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FERC Proposes Policy Statement to Clarify Jurisdiction in Wholesale Electric Market

On October 15, 2020, the Federal Energy Regulatory Commission (FERC) “proposed a policy statement to clarify that it has jurisdiction over organized wholesale electric market rules that incorporate a state-determined carbon price in those markets. The proposed policy statement also seeks to encourage regional electric market operators to explore and consider the benefits of establishing such rules.” (Quoting the FERC News Release)

FERC Chairman Neil Chatterjee said: “As states actively seek to reduce greenhouse gas emissions within their regions, carbon pricing has emerged as an important, market-based tool that has wide support from across sectors.” He added: “The Commission is not an environmental regulator, but we may be called upon to review proposals that incorporate a state-determined state carbon price into these regional markets. These rules could improve the efficiency and transparency of the organized wholesale markets by providing a market-based method to reduce GHG emissions.”

The FERC News Release also says: “The proposed policy statement follows the September 30, 2020, technical conference at which participants identified a diverse range of potential benefits from proposals to integrate statedetermined carbon pricing into the regional markets. Those benefits include the development of technology-neutral, transparent price signals within the markets and providing market certainty to support investment. States are taking the lead in efforts to address climate change by adopting policies to reduce their GHG emissions. Currently, 11 states impose some version of carbon pricing, and other entities, including the regional markets, are examining this approach. Participants at the technical conference said carbon pricing is an example of an efficient market-based tool to incorporate state public policies into regional markets without diminishing state authority. Today’s proposal finds that regional market rules incorporating a state-determined carbon price can fall within the Commission’s jurisdiction over wholesale rates. However, determining whether the rules proposed in any particular Federal Power Act (FPA) section 205 filing do fall under FERC jurisdiction will be based on the specific facts and circumstances.”

According to the FERC News Release, the Commission is seeking comments on the appropriate information to factor into the review of the filing. Comments on the proposed policy statement are due in 30 days, with reply comments due 15 days after that.


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