On October 15, 2020, the Federal Energy Regulatory Commission (Commission) issued a Notice of Proposed Policy Statement for Carbon Pricing in Organized Wholesale Electricity Markets after convening a technical conference on the subject. Due to the increased trend of states controlling greenhouse gas emissions by way of carbon pricing, the Commission’s proposed policy statement continues the discussion around market rules that include carbon pricing.

In its proposed policy statement, the Commission explains a long history of allowing generating resources to recover costs associated with environmental compliance through their wholesale rates. The Commission states that its jurisdiction over RTO/ISO market rules that include a state-set carbon price is no different. The Commission takes the opportunity to encourage RTOs/ISOs to consider establishing these types of market rules and make Federal Power Act section 205 filings.

However, the Commission explicitly states that it is not “pre-judging” matters, and it will review each section 205 filing in light of the specific facts and circumstances presented. To help guide section 205 filers, the Commission provides several questions it deems appropriate to consider when reviewing such filings. The Commission requests the public to comment on these questions and other matters concerning the proposed policy statement. Comments are due by November 16, 2020 and reply comments are due by December 1, 2020.

The proposed policy statement can be found here.

For more information on the Commission’s proposed, carbon price policy statement and its potential impacts, please contact Thomas Rudebusch.