FERC Law Updates

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, Charles A. Moore, 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.

Retail Customers Can Challenge Transmission and Wholesale Power Sales Rates

By J. Daniel Skees and Pamela Tsang // November 17, 2015

On November 12, the Commission resolved two certified questions and held that retail ratepayers have the right to file complaints and protest transmission rates and wholesale power sales rates when some portion of the rates will be flowed through to their retail bill.[1] This issue arose after an individual, who is an end-use customer, challenged transmission formula rate inputs, i.e., costs that flow through to the customer’s retail electric bill. These inputs go to the transmission of electric energy in interstate commerce and not local distribution. The customer asserted that she will pay a portion of the transmission rate when it is flowed through her retail bill, which the Commission found to be injury in fact.

The Commission noted that its ruling is consistent with prior holdings in which courts and the Commission concluded that protecting consumers is one of the Commission’s primary objectives.[2] The plain language of section 306 of the Federal Power Act (FPA) explicitly authorizes any person to file a complaint with the Commission. The Commission recognized that FPA section 201 generally limits its jurisdiction to the transmission and sale of electric energy at wholesale in interstate commerce, but noted that section 201 does not limit participation in Commission proceedings. Additionally, it has consistently ruled that FPA section 206 gives indirect/retail customers standing before the Commission. The Commission also found that allowing retail customers to challenge transmission and wholesale power sales rates does not violate principles of federalism.

[1] Am. Elec. Power Serv. Corp, 153 FERC ¶ 61,167 (2015).

[2] Id. at P 17 (citing cases including PATH, 140 FERC ¶ 61,229 (2012), Pub. Sys. v. fERC, 606 F.2d 973 (D.C. Cir. 1979), NC WARN, 151 FERC ¶ 61,079 (2015), Ass’n of Businesses Advocating Tariff Equity v. Midcontinent Indep. Sys. Op., Inc., 149 FERC ¶ 61,049 (2014), and S. Union Gas Co. v. Natural Gas Co., 71 FERC ¶ 61,198 (1995)).

House Passes Highway Bill Amendment to Enhance Electric Infrastructure Security

By John D. McGrane, J. Daniel Skees, and Arjun Prasad Ramadevanahalli // November 6, 2015

If signed into law, measures would grant the DOE authority to order utilities to implement emergency protective actions.

Early yesterday morning, H.R. 22 (the Highway Bill) was amended on a voice vote to include an amendment (House Amendment 828) addressing critical energy security issues. Developed by Representative Fred Upton (R-MI) and sponsored by Representative Markwayne Mullin (R-OK), the amendment aims to strengthen the federal government’s authority over electric grid emergency response, facilitate coordination among federal agencies on reliability issues, and enhance the protocols for the protection and sharing of Critical Energy Infrastructure Information (CEII).

The amendment would authorize the Department of Energy (DOE) to order utilities, the North American Electric Reliability Corporation (NERC), or NERC Regional Entities to implement emergency security measures for up to 15 days at a time. Such orders would issue upon a written determination from the President identifying a grid security emergency, which could include malicious electronic or physical attacks or natural events (e.g., geomagnetic storm events) that could disrupt critical electronic devices or communications networks. The amendment provides for the DOE to reissue emergency orders for consecutive 15-day periods if each time the President finds that the emergency is continuing.

To streamline emergency response actions, the amendment would exempt utilities from penalties for violations of Federal Energy Regulatory Commission (FERC or Commission) orders and NERC Reliability Standards due to implementation of emergency security measures directed by the DOE. The amendment acknowledges that utilities may incur substantial costs while implementing emergency orders that may not otherwise be recoverable through existing regulated or market rates. To address this gap, the amendment’s cost-recovery provisions would direct the Commission to establish a separate mechanism that permits recovery of those emergency-related costs, subject to public notice and comment procedures.

If enacted, the bill would also amend section 202(c) of the Federal Power Act, 16 U.S.C. § 824a(c), to provide utilities with protection from environmental penalties while operating under an emergency order issued by the Commission. This would most likely apply in circumstances where FERC directs a generator to operate to ensure system reliability but that generator is required to reduce operations due to environmental limitations. Under existing law, the generator would be required to run but would simultaneously incur penalties for operating in violation of the environmental laws.  

The amendment also aims to strengthen existing CEII protections. Mandatory disclosures of CEII information under the Freedom of Information Act or other federal and state mandatory disclosure requirements would be prohibited. Additionally, the amendment requires the Commission to segregate CEII and non-CEII within the agency and to require sanctions for knowing and willful disclosure of CEII by Commissioners, officers, employees, or agents of FERC.

