designed to increase accountability in reliability regulation.
Before turning to solutions, the paper first traces NERC’s history. One of the most prominent examples of industry self-governance, NERC was created in the wake of the 1965 Northeast Blackout to facilitate inter-regional collaboration on ensuring grid reliability. Following its designation in 2005 as the National Electric Reliability Organization, NERC, as required by Congress, worked collaboratively with the Federal Energy Regulatory Commission (FERC) to establish and enforce reliability standards that would protect the stability of the bulk power system. But complaints about NERC’s efficiency and efficacy have persisted throughout the organization’s history, as Welton and her coauthors highlight.
Nearly ten years ago, then-Chairman of FERC and former Carnot Prize winner Cheryl LaFleur posed a simple question to energy industry leaders: “Do we need a different set of standards…for a different kind of system?”1 Welton and her coauthors answer ‘yes.’
Their paper offers several reforms that, taken together, could help usher NERC into the electric era. First, the paper advocates internal reforms for NERC, such as adding public representatives to NERC’s board of trustees to increase board accountability. Second, it advocates several institutional reforms, including modifying the allocation of jurisdictional authority between NERC and FERC. These modifications could include limiting NERC’s deference to FERC, or even merging NERC entirely into FERC’s Office of Electric Reliability.
But Welton and her coauthors argue that even bolder changes may be needed. One option could be for Congress to award FERC control over all critical functions of reliability governance, vesting FERC with the full authority it needs to manage reliability through the electric era. By elevating FERC to an “Energy Fed[eral Reserve Board of Governors]” and limiting NERC’s role to that of a reliability consultant, Welton, Macey and Wiseman argue that FERC could harness NERC’s specialized expertise while taking ultimate ownership of ensuring grid reliability.
Re-thinking NERC’s role could not be timelier. Earlier this year, the U.S. Department of Energy announced it was dedicating $48 million in new funding to support grid reliability and resilience. In making the announcement, Secretary of Energy Jennifer Granholm emphasized that “a reliable and resilient grid is the key to protecting our power supply from outside threats and expanding America’s clean energy and transportation options.” Welton and her coauthors conclude that ensuring NERC and FERC are equipped to guide the country into its electric era will be critical to keeping the lights on throughout the transition.
The paper, Grid Reliability in the Electric Era, will be published in the Yale Journal on Regulation in early 2024.
CeCe Coffey
- B.W. Radford, Reliability vs. Resiliency, 152 Public Utilities Fortnightly 4, 6 (July 2014) (quoting LaFleur’s comments at a FERC technical conference). [↩]