Critics are raising conflict-of-interest questions about a report warning about reliability risks from the U.S. Environmental Protection Agency’s proposed Clean Power Plan.
The November 2014 report from the North American Electric Reliability Corporation (NERC) claims that putting the EPA’s plan into action could cause instability in the nation’s electric grid, increasing the risks for blackouts.
Now the Energy and Policy Institute has alleged there were potential conflicts of interest for Energy Ventures Analysis (EVA), a consultant with ties to a coal technology company that worked on the NERC report.
Meanwhile a critique by the Brattle Group concluded that flaws in the NERC report caused it to exaggerate any reliability risks. A combination of the proposed rules’ flexibility and readily available technologies can protect against anticipated problems, the critique said.
NERC is a private corporation under the oversight of the Federal Energy Regulatory Commission. It sets standards to ensure the reliability of the nation’s electric grid.
In November, NERC issued its “Initial Reliability Review” of the EPA’s proposed rules to lower carbon dioxide emissions from fossil fuel power plants. Those emissions are a leading contributor to greenhouse gas emissions in the United States, which contribute to climate change.
NERC’s report relied in part on work by EVA to project potential impacts if coal plants close and reliance on natural gas goes up. The NERC report does not state any potential conflicts on the part of that consulting firm.
However, Matt Kasper at the Energy & Policy Institute said potential conflicts exist and should have been noted.
For starters, Kasper produced a document stating that some principals at EVA have an ownership interest in another company, Clearstack LLC. EVA principal Thomas Hewson, Jr. is also Clearstack’s Chief Executive Officer.
That 2013 press release indicated that Clearstack’s other owners include Bowie Resources and Sterling Energy. Both companies are involved in the coal and natural gas industries either directly or through related companies and joint ventures.
Clearstack’s business is “clean coal technology” for coal-fired power plants. If the Clean Power Plan is weakened, then more coal plants would likely stay open and go through retrofits, Kasper reasoned. “That’s where Clearstack comes in.”
On the other hand, he continued, if the final rules are strict, more coal plants could close. Clearstack would be “a loser” if that happened, or if its technology couldn’t achieve necessary emission reductions, Kasper said.
For example, in November 2014—the same month that NERC’s report came out—EVA issued a separate report for Peabody Energy, Kasper noted. That report estimated that customers’ annual energy costs would be $284 billion more per year in 2020 as a result of market factors, other recent regulations, and the Clean Power Plan.
There are no allegations that EVA did anything improper or illegal in performing work for NERC or other entities. As a separate company doing consulting work in the energy industry, EVA could reasonably be expected to have a variety of clients, including some in the utility and fossil fuel industries. Likewise, there are no allegations that EVA did anything improper or illegal related to its connections to Clearstack.
Nonetheless, Kasper noted, the NERC report did not disclose any potential conflicts of interest for the consultant. As a result, Kasper said, EVA’s work for NERC appears to offer “a third party voice in the debate” when that might not be true.
“Does NERC know about a conflict of interest with EVA?” Kasper asked. “And if so, when did they know it?”
NERC spokesperson Kimberly Mielcarek said via email that the organization “would not answer any questions on specific contractors.”
“I will say, however, that NERC manages, directs and oversees the development of all its projects and assessments, including those requiring the use of contractors. NERC thoroughly reviews and validates all information used in its reliability assessments, including information obtained from industry, from a contracted source or other entities/resources,” she added.
Thomas Hewson of EVA said that “while EVA did provide technical assistance for this initial report and we fully agree with its findings, it is a NERC Report…. Needless to say, only NERC can speak about any NERC reliability concerns raised by the EPA proposal.”
[UPDATE: After this story was initially published, Hewson indicated he had not understood that there were claims of a potential conflict of interest when he received the request to be interviewed for the article to discuss questions that had been raised about EVA’s work for NERC on the November report. Specific questions are not typically provided in advance of phone interviews.
Hewson maintained that neither he nor Energy Ventures Analysis has a conflict of interest. “It seems to be you think that I represent the fossil fuel industry, and I don’t. I work for everybody,” Hewson said. “We’re an independent consulting firm. We are hired by all sorts of people.”]
Transparency: ‘How they’re doing the modeling’
Meanwhile, NERC continues work related to the Clean Power Plan and is expected to issue additional reports.
“We believe EVA is playing a significant role” in that ongoing work, said John Moore of the Natural Resources Defense Council. Failure to disclose potential conflicts of interest for EVA or any other consultant has the potential to reflect on NERC’s credibility, he added.
“We support a strong and credible NERC,” Moore stressed. “Why isn’t NERC doing this modeling in-house instead of farming it out?”
In his view, NERC should “open up the discussion on the modeling approach and everything else around it, and not just to a small planning committee or primarily utility companies.” Assumptions used in modeling can affect the outcome, Moore noted.
Even with the information already available, a February 2015 critique from the Brattle Group found significant flaws in NERC’s November 2014 reliability report. Advanced Energy Economy commissioned the critique.
“We conclude that initial reliability review did not include various options that, if used fully, could likely result in complying with the Clean Power Plan in a way that doesn’t lead to significant reliability impacts in the sense that you can plan for it,” Jürgen Weiss of the Brattle Group said during a webinar last week.
In any case, the proposed rules provide “quite a bit of flexibility,” Weiss added.
“It seems like [NERC was] choosing the most conservative and often wholly unrealistic assumptions” for the November report, Moore observed.
Nonetheless, NERC’s November report has already been cited by state officials and industry sources.
The Public Utilities Commission of Ohio (PUCO) relied on the NERC report in its comments opposing the Clean Power Plan last fall.
Asim Haque of the PUCO also cited the NERC report when he testified last month before the Energy Mandates Study Committee formed under Ohio Senate Bill 310.
Meanwhile, consideration of the Clean Power Plan continues. The plan is among the topics for discussion at a Federal Energy Regulatory Commission technical conference planned for this Wednesday, March 11.
The agenda identifies the PUCO’s Haque as a scheduled panelist on electric reliability considerations.
Seth Schwartz of EVA is also scheduled for a panel to address the Clean Power Plan’s potential market impacts that day.
The Natural Resources Defense Council is a member of RE-AMP, which publishes Midwest Energy News.