Thread by @JMGinNYC

Today's FERC technical conference on carbon pricing is about to start. ferc.gov/news-events/ev… It's going to be ~9 hours(!) of focused discussion. So, basically the opposite of last night's debate. I'll be tweeting about it in this thread...

If you want to see the agenda or panelists' prepared remarks, FERC has posted everything on the same page as the webinar link.

And if you'd like to start with the latest, definitive report on carbon pricing in RTOs, here's the link for you: policyintegrity.org/files/publicat…

Senator Whitehouse (D-RI) leads off by highlighting the bevy of recent reports on the dangers of climate-driven financial, economic, and physical mayhem, then turns to the policy and political viability of carbon pricing as a response -- it can provide a "soft landing".

Chairman Chatterjee sets the agenda: "When states or regions adopt a carbon pricing framework -- what issues does that raise for FERC?"

Key proviso: "FERC is *not* an environmental regulator." It's concern is "just and reasonable rates," and to "create value for consumers."

Chatterjee: FERC's markets "can't be hermetically sealed from state environmental regulation."

"As states and regions move forward with carbon pricing policies . . . what is [FERC's] role and responsibility in this moment?"

Commissioner Glick: Noting recent spate of climate impacts (storms, heat, drought, wildfires), observes that "we aren't really leading at the federal level. . . . We're seeing a lot of action at the state level."

Glick: "This conference is not about FERC wanting to set its own carbon price. . . . FERC's not an environmental regulator . . . . But FERC does have a role to play here."

Indicates that FERC would take a look at a 205 filing from an RTO that wants to accommodate state policy.

More Glick: FERC doesn't have the authority to simply block or preempt state clean energy programs. Warns against using this topic for that purpose.

Commissioner Danly (briefly!) indicates an interest in issues of implementation.

We're into Panel #1

David Hill energypolicy.columbia.edu/david-r-hill says FERC has a solid legal basis to act -- it's just a question of the factual showings made in support of proposed tariff changes.

Kate Konschnik (nicholasinstitute.duke.edu/people/kate-ko…) is next, emphasizes that demand for clean energy and emissions reductions will drive market actors to seek solutions, even if those solutions are out-of-market.

Ari Peskoe (hls.harvard.edu/faculty/direct…) identifies several sources of justification for FERC to review and accept proposals to accommodate a carbon price. Doing so "would not transform the Commission into an environmental regulator."

Matthew Price (jenner.com/people/Matthew…) also thinks FERC can accept a 205 filing proposing a tariff that incorporates a carbon price. There are several potential bases for such a proposal. Accepting it wouldn't impose anything on states.

Jim Rossi (law.vanderbilt.edu/bio/jim-rossi) offers 4 "guideposts" for a jurisdictional analysis: (1) CO2 price would be just like other input-costs under the FPA; (2) FERC must identify who is setting and who enforcing the price; (3) FERC should consider a preemption savings clause...

[more Rossi] (4) many state clean energy programs are simply beyond FERC's jurisdictional reach.

Roy Shankar (cornerstone.com/Experts/Roy-Sh…) says the best carbon price would a uniform tax, adopted legislatively, across all sectors. "I think I agree with everybody -- there's no bar under 205 on [accepting a proposed tariff change to incorporate CO2 pricing]." . . .

[more Shankar] . . . But he distinguishes a responsive from a proactive role. A proactive role is currently beyond FERC's authority, unless Congress changes it.

Panel #1 Q&A

Chaterjee asks Konschnik about jurisdictional considerations. K: Single state is easier, of course; multi-state scenario is tougher. But RTOs are well positioned to balance interests of participants in their territories.

Chatterjee asks about "two types of leakage" -- "emissions leakage" and "economic/pricing leakage."

[ed note: Folks, I implore you, there's just emissions leakage. We gotta stop calling the other thing leakage. it's just an "economic/price effect." Let's make this happen.]

Shankar's answer on leakage emphasizes that proactive intervention by FERC can make leakage problems worse, causing neighbor-state policy outcomes to be distorted.

