FERC Law Updates

Lawflash: US Supreme Court Holds FERC Has Jurisdiction Over Demand Response

Decision brings more clarity to jurisdictional boundaries between state public utility regulatory commissions and FERC set forth by the Federal Power Act.

On January 25, the US Supreme Court, in a 6-2 decision, ruled in favor of the Federal Energy Regulatory Commission’s (FERC’s or the Commission’s) demand response rule. The rule requires FERC-regulated market operators to compensate customers at the same prices as other wholesale market generators (also referred to as the “locational marginal price” or LMP) for curtailing power consumption during high-demand periods of energy usage.[1] Reversing the US Court of Appeals for the DC Circuit (DC Circuit), the Court supported both the Commission’s statutory authority to implement the demand response rule and the mandatory compensation scheme to which wholesale market operators must now adhere. The decision brings more clarity to the murky jurisdictional boundaries between state public utility regulatory commissions and FERC set forth by the Federal Power Act (FPA).

Hacker-Triggered Ukrainian Blackout Emphasizes the Importance of Cybersecurity

The electric utility industry has spent vast amounts of money on cybersecurity, an investment that has steadily escalated since the Critical Infrastructure Protection (CIP) Reliability Standards became effective in 2008. Those investments, and the increasingly strict CIP Reliability Standards, were intended to address fears that hackers could use the industrial control systems and other computer systems that control the electric system to cause a blackout. Until recently, that threat was hypothetical. Now, for the first time, public reports have emerged of hackers taking down part of an electric grid.

In late December 2015, hackers allegedly infected several of Ukraine’s power authorities, causing blackouts that lasted several hours and affected thousands of people. Ukrainian authorities confirmed that malicious software infected several control systems, which disabled those systems and resulted in a power outage. The malware, known to have been involved in attacks since 2007, was reportedly embedded in Microsoft Office documents and was retrofitted to include code targeting power stations and other critical infrastructure. Although the geopolitical circumstances in Ukraine are drastically different from those faced by electric utilities in the United States, the attack provides a “proof of concept,” demonstrating that it is possible for an attacker to cause a widespread blackout—the threat is no longer hypothetical.

LawFlash: FERC Confirms Regulatory Immunities for Private Equity Investors and Funds

Passive limited partner investors in private equity funds that make FERC-regulated investments are not themselves subject to FERC’s corporate regulatory regime.

Those that own interests in businesses that sell electricity in commerce and those that own interests in electric power generation, transmission, and distribution facilities are subject to extensive and microscopic federal corporate and financial regulation and disclosure obligations unique to the electric power sector. On December 22, the Federal Energy Regulatory Commission (FERC) issued an order[1] confirming that passive limited partner investors (LPs) in private equity funds that make FERC-regulated investments are not themselves subject to FERC’s corporate regulatory regime.

[1] Starwood Energy Group Global, L.L.C., et al., Docket No. EL15-87-000, 153 FERC ¶ 61,332 (2015) (the Order).

Lawflash: Congress Lifts Oil Export Ban

Oil exports permitted for the first time in 40 years.

On December 18, the US Congress passed H.R. 2029, ominbus appropriations legislation that provides discretionary funding for the federal government for the current fiscal year. This legislation provides funding for numerous annual appropriations bills through the fiscal year ending September 30, 2016 and addresses several policy items, including the longstanding ban on exports of crude oil from the United States.

Specifically, Title I in Division O of H.R. 2029 repeals Section 103 of the Energy Policy and Conservation Act (EPCA). That section of the EPCA, enacted in 1975, directed the President to ban crude petroleum oil exports except under select circumstances or unless the President determined the export “to be appropriate and consistent with the national interest and the purposes of [the EPCA].”1 As discussed further below, circumstances allowing export have rarely occurred.

142 U.S.C. § 6212(b)(2).

Webinar: Section 215A of the Federal Power Act: What It Means for Electric Utilities

The newly passed “highway bill” (Fixing America’s Surface Transportation Act) amends the Federal Power Act to incorporate new energy security provisions.

