OREANDA-NEWS. Reliability, gas-electric coordination and price formation have dominated Cheryl LaFleur's agenda since she became chairman of the Federal Energy Regulatory Commission (FERC) in 2013. But she has become more visible recently in discussing the Obama Administration's plan to limit CO2 emissions.

That proposed Environmental Protection Agency (EPA) rule is expected to drive significant shifts as states decide how to cut power plant CO2 emissions. Potential compliance options include redispatch, adding renewable energy, carbon trading and energy efficiency. But broad concerns remain about the rule's implications for energy costs and grid reliability. LaFleur has pitched FERC as an "honest broker" that would start discussions about the proposed Clean Power Plan. And she believes the commission will have a role in approving energy infrastructure and market rules that the plan will require. LaFleur spoke to Argus in Washington, DC, yesterday about the two technical conferences it has held on the rule and a third conference it hosts tomorrow focused on eastern power markets. The interview has been edited for length and clarity.

Argus: At the two technical conferences FERC has held so far on the Clean Power Plan, were there any issue that surprised you?

LaFleur: One of the things that has come into clearer focus from the technical conferences is the potential seams that could be created if we have a lot of different compliance plans in different regions.

The other thing I had not fully focused on and perhaps should have is the fact that so much has to happen at the state level. I had the image that under the Clean Power Plan states have to do their state implementation plan, but the thought that some states might undertake legislation or change laws . . . had not really occurred to me.

Argus: How hard is it going to be to reconcile the bilateral markets in the west with the CO2 restrictions in the Clean Power Plan?

LaFleur: I take it as a given that for the foreseeable future we will have a mix of organized competitive markets and bilateral market regions. I think what came out in Denver ... was that states were interested in finding ways to work together despite the fact that they did not have a single organizing market structure, and I think that will develop over time.

Argus: Grid operators seem pretty confident they can accommodate whatever the states throw at them, but are there any state compliance plans that would raise red flags?

LaFleur: I think it is up to the states to make the choices. To the extent they hard-wire the selection of certain resources to meet their goals, that could have an impact on capacity markets and other ways [that the] regions collectively choose resources, so I think that will bear close looking as we go forward.

Argus: At the first technical conference, we heard this idea of the risk of FERC getting into a jurisdictional fight with the EPA over a state compliance plan. What kind of options are you looking at to get ahead of this?

LaFleur: I do not see us in a battle with any other agency. What happened on the Mercury and Air Toxics Standards is that EPA built in a reliability safety valve, a mechanism under which a facility that needed more time to comply could send its documentation to certain [agencies], of which FERC was one, giving us an opportunity to weigh in on the process.

I think a major focus of the technical conferences has been, to the extent you want FERC or any other agency involved in checking a reliability issue, how that would work? At what stage would it be? What would the rules be? One of the things I hope to get out of the tech conferences is more of a sense of the mechanics of how that might work.

Argus: Winter is not over, but at this point it seems like there have not been any major problems despite higher peak load in PJM and frequent storms in New England. What explains the better performance this winter?

LaFleur: We are going to be talking about the winter at our upcoming winter meeting next week, because this is the time of year where we normally get a report on the markets. But I will say we have seen the regions learn from what happened last winter. For example, ISO New England had a winter reliability program that used more resources than it had the year before. We saw a lot of LNG import deliveries into the east helping with gas supplies this winter. We have done a lot of work on gas-electric coordination and communications, and the ISOs have stepped up their work with the pipelines. I think that helped.

Argus: How much credit do you give to FERC for this winter?

LaFleur: Probably too much. I hope that the amount of attention we gave it last year and the expectations that we held out to the RTOs to make improvements in their market rules had an impact. I also think a lot of the work we are doing on gas-electric and better communications between the pipelines and transmission control rooms helped. I think the work that FERC did has contributed, but the people who keep the lights on out there had an awful lot to do with it as well.

Argus: I could see an argument where someone says, 'Winter is not a problem anymore.' Are you concerned that now that we had a good winter, people may not care anymore?

LaFleur: I would rather have a good winter than a bad winter, because customers pay for price spikes in the long run and customers suffer many reliability issues. I think it is important that we learn what made it a good winter, so we can make any enduring changes that are needed.

Argus: You have about five weeks left as chairman. Are there any issues that you really want to get done before your chairmanship ends in April?

LaFleur: We have a lot of cases with statutory deadlines between now and the end of my term. It is important to me that we continue to make progress on gas-electric and some key reliability issues, but because I plan to stay on the commission, I do not have a sense of turning into a pumpkin on 15 April. I hope I will still be here to guide some of those issues with my colleagues.