Rossi on leakage: Important to distinguish leakage from discrimination on rates. FERC shouldn't get ahead of itself with this -- let's see what examples arise.

Peskoe on leakage: FERC has already approved a tariff that addresses a state concern about emissions leakage.

Responding to Dr Shankar, points out that FERC doesn't look at "the whole economy" when assessing efficiency.

Konschnik on leakage: Notes California/EIM example is just one solution and emphasizes that leakage is happening already. FERC can help now by facilitating tracking across lines between states that do and don't price carbon.

Shankar clarifies re efficiency: It's a question of materiality.

[ed note: feel free to chime in to interpret this one, everyone]

Chaterjee asks Hill what could prompt a filing under section 206.

Hill: If tariffs, filed under 205, were evidently working in a J&R fashion, it's within FERC's authority to go further.

Price on 206: There's a higher burden. I understand this conference to focus on FERC authority to play a reactive role.

Chatterjee (2 t's -- sorry sir!) asks Peskoe about relevance of FERC v. EPSA...

Peskoe: Key takeaway is that so long as FERC is working improve efficiency and effectiveness, courts will be reluctant to cut off FERC's jurisdiction.

Glick asks about differences between filing from single and multi-state RTOs.

Konschnik: No difference in legal rationale. But governance gets messier in a multi-state RTO. More leakage issues. It's technically difficult to track power flows.

Shankar responds re single/multi-state Q: Politics come to the fore in the multi-state scenario. "Jurisdictional creep" can ensue, pushing FERC beyond its jurisdiction.

Price on single/multi Q: Legality doesn't differ, but leakage comes to the fore with multi-state scenario. Valid to help states deal with emissions leakage. Impossible to avert *some* economic effects beyond state's borders. [ed note: Yes, he actually said "economic leakage."]

Glick asks about risk of unduly discriminatory treatment of similarly situated generators when dealing with leakage.

Price: Carbon pricing doesn't necessarily give rise to that. Emissions profiles are a valid basis for different treatment.

Shankar: Risks picking winners.

Konschnik: Getting a price from a state mitigates these concerns.

Peskoe: Like J&R, "unduly discriminatory" is a subjective standard. FERC has flexibility. Not a jurisdictional bar.

Glick asks Rossi about preemption.

Rossi: Yes, we need to examine problem of preemption, e.g., if there's tethering. Probative factor is how broadly the state imposes its price. Also! FERC accepting a price doesn't establish a ceiling on future changes to state-set price.

[ed. note: Rossi's last point about a ceiling is a very important one that states -- hi New York! -- are paying close attention to]

Hill on preemption: Generally, if RTO incorporates state-set policy, then concerns about preemption are effectively mitigated.

Price on preemption: No preemption issue arising from a state-determine carbon price. Such a price is akin to RECs or ZECs, which are "squarely within the state's authority." RTO is then submitting a rate for approval. This is fundamentally different from the situation in Hughes.

Glick closes by emphasizing that states have authority to adopt prices on a variety of sources of carbon emissions. FERC's responsibility is to ensure that markets are J&R and not UD.

Shankar jumps in: "I don't disagree" but state action will drag FERC toward proactive policy.

Commissioner Danly asks about limits of state power--any instance where "magnitude of the state policy is so great ... that we push ourselves into territory ... that it isn't J&R / amounts to tethering ...?"

Rossi responds to Danly: State law that applies broadly has more of a safe harbor re targeting a wholesale rate, but state reg that affects wholesale power sector isn't necessarily a problem. Key is whether tethering features. No reason why it has to.

Peskoe responds to Danly: Notes that recent SCOTUS Va uranium case suggests that tethering isn't a risk here. Also, states shouldn't tether.

Rossi chimes in: Yes, we shouldn't be looking to "state purpose."

Hill responds to Danly on Hughes: There will be implementation questions and fact-specific circumstances will matter. But a broad-based carbon price/regime will generally be permissible.

Danly asks: Anyone on the panel think FERC has authority to unilaterally impose a carbon price?

