The clarifications address concerns from market participants but leave some questions unanswered.
On May 19, the Federal Energy Regulatory Commission (FERC or the Commission) issued Order No. 816-A, which upholds and clarifies the Commission’s reforms to its market-based rate (MBR) program issued in Order No. 816 on October 16, 2015. Order No. 816 streamlined a number of requirements for MBR filings, such as those related to horizontal market power wholesale market share and pivotal supplier indicative screens, and the asset appendices required of each MBR applicant. In upholding the prior reforms, the Commission addressed requests for rehearing from various entities, some of which concerned the following topics: reporting obligations for fully committed long-term generation capacity, reporting of long-term firm purchases, notices of change in status, new affiliation and behind-the-meter generation, waiver of Part 101 of the Commission’s regulations, and corporate organizational charts. We discuss the clarifications on these issues in further detail below.
The proposal could create uncertainty for market participants and raise jurisdictional questions about which regulator should police power markets.
On May 10, the US Commodity Futures Trading Commission (CFTC) proposed an amendment to a prior order that exempted certain transactions that occur in the markets of Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs) from select provisions of the Commodity Exchange Act (CEA) and the CFTC’s regulations (the Proposed Amendment). With the issuance of the Proposed Amendment, the CFTC aims to ensure that Section 22 of the CEA—which enables private rights of action for entities or persons harmed by a CEA violation—will be an available remedy for ISO and RTO market participants that allege fraud and manipulation under the CEA.
FERC guidance clarifies the scope of the hold-harmless commitments offered in electric utility mergers and acquisitions, but discards its initial proposal to make those commitments open-ended.
On May 19, the Federal Energy Regulatory Commission (FERC) issued a final policy statement on the scope of hold-harmless commitments that can be offered to satisfy ratepayer protection concerns when seeking FERC approval of electric power sector mergers, acquisitions, divestitures, and control transactions.
The final guidance generally affirms FERC’s earlier proposals on the scope of transaction-related costs that utilities cannot charge to ratepayers when offering a hold-harmless commitment and the requirement to establish controls for separating transaction-related costs (for an overview of the proposed hold-harmless policy statement published in January 2015, read our LawFlash, “FERC Proposes to Strengthen Hold-Harmless Policy for Electric Mergers”). Importantly, however, FERC withdrew its proposal to require an open-ended hold-harmless commitment, concluding that the traditional five-year period during which ratepayers would need to be protected from transaction-related costs was sufficient.
In a surprise move, the US Court of Appeals for the District of Columbia Circuit has skipped the normal three-judge panel consideration of the consolidated challenges to the Environmental Protection Agency’s Clean Power Plan and will move directly to en banc review before the full circuit court. The US Supreme Court recently stayed the Clean Power Plan’s implementation, and the DC Circuit had the case on an expedited schedule for argument in June before a traditional three-judge panel.
On May 16, the DC Circuit issued a highly unusual order announcing that the court will skip the three-judge panel review, including the June oral argument, and will instead proceed directly to en banc review with oral arguments at the end of September. As a result of this change in the procedural schedule, a decision by the DC Circuit on the challenges to the Clean Power Plan is unlikely before 2017.
On March 21, 2016, the North American Electricity Reliability Corporation (NERC) submitted an informational filing to update the Federal Energy Regulatory Commission (FERC or Commission) on the implementation of the Risk-Based Registration (RBR) initiative—a program NERC launched to reduce unnecessary compliance and registration burdens through the use of risk-based assessments. The filing is an example of NERC’s continued push towards implementing a risk-based approach to reliability and focusing compliance and enforcement efforts on high-risk areas. As reflected in the filing, certain low-risk entities have been dropped from the NERC Compliance Registry, removing the reliability compliance obligations to which those entities were previously subject.
The proposal furthers an ongoing effort to minimize Dodd-Frank burdens on commercial end users.
On April 4, the US Commodity Futures Trading Commission (CFTC) issued an order proposing guidance about the Dodd-Frank regulatory treatment of certain gas and power contracts. As issued, the CFTC’s proposed guidance would provide clarity and welcome relief concerning the application of the Dodd-Frank Act to capacity contracts and/or natural gas peaking supply contractual arrangements entered into by investor-owned utilities and independent power producers. The CFTC has requested that interested entities submit comments concerning the proposed guidance on or before 30 days after the CFTC’s April 4 issuance is published in the Federal Register.
