President Donald Trump has replaced Neil Chatterjee, the Republican chairman of the Federal Energy Regulatory Commission, with James Danly, another Republican who has taken a more conservative approach to federal energy policy at an agency that's taken fire from clean energy advocates for using its regulatory power to impose restrictions on state-subsidized clean energy. 

Thursday’s surprise announcement comes as Trump is trailing Democrat Joe Biden in the electoral votes needed to win the U.S. presidential election, with several key states yet to complete their vote tallies. 

“It’s been the honor of a lifetime to serve as the Chairman of FERC alongside my colleagues and staff, who represent some of the most talented and hardworking professionals in the U.S. government,” Chatterjee said in a prepared statement. The former senior aide to Senate Majority Leader Mitch McConnell was appointed to FERC in 2017 and served as interim chair before being named chairman in 2018, and he will remain on the commission through June 2021. 

A Thursday report from the Washington Examiner quoted Chatterjee as speculating whether his abrupt replacement was due to his decision to issue a policy statement in September affirming FERC’s willingness to consider proposals for the country’s interstate grid operators to integrate carbon pricing into the wholesale energy markets they manage. 

"I have obviously been out there promoting a conservative, market-based approach to carbon mitigation and sending signals the commission is open to considering a carbon price, and perhaps that led to this," Chatterjee was quoted as saying.  

The Trump administration has restricted federal agencies from sharing information on the global warming impacts of human-caused carbon emissions. Danly issued a partial dissent to FERC’s carbon-pricing policy statement, calling it “unnecessary and unwise.” 

Danly also voted against last month’s Order 2222, which orders the country’s grid operators to allow aggregated distributed energy resources such as batteries, electric vehicles and demand response to participate in their wholesale energy, capacity and ancillary services markets. His "no" vote was overridden by Chatterjee and Richard Glick, FERC’s sole Democratic commissioner. 

Danly’s tenure as FERC chairman could end quickly if Joe Biden wins the presidency, as the president may name any sitting FERC commissioner as chairman without Senate approval. 

Danly’s rise to a Republican-dominated FERC

Danly graduated from law school in 2013 and worked as a corporate energy lawyer before he was named general counsel at FERC in 2017. He was nominated in 2019 to fill the seat left vacant by the death of Republican Chairman Kevin McIntyre. 

“It has been my utmost pleasure to have served under Neil Chatterjee, both as General Counsel and alongside him as Commissioner,” Danly said in a statement. “I have learned a tremendous amount from his expertise and insight, and I am proud of the work we’ve been able to accomplish under his thoughtful watch.” 

Danly’s 2019 nomination was made without the simultaneous nomination of a Democrat to fill another vacant seat left by departing Democratic commissioner Cheryl LaFleur, which broke with longstanding precedent to “pair” FERC nominees to maintain bipartisan balance. 

That move, along with Danly’s relative lack of experience compared to many previous FERC nominees, drew sharp criticism from Senate Democrats, and his nomination was rejected by the Senate in January. 

Trump renominated Danly the next month, and he was confirmed by the Senate in March, leaving FERC with a 3-1 Republican majority. The commission retained a 2-1 Republican majority after commissioner Bernard McNamee departed in June.  

FERC decisions under fire from states with clean energy policies

Danly has voted with FERC’s Republican majority on several key issues that have been unpopular with clean energy advocates and states with clean energy mandates and incentives. Those include FERC’s minimum offer price rule order in 2019, which required mid-Atlantic grid operator PJM to require state-subsidized clean resources to use administratively set minimum prices when bidding into its roughly $10-billion-per-year capacity market. 

The rules that will keep PJM’s capacity market in compliance with the order are still being finalized. But critics say that while they may have relatively little impact in the early years, leaving them in place through the coming decade could end up effectively preventing some clean energy resources from clearing the market, driving up prices for consumers’ electricity bills by billions of dollars per year in unnecessary capacity payments for fossil-fuel-fired power plants. 

Environmental groups and PJM states have brought legal challenges against the order, as PJM works to comply with the order’s strictures and restart capacity market auctions that haven’t taken place since 2018. New Jersey and Maryland, two states with decarbonization plans that would rely heavily on offshore wind power, a resource that would almost certainly be priced out of PJM’s capacity market under PJM’s implementation of FERC’s order, have been considering ways to create their own capacity constructs to avoid that eventuality.  

FERC’s Republican majority has also issued decisions that have denied New York grid operator NYISO’s plans to alter the workings of its capacity market to accommodate the state’s preference for carbon-free resources to help meet its aggressive clean energy goals. 

Chatterjee has defended these decisions as efforts to prevent market pricing distortions and to “level the playing field” for resources that lack state subsidies such as natural-gas-fired power plants. But Glick has accused his Republican colleagues of using the orders to stymie state efforts to set their own clean energy policies and undermine the economics of their preferred mix of resources.