Shortly before breaking for the August recess, the US Senate voted to approve commissioners to both the Commodity Futures Trading Commission (CFTC) and the Federal Energy Regulatory Commission (FERC), providing both agencies with enough commissioners for a functioning quorum. The Department of Energy Organization Act requires three commissioners to constitute a quorum at FERC, and the CFTC’s regulations similarly require three commissioners, although the CFTC can operate with fewer if there are not three members in office. Both the CFTC and FERC have been without three commissioners for months, preventing the agencies from carrying out any but the most basic items of regulatory business. The loss of quorum was particularly damaging on the policy front, as neither agency could move forward on many existing policy initiatives or push through many administration priorities.

Join Morgan Lewis lawyers this August for these upcoming programs:

Doing Business in the Golden State – Trade Secrets and Noncompetition | August 2, 2017 | Webinar presented by Christopher J. Banks, Debra L. Fischer, and Seth M. Gerber

Event Shareholder Activism Defense: What You Need to Know About the Securities Laws, Rules, and Practice | August 9, 2017 | Webinar presented by Keith E. Gottfried and Sean M. Donahue

Visit our events page for more of our latest programs.

On July 7, the US Court of Appeals for the District of Columbia Circuit issued its opinion in NRG Power v. FERC, vacating in part and remanding a May 2013 order by the Federal Energy Regulatory Commission (FERC) that had accepted PJM Interconnection, L.L.C.’s (PJM’s) revisions to the Minimum Offer Price Rule (MOPR) in the PJM electricity capacity market subject to PJM’s acceptance of certain modifications.

The court held that in directing the modifications to the PJM proposal, FERC created “a new rate scheme that was significantly different from [both PJM’s proposed and existing rate designs],” thereby exceeding FERC’s authority under Section 205 of the Federal Power Act (FPA). The court also held that PJM’s consent to FERC’s modifications did not cure FERC’s regulatory overreach because utility customers did not receive an opportunity for notice and comment on the modified rate.

Following this most recent decision, FERC will need to exercise caution in proposing modifications to a utility’s filing under Section 205.

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Earlier this month, the US Supreme Court issued a ruling that imposed a five-year statute of limitations period in which disgorgement could be ordered by an administrative agency penalizing regulatory violations. Although the Court’s decision in Kokesh v. SEC arose in the context of an enforcement action initiated by the Securities and Exchange Commission (SEC), the Court’s decision may well be applied to disgorgement orders issued by either the Federal Energy Regulatory Commission (FERC) or the Commodity Futures Trading Commission (CFTC). However, additional litigation may be required to ensure that the disgorgement boundaries set forth by the Court in Kokesh are equally applied to FERC and CFTC enforcement actions seeking disgorgement from an energy market participant.

On June 8, the North American Electric Reliability Corporation (NERC) released its report on the loss of 1,200 MW of solar generation in southern California during a system disturbance that unexpectedly caused inverters at solar generation facilities to trip or momentarily cease to operate. The report provides solar plant owners and engineers with recommendations to prevent future occurrences. According to NERC, inverter disconnect events pose an increasing reliability risk given the expansion of solar generation.

Growing solar penetration has made the response of solar generators to system disturbances more critical. If NERC and utility-scale solar generators adopt the report’s recommendations, the likelihood of both recurrences and government-imposed regulations will be reduced. The Federal Energy Regulatory Commission’s (FERC’s) recent orders requiring renewable generation to promote frequency response (Docket No. RM16-6), reactive power (Order No. 827), and ride-through capability (Order No. 828) indicate a willingness to impose regulatory requirements on renewable generation where FERC sees it as necessary to preserve system reliability. Separate and apart from NERC action and any voluntary industry response, the report may lead FERC to consider such action.

Continue reading the LawFlash.

As you have likely heard by now, the US Securities and Exchange Commission (SEC) has been targeting companies that require departing employees, as a condition to receiving severance benefits, to enter into severance agreements that discourage or prohibit the former employees from contacting regulators or from receiving whistleblower awards. The SEC whistleblower programs, established under Section 922 of the Dodd-Frank Wall Street Reform and Consumer Protection Act and memorialized in Section 21F of the Securities and Exchange Act of 1934, as amended, and SEC Rule 21F-17, are designed to provide incentives to individuals to encourage their providing information regarding violations of securities laws, and to protect whistleblowers from retaliation resulting from any disclosure.

On May 23, the Federal Energy Regulatory Commission (FERC) issued a notice inviting comments on the interplay between state policy goals and organized wholesale electricity markets. The referenced state policy goals involve state support for zero-carbon-emitting power plants, including nuclear power plants, generally in the form of tax credits.

FERC is asking for comments to further explore information presented on this topic at a technical conference convened by FERC commissioners and staff on May 1 and 2, 2017. FERC seeks comments on the five potential paths for reconciling the two policies already identified by the FERC staff. It also seeks broader comments on any “conceptual level” changes that would need to be implemented, and whether the necessary changes could be implemented and in what time frame. Finally, the notice seeks input on the larger principles that should drive reconciliation of the two separate policy goals, including any necessary procedural requirements.

Continue reading the LawFlash.

The recent “WannaCry” ransomware cyberattack highlights the need for firms to engage in proactive prevention and protection. Ransomware (malware that encrypts data pending an extortion payment) is a recurring cyber threat that is growing more pervasive and profitable for criminals. This most recent attack this month by the WannaCry virus highlights the potential global impact, speed and acceleration, and scope of the ransomware problem.

Ransomware as one unique form of cyberattack has been an increasing global and domestic cybersecurity problem over the last several years. Ransomware targets have included businesses, hospitals, schools, and even police departments. Worryingly, some recent forms of ransomware are becoming more sophisticated and resilient.

In response to the recurring nature of this type of cyberattack, Morgan Lewis partner Mark Krotoski and associate Martin Hirschprung authored a LawFlash offering some steps for proactive prevention and protection as well as some thoughts on the legal issues that may arise following these types of cyberattacks.

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On April 14, the US Court of Appeals for the DC Circuit issued its opinion in Emera Maine v. FERC, vacating and remanding FERC’s Opinion No. 531 in which FERC established a just and reasonable rate of return on equity (ROE) for transmission-owning utilities in the Northeast (NETOs) and adopted a new methodology for determining the ROE for FERC-jurisdictional electric utilities.

The DC Circuit found two grounds for sending the case back to FERC. First, because the proceeding began through a complaint filed under section 206 of the Federal Power Act (FPA), the court found that FERC failed to find that the existing ROE for the NETOs was unjust and unreasonable before proceeding to set a new just and reasonable ROE. Second, the court found that FERC had not adequately justified its determination of the new just and reasonable ROE.

The court’s decision creates significant uncertainty in FERC ROE policy.