FERC rejected a transmission developer’s request that binding revenue requirement transmission project bids should be deemed just and reasonable and subject to Mobile-Sierra protections, but announced a technical conference to address the policy implications of binding transmission project bids.
On March 17, the Federal Energy Regulatory Commission rejected a request for heightened rate protections for transmission developers that submit binding revenue requirement bids for projects identified through Order No. 1000 regional transmission planning. FERC recognized that binding revenue requirement bids (i.e., those where the bidder promises a cost cap) provide certain benefits. But FERC concluded that the policy implications of those bids and the issue of how it should review rates with binding revenue requirements resulting from a competitive bidding process would need to be addressed through a future proceeding that could evaluate the broader policy considerations. FERC plans to hold a technical conference to explore those issues, among others.
ITC Grid Development, LLC (ITC Development) had requested a declaratory order to protect the transmission rates resulting from its cost-capped transmission development bids in Order No. 1000 regional planning processes. ITC Development asked FERC to make two determinations: (a) that FERC would find winning bids with a cost cap to be “just and reasonable” when filed with FERC to commence the collection of those rates and (b) that FERC would consider those binding bids to be subject to Mobile-Sierra protection and therefore only subject to changes if FERC finds them to not meet the high “public interest” standard. In the event that FERC would not grant Mobile-Sierra protections on a generic basis, ITC Development asked that FERC be willing to grant those protections on a case-by-case basis based on FERC’s evaluation of the bidding process and the binding nature of the winning bid.
Movants must clear high hurdle once parties reach settlement in principle.
On March 9, the Federal Energy Regulatory Commission (FERC or the Commission) issued an order in Maritimes & Northeast Pipeline, LLC (Maritimes Order) rejecting a movant’s attempt to intervene in the final stages of an ongoing proceeding, in large part because granting party status “would seriously disrupt the proceeding, place unwarranted burdens on the active parties, and prejudice the interest of the settling parties.”1 FERC also expressed concern that granting the late intervention would “undermine the Commission’s policy of encouraging settlements as an effective means of resolving cases.”2
In Maritimes, FERC confirms the standards applicable to its review of untimely motions for leave to intervene and the Commission’s intent to apply “the strictest possible scrutiny” to any request filed after parties have reached a settlement in principle.3 As explained below, the Maritimes Order serves as a useful reminder for all practitioners appearing before FERC in either Natural Gas Act (NGA) or Federal Power Act proceedings to make every effort to timely file interventions or risk being excluded from a proceeding.
1Maritimes & Northeast Pipeline, LLC, Order Granting Interlocutory Appeal, Denying Intervention, and Approving Settlement, 154 FERC ¶ 61,182 at P 37 (Mar. 9, 2016) (Maritimes Order).
2Id. at P 28.
3Id. at P 32.
Decision establishes framework for future rulings that covenants in midstream agreements do not run with the land.
On March 8, Judge Shelley C. Chapman of the US Bankruptcy Court for the Southern District of New York issued an order determining that Sabine Oil & Gas Corp. (Sabine), an exploration and production (E&P) company in the natural gas and condensate sector, is permitted to reject three midstream gas and condensate gathering agreements. Although Judge Chapman’s opinion that the agreements do not contain covenants that “run with the land” under Texas law is not binding, the ruling may well reverberate throughout the midstream pipeline and shipping industry for the considerable future, and could ultimately lead to additional upstream bankruptcy filings by companies eager to either shed or renegotiate existing midstream agreements.
April 12, 2016
12:00 PM – 02:00 PM ET
11:00 AM – 01:00 PM CT
09:00 AM – 11:00 AM PT
One Market, Spear Street Tower
San Francisco, CA 94105-1596
We are proud to host the Energy Bar Association’s EBA Energizer: Mediating an Energy Case, in which panelists will discuss practical advice and mediation techniques.
The event will take place live in our Washington, DC, office and via video conference in our San Francisco office.
Deborah M. Osborne
Director, Dispute Resolution Division, Federal Energy Regulatory Commission
Amy E. Wind
Chief Circuit Mediator, US District Court for the District of Columbia
Claudia L. Bernard
Chief Circuit Mediator, US Court of Appeals for the Ninth Circuit