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November 14, 2017
Senate Confirms McIntyre, Glick to FERC, Giving Agency 5 Commissioners for First Time in Over 2 years
The U.S. Senate confirmed the nominations of Kevin McIntyre and Richard Glick to join the Federal Energy Regulatory Commission (“FERC”) on November 2, 2017. McIntyre will serve as Chairman, replacing current Acting Chairman Neil Chatterjee, who will remain a Commissioner.
McIntyre, co-leader of the global Energy Practice at the law firm Jones Day, will serve out the remainder of a term that ends June 2018 and a full term that ends June 2023. Glick, general counsel for the Democrats on the Senate Energy and Natural Resources Committee, will serve out the remainder of a term that ends in June 2022.
The confirmations of McIntyre and Glick give FERC a full slate of Commissioners for the first time in over two years. Their confirmations come at an especially contentious and important time at FERC, as the new Commissioners are expected to be in place in time rule on the Department of Energy’s controversial proposed rule on grid resilience. During their confirmation hearings, both McIntyre and Glick emphasized that they would seek to maintain the independence of the commission, as well as its "fuel neutral" outlook.
“The importance of [baseload] resources cannot be denied,” said McIntyre during his Senate confirmation hearing. “However, FERC is not an entity whose role includes choosing fuels for the generation of electricity. FERC’s role rather is to ensure that the markets for the electricity generated by those facilities proceed in accordance with law.”
FERC is expected to take action on the Department of Energy’s proposed rule by the end of 2017.
Moodys Has Stable Outlook for Regulated Power Sector, but Unregulated Sector Continues to be Negative
Moody's Investors Service recently issued a pair of reports on the unregulated and regulated power sectors.
Regarding the unregulated power sector, Moody’s had a generally negative outlook, as a combination of low natural gas prices, stagnant demand, and oversupply have lead to sustained low wholesale market prices.
"Power prices are showing a similar trend to natural gas prices, rising slightly from lows in early 2016 but with forward projections looking relatively flat," says Laura Schumacher, a vice president at Moody's.
Moody’s noted that potential market interventions, such as nuclear power credits in New York and Illinois could bolster certain economically challenged plants, and that the Department of Energy’s proposed reforms related to grid resilience are likely to accelerate energy pricing reform.
"This type of reform may lead to increased revenues for nuclear and coal-fired generation," says Schumacher. "However, this would likely delay the shutdown of uneconomic plants, which could prolong the oversupply situation."
Meanwhile, regulated utilities’ financial condition is healthy, and they are increasing their operating cash flows with investments in plant and equipment while cutting costs. Those actions have served to offset flat power demand and lower allowed equity returns. However, there are some signs of regulatory push back, especially in states with large failed projects such as Mississippi Power’s Kemper project and South Carolina Electric & Gas’ V.C. Summer nuclear project.
Vistra-Dynergy Merger Announced
On October 30, 2017, Vistra Energy and Dynegy Corp. announced an all-stock merger which aims to create the leading integrated power company in the United States. The companies anticipate closing the transaction in the second quarter of 2018. The deal is a $1.74 billion offer for Vistra to acquire Dynegy. The combined company would own more than 46 GW of capacity, surpassing NRG Energy, the largest independent power producer in the country. Approximately 60% of that generation is gas-fired, and almost 85% of it is located in the ERCOT, PJM and ISO-NE competitive power markets.
Exelon Merchant Unit in Texas Files for Bankruptcy
Citing historically low electricity prices and a challenging business environment for power generators, Chicago-based Exelon Corp. filed Chapter 11 bankruptcy protections for Exelon Generation Texas Power LLC (“EGTP”) — a merchant generation unit Exelon owns in Texas. The unit will continue to own and operate the 1,265 MW Handley Generating Station in Fort Worth, Texas, in exchange for a $60 million payment to the lenders.
“Exelon Generation remains committed to working with all stakeholders to ensure the best outcome for our employees, customers, communities and shareholders,” according to Exelon.
A combination of forces, including flat demand, cheap natural gas and low renewable energy prices, are putting pressure on merchant generators, making it hard for them to recoup their costs. EGTP’s bankruptcy comes as Vistra Energy recently announced plans to close three coal-fired power plants in Texas — part of 5,625 MW of fossil fuel capacity that is slated to be retired or mothballed in Texas over the next year.
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