Peskoe: Well, it would be based on the record. If FERC develops a record that establishes that a carbon price would be J&R, there's no jurisdictional bar.

Danly disagrees. Strongly.

Shankar on FERC authority to impose a price: FERC would need to point to something in the Federal Power Act that allows that. It would be "a lot of bridges too far."

Price on FERC imposing a price: We're talking about 205 today. But section 202(a) does provide some authority for this. FERC could in principle reach the conclusion under Chevron that it's within its authority under the FPA.

Rossi on FERC imposing a price: Does the FPA *foreclose* FERC from doing this under 206? Open question, per DC Circuit's Council of Crees decision, is whether FERC could address environmental impact. FERC would need very good arguments to support such an action.

[more Rossi] If this is about reducing barriers to competition, FERC is squarely in its wheelhouse.

Danly to Peskoe: Really possible to develop a record supporting carbon price via 206?

Peskoe: Stakeholders deal with carbon emissions differently already. FERC could, in principle, develop a robust record that recognizes the salience of carbon.

Hill responds to Danly: FERC's authority is very broad when responding to inputs from the market. If FERC were to undertake on its own motion, as opposed to incorporating what states or EPA have done, that "walks pretty far afield" and presents difficult jurisdictional issues.

Shankar responds to Price (and Peskoe?) re relevance of 202(a): I don't think FERC has authority to proactively adopt a carbon price under 206. We've had a test case where efficiency rationale was unambiguous and that "got flattened."

Starting Panel #2. [ed note: if this is going to be the pace all day I might not survive.]

Dr Joseph Bowring (monitoringanalytics.com/company/team_f…)'s opening: CO2 pricing generally makes sense. Adoption of a price by states'd be like RGGI; states control revenues. Lots of examples today. But state pgms are diverse, not transparent. More coordination & transparency-->good for all.

Richard Dewey (nyiso.com/who-we-are)'s opening: New York has adopted ambitious targets for renewables deployment and emissions reductions. NY is "relying on decarbonization of the electric system" &"keeping alignment" with wholesale market is key, so: nyiso.com/carbonpricing.

Devin Hartman (rstreet.org/team/devin-har…)'s opening:
-Crucial to reconcile state and fed policy. Recognized at 2017 tech conf. Status quo is unsustainable.
-CO2 pricing is a great place to start.
-Kudos to FERC for framing this as state-led.
-Institutional context matters!

Arne Olson (ethree.com/people/arne-ol…)'s opening: carbon pricing is "the holy grail for climate policy." But it only works well if it covers whole market--i.e., pricing can drive leakage. Absence of fed action has led to diverse efforts by states, pvt actors. Reconciliation needed!

Gordon van Welie (iso-ne.com/about/corporat…)'s opening: To fully decarbonize New England, we need balancing resources. Region hasn't been able to agree on a solution that balances priorities of decarb, resource adequacy, integrity of price formation. Pitches "net carbon pricing."

Frank Wolak (web.stanford.edu/group/fwolak/c…)'s opening: 3 key points: 1) CO2 pricing, not subsidies, is the least-cost way to reduce emissions; 2) impossible to measure precisely the CO2 content of imported electricity; 3) CO2 tax better than cap-n-trade: "tax brown > subsidize green"

[ed note: van Welie & Wolak said more than what my tweets caught -- check their written comments for fuller content: ferc.gov/news-events/ev…]

Chair Chatterjee asks about how rules incorporate state policies/laws.

Bowring starts: "Quite simple. No change to the rules necessary. RGGI costs became a part of dispatch costs. . . . It's been done entirely consistent with the functioning of PJM markets."

Dewey on incorporation of state-imposed compliance costs: "Just incorporated into the offers, and that in turn is reflected in dispatch. No need to change the rules."

von Welie: Ditto, but another point: "RGGI price isn't high enough to be the driver of clean energy transition." So until we address that [because of states' responses], we'll be stuck with the problem that has led us to imposition of the MOPR/BSM in PJM/NYISO.

