Jon Wellinghoff: The TT Interview

WASHINGTON — Jon Wellinghoff, chairman of the Federal Energy Regulatory Commission, says the rest of the country can learn something from Texas when it comes to wind energy. “Texas is understanding how to manage it,” Wellinghoff says.

He shared what he sees in the future for Texas energy in an interview last week with The Texas Tribune at the headquarters of the commission, which regulates interstate oil and gas pipelines. The commission also oversees electricity transmission between states — except, uniquely, in most of Texas, which has its own electric grid. 

Wellinghoff also discussed his strategy for monitoring energy use in his own home. And he talked about how the commission has changed in the decade since Houston-based Enron's downfall.  

The following is an edited and condensed transcript.

TT: You recently took a trip to Texas. What were you doing there?

Wellinghoff: There were two purposes for the trip to Texas. One was to meet with the [Texas Renewable Energy Industries Association] there in Texas and talk about renewable energy in general and some of the things that FERC was doing in other states outside of Texas with respect to the enabling of renewables and the interconnection of renewables to the grid. The other purpose was to meet with [some of] the Texas Public Utility Commissioners. As you’re probably aware, FERC has limited jurisdiction over Texas related to gas pipelines and related to interstate gas pipelines, and also related to reliability on the electric grid. We don't have responsibility for rates or markets or interconnection on the grid, given that it is not part of the interstate system, but we do have reliability responsibilities.



TT: What can the rest of the country learn from the Texas electric grid — and what can Texas learn from the eastern and western grids? 

Wellinghoff: I think Texas can learn from the rest of the country that the ability to have markets across borders is a very positive thing — and across regions — and I’d encourage Texas to look into how that can be facilitated and still potentially maintain their jurisdiction. 

I think we can learn a lot from Texas. That’s another reason I visit there as often as I can. I’m nothing but impressed with the transmission project that the Texas PUC put together for moving that west wind into the central and eastern parts of Texas. It seemed anyway to me an extremely efficient process as far as how the different developers were selected, and a very efficient process with respect to the siting and the entire development of it. [It was done] in a very expeditious manner and a manner that is probably unprecedented with respect to a transmission project of that size anywhere in the country.

I’m also very interested to see what Texas is doing on the retail level. Texas has the most robust retail competition anywhere in the country. I think that’s a fantastic experiment to see how that’s moving forward and to see how that plays out to the benefit of Texas consumers.

Other things I’m interested in in Texas include the use of [demand response]. I know you’ve got a program called Demand Acting as Load that is very effective, especially in mitigating fluctuations in wind … in the system. [It] is a very interesting thing for us to follow here at FERC because it’s a subject that’s going to become an increasing issue with other areas of the country. So as Texas gains experience, Texas really is in the forefront because, I think, from a percentage standpoint, ERCOT has more wind in their system as a percentage than almost any other area of the country.

TT: Texas does have a lot of wind on its grid, about 8 percent of the electricity supply last year. Does that sort of load cause a strain for the grid?

Wellinghoff: It only puts a strain on the grid if you don’t know how to manage it. So Texas is understanding how to manage it, and I think they’re doing a very effective management effort — but you do have to have the additional resources that can provide for that management. And then you have to have the software and the operational tools to make it work all together, and if you do that it doesn’t strain the system. But if you don’t plan for it, certainly, because it is a variable resource unlike other resources that are more ... dispatchable, it can have effects on the system. But I think Texas really is on the forefront of developing mechanisms and methods.



TT: The North American Electric Reliability Corporation recently reported that Texas and New England were the likeliest to have reliability problems over the next decade. What do you make of this, especially from the Texas angle? 

Wellinghoff: I think that Texas, again, is up to the task. Part of the effect is Texas is growing faster than most other parts of the country, so that is a challenge for you. And, certainly, to the extent that there are retirements of certain units or needed retrofits that will require outages at certain times, that’s a challenge as well. I think it’s a good marker for Texas to have that information, but I believe that the ERCOT planning authority has the full array of tools, as well as the state PUC, to step up to that challenge and deal with it.

TT: Could the Tres Amigas project to tie three electric grids together in New Mexico alter FERC's relationship to the Texas grid?

Wellinghoff: Legally, they’re trying to structure it in a way that it would not. And I think Texas would want to ensure that before there was any approval. I don’t think Texas would authorize interconnections unless there was some agreement on the legal side that Texas’s jurisdiction was maintained. We’re still trying to work through that. I think it’s a matter of Tres Amigas just making the right contacts and negotiations to get that interconnection made.

TT: Can electric cars change the grid and, if so, how and when?

Wellinghoff: I think electric cars can change the grid everywhere in the sense that electric cars are demonstrating now — and it’s been well demonstrated over a number of years — that they can be used not just as a transportation vehicle for a consumer, but the consumer then can also use them while they’re charging as a grid asset to actually stabilize the grid. And over the period of time while the car’s actually plugged in and charging the car, it can provide that service at the same time and get paid to do it, and get paid in a way that will ensure that if there’s any degradation to the battery … that the consumer’s fully compensated, and beyond that compensation, actually makes money.

We are just at the beginning because, first of all, we need some substantial number of these vehicles on the road or being purchased by consumers. But the ones that are even out there now don’t have the control equipment in them necessary to do this. So there has to be either retrofitting existing ones or original manufacturers have to start putting it into the new cars. I think the manufacturers, it’s on their radar screen, but it’s going to be a couple iterations up. It may be two or three years before the Volt that you buy in a showroom is going to have this kind of capability in it. Then you’re going to have to have some sort of intermediary that acts as the aggregator for all of these to basically put hundreds or thousands of them together to sell this up to the grid as a service.

TT: You measure your own electricity consumption in your home. Can you talk about what you have learned? 

Wellinghoff: I learned that knowing the data helps you make some decisions you never would have made. If you don’t know what’s going on, you can’t do anything. That’s why I think it’s so important to have access to that data for individuals and also for third parties that individuals can give it to, because there are people who can now analyze that data for me sand say, “Well, you can do this, that and the other and save energy,” and give me a lot better ideas of how I can reduce my bills. And that will, in essence, create whole businesses in this country.

We’re putting in smart meters throughout this country and smart meters are sort of the first step. Although, I can tell you I’ve been somewhat disappointed by a lot of utilities’ approach to the smart meters, because a lot of utilities don’t take that technology and then use it to enable the consumer to see and utilize the data. I think that’s a mistake, and that’s why I sort of did this on my own.

TT: It’s been about 10 years since Enron filed for bankruptcy. How has FERC changed since then in terms of being able to fight energy-related fraud?

Wellinghoff: We’ve changed a lot. I think we had 11 people during Enron, and we have 160 people now in our enforcement division that’s headed by a former U.S. attorney and that has extremely capable attorneys and market analysts and others to engage in enforcement activities.

We also have an entire market-monitoring center. We monitor the markets every day on a real-time basis, minute by minute, as to what’s happening in those markets. So, if we see anomalies — it’s like if I see an anomaly in my house — in the markets, we can then act on it and initiate an investigation and do something, instead of waiting months or whatever.

I think most importantly we have specific enforcement authority that we never had. In 2005, that energy policy act put in place the ability for us to specifically prohibit fraud manipulation. We never had that in our statute before. And in addition, it gave us million-dollars-a-day penalties per violation. That can effectively deter people from engaging in those kind of practices.

So I feel fairly confident that we have the tools in place now to make markets work fairly for consumers and so consumers should not be afraid to have both robust wholesale and retail markets. And I think, again, Texas is a good example of that, because you have the most robust wholesale and retail market system of any area in the country.