Not all of the amendment’s provisions seek to unconditionally limit access to information. For example, federal agencies would be allowed to provide temporary access to classified information to entities subject to emergency grid security measures. The amendment also encourages the voluntary sharing of CEII (e.g., between federal and state authorities or between the Commission and cross-border authorities). Additionally, CEII designations by the Commission would last no longer than five years (unless redesignated) and would also be subject to judicial review.

Last, the amendment addresses the reliability risks posed by the unexpected loss of large power transformers. The amendment would require the DOE, FERC, NERC, and electrical infrastructure operators to develop a plan for storing spare large power transformers and emergency mobile substations that can be quickly deployed to temporarily replace damaged large power transformers and substations that serve grid-critical functions. The plan would need to determine, among other things, the number of spare transformers and mobile substations necessary to restore grid resiliency following an outage, the optimal locations of storage facilities, the relative ease and speed of deploying spare transformers and mobile substations, and the cost of implementing such a plan.

Read House Amendment 828.

Webinar: Proposed FERC Requirements For ISO/RTO Participants: You’re all “Connected Entities”

FERC has devoted considerable resources to policing the electric trading markets, but its recent market participant information collection proposal represents a significant change in how it will look for improper market behavior. FERC’s recent Notice of Proposed Rulemaking would require RTOs and ISOs to collect and submit to FERC significant information concerning market participants and the “connected entities” of those participants, including those with remote financial or legal relationships to the market participants (such as corporate family affiliates, some lenders, trading employees, and certain contractual counterparties).

Please join us for a one-hour webinar about FERC’s proposed rulemaking and what it means for RTO and ISO market participants and those companies that lend to, contract with, or invest in such market participants. We will examine the crucial business issues and regulatory implications of FERC’s proposal and discuss how companies can respond with comments.

Wednesday, November 11, 2015

Our Participants:

  • Mark C. Williams
  • Heather L. Feingold

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

Register here >>

Webinar: Regulatory M&A Academy – M&A Regulatory Developments at FERC

In the past year, the Federal Energy Regulatory Commission (FERC) issued nearly 200 electric-sector mergers and acquisitions (M&A), reorganization, and control-change orders—ranging from fund transactions, to initial public offerings, to major generation deals, to traditional mergers—that make the last year one of the busiest years for transactions.

FERC has also issued new regulations concerning M&A rate-protection mechanisms, and these new regulations look more strictly at competition and accounting matters in electric transactions.

Please join us for our annual webinar on M&A regulatory developments at FERC. During this one-hour webinar, we will examine many of the critical business issues and regulatory actions of the last year and discuss the outlook for transactions and capital flow in the coming year.

Tuesday, September 29, 2015

Our Participants:

  • Mark C. Williams
  • Heather L. Feingold
  • J. Daniel Skees

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

Register here >>

LawFlash: President Obama, EPA Unveil Final Greenhouse Gas Emissions Reduction Rule

On August 3, US President Obama and the US Environmental Protection Agency (EPA) released the final Clean Power Plan (CPP or final rule), an ambitious regulation establishing state-specific standards for reduced carbon emissions from fossil fuel-fired power plants. Promulgated under the EPA’s authority under Section 111(d) of the Clean Air Act, 42 U.S.C. § 7411(d), the regulation is the first-ever federal limitation on carbon emissions and marks the culmination of the Obama administration’s efforts to reduce emissions from power plants and to encourage renewable energy development, with the stated goal of lessening the impact of climate change.

The final rule is an updated version of a proposal released in June 2014 that called for a reduction in power plant carbon dioxide emissions of 30% below 2005 levels. The final rule targets a 32% cut in power plant carbon dioxide emissions (using 2005 as the baseline) by 2030. The final rule promises to have a significant impact on the electric power sector.

Lawflash: Battery Energy Storage Facilities May Be Subject to Wholesale Distribution Charges

FERC found that a storage device using a utility’s distribution system in charging mode should share in the costs of the distribution system.

On June 18, the Federal Energy Regulatory Commission (FERC) upheld an earlier order allowing Commonwealth Edison Company (ComEd) to assess a wholesale distribution charge on Energy Vault, LLC (Energy Vault), which owns a battery energy storage facility directly interconnected to ComEd’s distribution system.[1] Because Energy Vault will use ComEd’s distribution system to charge its batteries, FERC concluded that that it would be appropriate for Energy Vault to be assessed the distribution charge.

ComEd assesses a wholesale distribution charge on non-generator customers connected to its distribution system that take distribution service. This wholesale distribution charge is a weighted average carrying charge that is calculated based on the distribution facilities that will be used in providing wholesale distribution service. Generator customers connected to the distribution system are not subject to this wholesale distribution charge because ComEd had previously concluded that reverse flows from generators may benefit its system by reducing congestion and line loading in some conditions.