Wolak answers Q re incorporating costs: California has found it can't stamp out reshuffling, only mitigate. Led to EIM market's approach to imports into California [which are subject to Cal cap-and-trade program].

Chatterjee: Do/can existing CO2 pricing mechanisms ensure econ efficient outcomes?

Wolak: Current prices are too low.
Bowring: "Simple answer is 'yes'"
Olson: Challenge=each state has own implied price, no fed leadership-->higher emissions AND higher costs can result

Chatterjee: How does emissions leakage and pricing leakage occur? [ed note: this tweet is not an endorsement of the use of the term "pricing leakage"]
van Welie starts by answering a related question: FERC can't escape dealing with state efforts. Then we can deal with leakage.

Dewey: NYISO sees CO2 pricing as part of a general evolution of market rules in response to state policy changes. Multiple changes in E/AS and capacity markets needed as energy transition proceeds. Dewey notes importance of authority to allocate cost of new transmission fairly.

Bowring answers directly: "Leakage is unavoidable... A fact of markets." We don't need complex rules to deal with leakage -- and, besides, you can't measure CO2 content of power flows accurately. In sum: "leakage isn't a reason not to proceed with carbon pricing."

Olson on leakage: Uses a bathtub analogy about flows of emissions across jurisdictions [ed note: I think a waterbed analogy works better, but OK] to illustrate challenge of measuring state policy effectiveness.

Hartman on leakage: Distinguishes short and long-term leakage. Longer-term can have relocation and substitution effects. Short-term effects can be addressed well by RTOs thanks to granular data re CO2-intensity of a system. Long-term is harder to quantify but needs examination.

Chatterjee asks: Other challenges for CO2 pricing apart from leakage for multi-state regions?

Bowring: If some states don't want CO2 pricing, it's possible to account for and redistribute revenue. It would require an agreement among the states. "Eminently doable."

Hartman re challenges in multi-state RTO: Setting price level is a challenge. States must determine. Long-term pricing stability would be very valuable for investment.

Wolak: Important to understand implicit costs of state policies. Making that info transparent can move us fwd.

van Welie re multi-state challenges: ISO-NE is considering Net Carbon Pricing and FCEM. But states must agree to whatever we adopt. Our 2 key problems: accomplish energy transition, deal with features of resource adequacy arising from new resource mix.

Glick asks van Welie about cat-herding New England states--"Can you get 6 states to agree on a CO2 price?" "States have various goals for energy policy."

van Welie: "I'm hoping states will warm up to the idea." But the other problem is resource adequacy. We can't escape need to pay for balancing resources. If we don't confront this problem we'll have to reevaluate market constructs holistically.

Dewey on cat-herding states: "I haven't gotten all of my New York states in agreement." It's difficult. This conversation and others are helpful.

Bowring on cat-herding: Not essential for all PJM states to agree on a carbon price. We can adopt a mechanism to allocate revenues if necessary. A single price would be better, of course. Re resource adequacy: current market constructs can handle it.

Glick responds quickly to Bowring on resource adequacy: For another day, it'd be helpful to address those resource adequacy issues outside of a carbon pricing discussion.

Wolak: Resource adequacy discussion is long overdue; RA = energy when you need it.

Dewey chimes in re resource adequacy: It's a mistake to view energy market revenue and adequate capacity as separate. Carbon pricing can help to address both issues and so should be part of any resource adequacy discussion.

Glick, noting that FERC must opine on a 205 filing, asks what FERC should look for to determine whether it's J&R-not-UD. [ed note: this is a very very important question, folks]

Dewey re what would make CO2 pricing J&R: Proper allocation of risk, costs, benefits, given that these resources are coming no matter what NYISO does.

Hartman re how to evaluate J&R:
1st how do we eval economic efficiency -- look to just one market or neighboring regions too? Also, should we look beyond electric industry?

2nd how do we define the status quo, and would a proposal improve on it?

van Welie: I'd prefer a clean solution that doesn't end up in court. We have a CASPR work-around today.