The provisions aim to strengthen the federal government’s authority over electric grid emergency response, facilitate coordination among federal agencies on reliability issues, enhance the protocols for protecting and sharing Critical Energy Infrastructure Information, and exempt utilities from environmental penalties when operating subject to Department of Energy emergency directives.

Please join us for a one-hour webinar about the new provisions and how they will likely affect electric utilities.

Topics will include:

  • An overview of the new provisions
  • The provisions’ background
  • The regulatory steps required

CLE credit: CLE credit in CA (1.0 hour), FL, IL, NJ (via reciprocity), NY, PA, TX, and VA is currently pending approval.

For more information, contact Mary Ann Huntington at +1.202.739.5622 or mhuntington@morganlewis.com.

Register here >>

Lawflash: Highway Bill Adds New Security Measures to Federal Power Act

Amendments to Federal Power Act grant the DOE authority to order emergency protective actions by utilities, provide greater protections for Critical Energy Infrastructure Information, and exempt utilities from environmental fines when subject to emergency DOE orders.

The newly passed “highway bill,” the Fixing America’s Surface Transportation Act, amends the Federal Power Act to incorporate new energy security provisions. Those provisions aim to strengthen the federal government’s authority over electric grid emergency response, facilitate coordination among federal agencies on reliability issues, enhance the protocols for protecting and sharing Critical Energy Infrastructure Information (CEII), and exempt utilities from environmental penalties when operating subject to Department of Energy (DOE) emergency directives.

Lawflash: FERC Terminates Proceeding That Would Increase Reporting of Natural Gas Sales

On November 17, 2015, the Federal Energy Regulatory Commission (FERC) issued an order terminating its inquiry on potentially requiring jurisdictional sellers to submit quarterly reports on natural gas transactions.

LawFlash: FERC Terminates Proceeding That Would Increase Reporting of Natural Gas Sales

By Pamela C. Tsang and Levi McAllister // November 17, 2015

On November 17, 2015, the Federal Energy Regulatory Commission (FERC) issued an order terminating its inquiry on potentially requiring jurisdictional sellers to submit quarterly reports on natural gas transactions.[1]

Three years ago, FERC issued a Notice of Inquiry and requested comments on its proposal to require quarterly reporting of every natural gas transaction within its jurisdiction under the Natural Gas Act (NGA) that entails physical delivery for the next day (or, next day gas) or for the next month (or, next month gas).[2] Section 23 of the NGA directs FERC “to facilitate price transparency in markets for the sale or transportation of physical natural gas in interstate commerce” and grants FERC the authority to require market participants to submit information on the availability and prices of natural gas sold at wholesale and in interstate commerce.

[1] Enhanced Natural Gas Market Transparency, 153 FERC ¶ 61,174 (2015).

[2] Enhanced Natural Gas Market Transparency, 141 FERC ¶ 61,124 (2012).

LawFlash: FERC Clarifies Policy on Simultaneous Exchange Transactions

By Steven M. Spina, Joseph W. Lowell, and Serge Agbre // November 17, 2015

On November 2, the Federal Energy Regulatory Commission (FERC or the Commission) rejected challenges to its 2012 order on “simultaneous exchange transactions.” Under the order, affiliates may enter into simultaneous exchanges as long as they obtain prior approval from FERC and FERC finds that there are not attempts to circumvent transmission service regulation or concerns of affiliate abuse or separation of functions violations. FERC also provided key clarifications to its policy by explaining the types of transactions included within or excluded from the requirement of prior FERC approval.

Simultaneous exchange transactions occur when a pair of wholesale power transactions are simultaneously arranged (i.e., are part of the same negotiations) between the same two counterparties such that Party A sells an electricity product to Party B at one location and Party B sells a similar electricity product to Party A at a different location with both transactions having an overlapping delivery period. The simultaneous exchange is the overlapping portion (both in volume and delivery period) of these wholesale power transactions.