United States: Special Update Regarding Presidential Election And Impact On The FERC

Donald J. Trump (R) was elected 45th President of the United States yesterday, a development that will likely change the way energy companies interact with regulators and the federal government. Without addressing the political issues associated with the race itself, we provide the following initial thoughts on practical issues regarding FERC associated with a shift in political party control of the Executive Branch, an event that has not affected Washington, D.C. since late 2007/early 2008.

Specifically, FERC currently has three sitting Commissioners, all Democrats. Mr. Trump's election will permit his administration to dramatically change the make-up of the Commission. He may be able to appoint as many as four new Commissioners in 2017, and will almost certainly appoint a new Chair upon his inauguration. Notably, given the timing of the confirmation process for new FERC Commissioners, the current sitting Commissioners could be in control of FERC through at least April of 2017, assuming none of them resign in the interim. We explain below how these FERC changes will happen and provide a general sense of the timeline for new Commissioners and new leadership to be installed.

  • Independent Agency: FERC is an independent agency of the federal government. The agency is authorized under the Department of Energy Organization Act ("DOE Act") to be comprised of no more than five (5) members. There may be no more than three (3) FERC Commissioners at any time representing the political party that is then in control of the Executive Branch. Currently, FERC has three members and they are all Democrats.
  • President's Authority/ Political Party: Under a Trump Administration, no more than three (3) FERC Commissioners may be from the Republican Party. Although it is administratively authorized by, and organized under, the U.S. Department of Energy, FERC does not serve at the direction of, nor at the pleasure of, the President. The President may, however, designate the FERC Chair from among sitting Commissioners. Commissioners are appointed by the President to specific terms, which last no more than five years.
  • New Commissioner Vetting and Approval: FERC potential nominees are vetted through FBI background checks. After such clearance and official nomination by the President, such appointees are then reviewed by the U.S. Senate, as follows: (a) a hearing is held in the U.S. Senate Committee on Energy and Natural Resources ("Energy Committee") regarding the fitness of the nominee(s) to serve; (b) a mark-up is held in that Committee (at which Senators vote whether to recommend that the full Senate approve the nominee); and (c) the nomination is put before the full Senate for a vote, up or down. Usually, nominations approved by the Senate committees of jurisdiction are approved via unanimous consent, however, Senators may request floor time to speak regarding the nominee or enter a colloquy on the record. It should be noted that not all nominees are approved by the Energy Committee, although historically, most such nominees have been approved by the panel. In 2013, for example, FERC nominee Ron Binz (D) requested that President Barack Obama withdraw his name from consideration after a difficult hearing process.
  • Chair Designation: Effective upon being sworn in as President (January 20, 2017), Mr. Trump will have the authority to designate a new acting FERC Chair, even while he considers nominees to fill the open seats. In other words, while he considers possible Republican nominees to the FERC, he may choose a different sitting Commissioner to sit as Chair. It is possible he will do so in this situation given the constitutional process for appointments by the Executive Branch which requires the advice and consent of the U.S. Senate. As noted above this process takes time, e.g., a full wrap-up for a new FERC nominee is not likely earlier than late-April 2017. Even in situations when a new President succeeds a sitting executive from the same party, a new FERC Chair may be designated Acting Chair from the opposing party.
  • Possibilities Regarding New FERC Members/ Practical Issues: Currently, the three sitting members of the FERC are all Democrats: Chairman Norman Bay, Commissioner Cheryl LaFleur and Commissioner Collette Honorable, leaving two open seats. There is speculation (although no confirmed reports) that Commissioner LaFleur could be appointed Acting Chair, given the fact that her term is the longest (expiration 2019) of the three sitting Commissioners. In addition, when President Obama nominated and selected Mr. Bay as Chairman, Senate Energy Committee Chair Lisa Murkowski (R-AK) publicly supported Commissioner LaFleur to serve as Chair -- rather than Mr. Bay -- in her Senate floor comments on the nominee. Notably, Commissioner Honorable's term expires June 30, 2017. It is possible that she may continue her term, as a holdover, until the new Congress adjourns sine die (e.g., potentially until December 31, 2017). However, there is also the possibility that Mr. Trump will seek to appoint a "package" of nominees to the FERC. Such nominees are often put through the Senate confirmation process as a package "deal." Because the Republicans control the U.S. Senate, there would have historically been little practical opposition to the confirmation process of new appointees to the FERC. However, it is not yet clear how Mr. Trump's relationship with the Senate will unfold.
  • Business in the Interim: Business before FERC between now and the events noted above will be affected. First, it is notable that the FERC Chair sets the agency's agenda, i.e., he or she controls when and how adjudications and rulemakings are brought before the agency for a vote. Chairman Bay will, therefore, continue to control the agency's decisions unless and until he: (a) resigns; or (b) is replaced via a new Chairman designation by President Trump, after the latter's inauguration. FERC rules require a minimum of three members as a quorum to conduct business. If any of the three sitting Commissioners resign before new appointees are confirmed, FERC will lack a quorum and will not be able to vote.
  • FERC Staff: FERC senior staffers who are members of the civil service may not be reassigned or replaced for 120 days after the appointment of a new Chairman. FERC senior staffers who are so-called "Schedule C" employees (i.e., political appointees) are subject to dismissal as of January 20, 2017, without civil service protection. New Schedule C employees (of President-Elect Trump's choosing) may be hired by the agency thereafter. Civil service rules limit the number of Schedule C employees FERC may hire.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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