Bowring: No question that a state-initiated pgm "passes a 205 test." Same with a pgm initiated by another federal agency.

Olson on J&R: Notes that CO2 pricing can aid with capital-intensive renewables' need for investment. But also highlights that corporate PPAs for clean energy are salient and will continue playing an important role.

Wolak: Dealing with imported electricity is where legal rubber will meet the road. Geographic scope of pgm coverage can help there.

Lunch break! I'll be using the time to gird myself for Panel #3, Considerations for Market Design, which has two groups of panelists.

Programming note for anyone counting on this thread to cover Panel #4, Closing Roundtable Discussion: You don't have to go home at 4:30 but you can't stay here (because at that point I'll be biking uptown to pick up the kiddo).

We're back! And I am re-caffeinated!

Here we go...

Anthony Giacomoni (linkedin.com/in/anthonygiac…)'s opening: 3 points: 1) PJM supports market-based mechanisms, most efficient mode of emissions reduction; 2) such pgms aren't new: RGGI has been operating for >10yrs; 3) CO2 pricing task force has studied options for mitigating leakage.

William Hogan (scholar.harvard.edu/whogan/home)'s opening: Yes, an economy-wide price'd be best. We're here b/c of diverse pgms across states, regions. Key Q: What are we trying to accomplish--to fix? E.g., do we want to null out IM/EX across jurisdictions?

Rana Mukerji (linkedin.com/in/ranamukerji)'s opening: Several ways that CO2 pricing, like NYISO has proposed, can make energy transition more efficient than alternatives. [ed note: full texts of opening comments are available on the tech conf's webpage: ferc.gov/news-events/ev…]

Mark Rothleder (caiso.com/about/Pages/Ou…)'s opening: 2 types of objectives at issue: operate the grid, enable state carbon reduction programs. CAISO has had to deal with states that do and don't price carbon; solution=market rules allowing for voluntary transfers via EIM.

Matthew White (ISO-NE Chief Economist)'s opening:
-CO2 pricing can be simple, transparent, cost-effective means of facilitating decarbonization of power sector
-CO2 pricing entails measuring & allocating, which RTOs do very well
-CO2P can help resolve current state-fed conflict

Panel #3 Q&A

Chatterjee: What are the common design features necessary to accommodate or integrate state-set CO2 pricing into RTO market design? E.g., must all designs account for leakage?

Mukerji on necessary design features: Yes, there are some common features across all designs. Price reflected in LMP. Important to track leakage. Harder in multi-state RTO, but it can be done. Also possible to allocate revenues to equitably address effects on LMPs across region.

Rothleder on design features: Price of CO2 must be reflected in dispatch. Re leakage: bids submitted within or outside California reflect additional price of carbon ("adder") needed to comply with Cal Air Resources Board cap-and-trade program price.

Hogan on design features: Again, depends on your objective. Policies should focus on price issues, not quantities. Need to resolve issues arising from states in an RTO that don't assign a price to emissions.

White on design features: Important that price reflects cost of emissions to society. Also, price in a region must be uniform across, e.g., all 6 ISO-NE states. Incorporating adder into offers is the simplest approach. Re leakage: not strictly necessary to address it.

Chatterjee: Are there fundamental differences in market designs that arise from a state-administered vs RTO-administered CO2 pricing mechanism? E.g., Cal vs NYISO?

Mukerji's answer (really a clarification): NYISO will use a price *established* by the state.

White: Short answer is No, no fundamental differences & both can be made to work. But state admin can make measuremnt issues more complex bc of access to info abt flows acrss boundaries

Giacomoni: Key difference between inter and intra-RTO leakage. They need to be handled differently because of different admin treatments of each.

Hogan: Endorses Wolak comments re focus on price rather than attempting cap-and-trade.

Rothleder: A common price across the widest footprint is better. But the problem isn't different prices per se, but other differences across states that add to admin complexity.

Chatterjee: Could CO2 pricing have an impact on the competitiveness of wholesale markets? What factors can ensure continued competitiveness?

