FERC's responsibility towards Environment.

Apart from largescale hydro, FERC has no statutory authority over environmental matters. FERC’s role is generally understood to create a market based reliable and affordable whole sale energy market, and environmental concerns are left to be dealt by EPA and other federal and State authorities.  Even though the US power sector emits more than 1/3 of the total CO2 emitted,( in addition to other significant water and land use impacts) FERC is correct that it is not its role to deal with these ‘environmental’ issues. 

However, the flaw with this argument is that, the environment is directly is interlinked with FERC’s objective to create “reliable and affordable” electricity market.

Global and local climate effects can have a significant impact on the electricity market. For instance, unusually cold winter last year created soaring natural gas prices, significantly impacting the electricity market. Hurricane Irene flooded large sections of NYC leaving them without electricity for days. One of the worst droughts in California is severely impacting its hydro-electricity production.  And rest assured, these events will continue to exacerbate with climate change. 

Apart from these large scales, high probability but low frequency catastrophic events, simple increase in temperatures put a severe strain on the grid. Higher summer temperatures increase the peak load, creating high electricity prices and need for extra generation capacity. Transmission lines also gets overburdened. Even night time high temperatures impact the cooling cycle of the transformers, decreasing its lifespan and efficiency.  Creating more power capacity, transmission lines will amount to billions of dollars. 

These are just a tiny fraction of the issues how climate severely threatens  FERCs responsibility to ensure “reliable and affordable” energy. If FERC is serious about fulfilling its objectives, then it should seriously consider measures to limit GHG emission from the power sector, including measures proposed by the article.  Carbon surcharge is an excellent market based tool that will take in considerations of the externalities  of the carbon emission. There is no need to look at a carbon surcharge as an environmental charge, but rather this could be seen as a charge to create reliable and affordable power system, and FERC has the authority to do that.