Hogan's answer: My comments cover factors that I think FERC should attend to on this point. Insofar as CO2 pricing can obviate out-of-market mandates, it can improve competitiveness.

Mukerji's answer: Energy market is the most important one to enhance as more renewables come online. Adding info about carbon emissions will support (short-term) need for ramping to firm up renewables' variability, and (long-term) need to guide entry and exit.

White's answer: Unequivocally, yes, CO2 pricing can enhance competition, chiefly over the long-term by better informing investment. Right now, lots of uncertainty for investors/investments. A substantial and stable CO2 price signal can address this and thereby lower costs.

Rothleder adds: CO2 price adds an important long-term signal. Challenge comes from diversity of programs across a region. If diverse mechanisms underlie a CO2 price, that diversity can present a barrier.

Chatterjee asks about effect of CO2 pricing on entry and exit decisions.

White's answer: New England weather adds to balancing challenge--CO2 pricing can facilitate investment in resources needed. Also, CO2 pricing will increase energy market revenues, reducing source of tensions surrounding MOPR/BSM. [ed note: very savvy answer Mr White!]

Hogan re effect on entry/exit: Relates to order twenty-two twenty-two. [ed note: you read that pronunciation of 2222 right, folks.] That way, no need to have "central knowledge" about which resources will add value.

Mukerji re effect on entry/exit: New York has set a deadline for itself. The technologies needed to meet it aren't yet totally clear, but a uniform CO2 price can guide the market. Otherwise, we're left with state-directed solutions, pursued using subsidies.

Chatterjee asks What are the key elements of RTO market design that have a consumer impact--can CO2 pricing be implemented in a way that protects consumers from double-payments for environmental benefits? (Shout out to @TysonSlocum in there.)

Mukerji's answer re consumer impacts: Brattle and Analysis Group's studies conclude that CO2 pricing is a more cost-effective pathway to reach New York's clean energy objectives for consumers. With CO2 pricing, REC and ZEC prices would fall, sometimes to $0.

Hogan on consumer impacts: I worry as much about competition between new and old renewables as I do about double-payment for environmental benefits.

Giacomoni: RTO-wide programs are far more cost-effective than patchy approaches.

White on consumer impacts: Several potential sources of offset to higher consumer costs, including lower REC/ZEC prices and lower PPA costs. Relates to MOPR. . .

[more White re consumer impacts]: consumers pay thru state pgms, then again thru capacity market. But if CO2 pricing compensates thru energy markets, no need for out-of-market contracts, and no application of MOPR offer floor.

Commissioner Glick asks Hogan about "discriminatory pricing structures" in California's EIM.

Hogan: Resource shuffling results from differential eligibility. Looks effectively discriminatory. The interventions that seek to deal with resource shuffling thus impose discrimination.

Glick asks White about point re interaction with MOPR.

White's answer: Capacity market = "missing $" market. No reason to worry about price suppression in capacity market if we remove the problem of missing money.

Rothleder re Hogan's point about potential for discrimination: CAISO has sought to mitigate any form of discriminatory impact. Hogan's solution actually risks creating discrimination.

Commissioner Glick notes that some argue that CO2 pricing "may not be the way to go," because state or fed govt's pursuit of CO2 price will result in underpricing CO2 relative to what's need to address climate change. So, what are implications if an RTO CO2 price is "too low"?

Mukerji's answer: CO2 pricing exists with other state programs. If CO2 pricing isn't sufficient, then states will turn to other programs to achieve their objectives.

Hogan's answer re too-low price: "I think this is the elephant in the room." If you have the best estimate (the Social Cost of Carbon), that provides the basis for action. Deadline-based approach can conflict.

White re too-low CO2 price: That's the status quo. RGGI does too little to drive progress toward state objectives. It would be a lost opportunity if we missed the chance to have a higher CO2 price. But there's a difference between CO2 now and in the future. Possible to escalate.

Glick asks about best approaches for dealing with revenue generated by CO2 price.

Mukerji: NYISO looked at 4 options. We've opted to use a load-ratio: carbon charges are reallocated based on share carried by each load-serving entity. So, upstate & downstate get same % back.

White re revenue allocation: pros&cons to different approaches, and more discussion is warranted. One option: "net carbon pricing" is simplest and would address concern about consumer impacts (looks like marginal loss revenue disbursement). But mutes price signal to end-users...

[more White]: Second option is to allocate it to state initiatives, e.g., energy efficiency. This might address emissions objectives most directly, but does less to address concerns about consumer impacts and raises issues due to complex accounting involved.

Hogan on revenue allocation: This makes me nervous. Proportional allocation undermines utility for DERs, demand-side market participation. High marginal prices send important information to all stakeholders.

Rothleder on revenue allocation: In California, cap-and-trade revenues flow back to LSEs. We augment that with info transparency, indicating on our website the average emissions rate at any given time.

That's it for Panel #3, Group #1.

Next up is Panel 3-2.

Clare Breidenich (wptf.org/membership-man…)'s opening: Key principles for CO2 pricing thru an RTO include: transparency (including re effects of pgm), non-discriminatory treatmnt based on location, resource-specific charges, avoidance of perverse outcomes, voluntary participation.

Travis Kavulla (nrg.com/authors/travis…)'s opening: Important to deal with states' RPS/CESs, which aren't transparent. Also states should be more directly involved in RTO proceedings and decisions. [ed note: see Kavulla's written remarks for the full statement]

Michael Mager (couchwhite.com/attorney/micha…)'s opening: NYISO's proposal raises concerns for Multiple Intervenors, including: costs for energy-intensive end-users; how and how often to update the price; revenue allocation and potential for state to intervene; risk of double-payments.

Arne Quinn (linkedin.com/in/j-arnold-qu…)'s opening: For wholesale markets, CO2 pricing is superior to a clean energy std. Leakage is the biggest challenge to an RTO CO2 pricing pgm. Efforts to address intra-RTO leakage can mitigate this; Vistra has a proposal to solve it more fully.

Harry Singh (J Aron & Co LLC)'s opening: Whether driven by states or RTOs themselves, CO2 pricing will be significant. FERC can lend confidence to investors re success of clean energy goals. [ed note: nice placement of toy wind turbine over his left shoulder]

Sherman Knight (cpv.com/our-company/le…)'s opening: Currently, numerous diverse state policies create inefficiencies. FERC can help steer the energy market to greater uniformity and effciency.

Joseph Wadsworth (linkedin.com/in/joe-wadswor…)'s opening: Lists operational features and benefits of a robust CO2 price. Asks for Notice of Inquiry to discuss the topic further.

Chatterjee asks about degree to which carbon price should be transparent in LMP. Sufficient for it be allowed into the bid?

Quinn's answer: Transparency is generally a source of efficiency. Some inputs are hard to get at, but transparent LMPs are the key to market function.

Knight's answer: Transparency is important, but somewhat 2ary. NGCC located across a state line might not be dispatched due to location; leveling that playing field is our main objective.

Kavulla's answer: Transparency is an important consideration, depends in part on whether source of price is a set price or a cap.

Breidenich: Related problem in EIM owes to different treatment of gas resources within and w/o California.

Mager's answer re transparency: NYISO proposal would return revenues thru LSEs; we [large consumers] would want to know how closely that would align with what we paid in.

Quinn: CO2 pricing is inherently more transparent than most alternatives. Even cap-n-trade yields a price.

Chatterjee asks Breidenich about day-ahead approach in EIM--lessons to be shared from experience there?

Breidenich: Oreg & Wash are both considering CO2 pricing pgms. Disparate CO2 prices not necessarily prob for dispatch algorithm but resource then needs to input correct bid...

[more Breidenich] State actors are always going to want control. So market operator will need to be vigilant about that. For instance, eligibility of RECs from one state in another could be made to depend on delivery under state law.

Chatterjee asks Quinn: How critical is it to address leakage? Are emissions leakage and pricing leakage both of concern?

Quinn's answer: Degree of leakage matters. Higher CO2 price-->potentially material problem. Distinction between emissions and economic effects is important...

[more Quinn] Given political economy of CO2 pricing, we need to attend to states that have no CO2 price. This was the reason Vistra developed a proposal for transfer payments that get non-CO2-pricing states back to where they were before the price was imposed.

Chatterjee asks if there are specific market designs that should be avoided.

Singh's answer: Differentiating between resources outside of CO2-pricing region-->resource shuffling. EIM makes that problem even more complex. NYISO avoids this, but mutes the signal to out-of-state resources. It's a tradeoff.

Wadsworth's answer: We have to decide if leakage is really a problem. If so, we need to balance integrity of clean energy policy with competition. NYISO's approach strikes a good balance, in part by allowing inter-regional competition.

Chatterjee asks how market rules about leakage could affect behavior of market participants.

Kavulla: EIM's approach can't be copied for intra-RTO leakage mgmt. Even if CAISO goes to day-ahead, still limited applicability. Vistra's proposal to settle on the back end could work.

Breidenich's answer: Important distinction between leakage and resource shuffling. Unclear that resource shuffling is bad per se. What *is* bad is CO2 pricing increasing overall emissions relative to non-CO2 pricing scenario....

[more Breidenich]: Some blunt solutions, like a hurdle rate, are problematic.

Knight's answer: Aim should be to reduce leakage, not necessarily eliminate it. Generation development can take a very long time, so future costs, even if uncertain, are material.

Chatterjee asks Mager: Do governance arrangements, i.e., setting & updating of a CO2 price, affect consumers?

Mager's answer: Yes. Current NYISO plan is to delegate price setting to the state. How and how often it could be updated is unclear and concerning.

Commissioner Glick asks Kavulla about suggestion for joint state-federal boards: Could you elaborate on how FERC can use its authority to improve dialogue with states?

Kavulla's answer: FPA s209 and implementing regs haven't been used often. FCC has done something like this with telecoms. FERC rules contemplate concurrent hearings that partly delegate some measure of authority, or joint consideration that ends with FERC order (no delegation)...

[more Kavulla] There are already RTO stakeholder processes that perform something like this function. Even so, FERC could undertake a more direct dialogue pursuant to the FPA.

Quinn jumps in: FERC has done direct outreach before, informal and otherwise.

Glick asks Quinn about Vistra's proposal to handle CO2 price by allocating collected revenues on back end: Wouldn't a coal-fired generator in a non-pricing state still be adversely impacted, even under this approach?

Quinn answers: We need to refine what it would mean to make a state "indifferent" to other states' CO2 price. It would require considering whole array of resources in non-CO2-pricing state.

Glick asks for how FERC should assess J&R-ness of 205 filings.

Quinn: Peskoe identified what FERC has said in context of price formation decisions & rules; same list of factors as w/other market design issues. What's special with CO2 pricing is leakage and effects across states.

Mager's answer: Implementation details matter.
-Social Cost of Carbon will be a major input into LMP, so FERC must examine nature of the process that specifies the SCC and parameters for updating
-Equity in allocation of revenues
-Leakage & non-discrimination

Wadsworth's answer re J&R factors: Not very different from evaluation of price formation improvements. Also, FERC should consider impacts on bilateral markets. If real-time energy markets yield accurate price signals, good indicator that program is healthy.

Kavulla's answer re J&R factors: Useful to ask if effect is to make energy marketplace less discriminatory, e.g., if CO2 price drives ZECs to $0 while sending clearer signal re entry/exit.

Singh's answer re J&R factors: [ed. note: my internet feed was buffering for most of his answer--sorry!] Important for FERC to give guidance re what it's looking for from RTOs, states.

OK everyone. I'm signing off. Parenthood calls.

Quick caveat re this monster thread: my internet flickered here & there, and my powers of stenographic paraphrasing are limited, so please don't mistake this as a transcript (also, FERC will produce an actual transcript).