Energy companies that offer group health plans to their employees should check on the plan’s administration to minimize any litigation risk associated with inadequate compliance with the Consolidated Omnibus Budget Reconciliation Act (COBRA) continuation coverage requirements. Four companies have recently been accused of failing to provide COBRA notices to participants in their group health plans.

To learn more, read COBRA: Back to Basics published on our ML BeneBits blog.

Morgan Lewis’s energy team has been named as a Law360 Practice Group of the Year for 2016. The Morgan Lewis team was one of only four chosen from a group of practices at more than 600 firms considered for the distinction. This is the second time in the seven-year history of the contest that the firm’s energy team has earned the national recognition.

Law360’s annual Practice Group of the Year series honors law firm practices that have played an integral role in the year's most significant litigation victories or deals, based on the size, complexity, and importance of the cases. Morgan Lewis’s energy team is one of the few that handled landmark transactions, litigation, and regulatory proceedings in 2016 on behalf of industry leaders across the nuclear, electric, oil and gas, and renewables sectors.

The team will be profiled by Law360 on January 24.

FERC claims that the change in the nation’s generation mix and increase in interconnection requests necessitate reforms to improve the efficiency and transparency of the interconnection process.

A recent Law360 (Energy) article written by Morgan Lewis energy partners Levi McAllister, Dan Skees, and Kirstin Gibbs covers FERC’s recent Notice of Inquiry (NOI) that represents the first step in changes to the treatment of income taxes for ratemaking and cost recovery purposes. 

The outcome of the NOI will likely affect all oil and gas pipelines and electric utilities organized as pass-through entities and charging cost-of-service rates.

Read the full article.

The White House’s newly released National Electric Grid Security and Resilience Action Plan contains dozens of directives to various federal agencies for enhancing the electric grid’s resilience in the face of cyber threats, physical attacks, and natural disasters. Many of the directives build on different programs that federal agencies already run, but for the first time, this action plan synthesizes those disparate initiatives and focuses them on three goals: protecting the grid’s vulnerabilities, improving responses to contingencies, and building a more resilient system.

Notably, the action plan realizes that many of these directives can only be achieved with public utilities’ participation and that cost recovery of investments for grid resiliency is essential if the government expects significant private investment to address the existing system vulnerabilities.

Read the full LawFlash: White House Releases Checklist to Improve Grid Resiliency.

This week, FERC submitted its annual financial report to the US Congress. Although part of the regular slate of voluminous reports sent up to Capitol Hill each year, FERC’s report often includes certain nuggets of information useful to the regulated community.

Buried in the report this year was a reminder that FERC—for the first time—has adjusted the civil monetary penalties that it may administer in response to violations of its rules.

As of July 16, 2016, the following civil monetary penalties apply:

  • $1,193,970 per violation, per day for violations of any provision of Part II of the Federal Power Act (FPA) or FERC’s regulations and orders thereunder, including the electric market manipulation provisions of the FPA and mandatory reliability standards.
  • $1,193,970 per violation, per day for violations of the Natural Gas Act or FERC’s implementing regulations and orders thereunder, including the natural gas market manipulation provisions.
  • $1,193,970 per violation, per day for violations of the Natural Gas Policy Act or FERC’s implementing regulations and orders thereunder.

FERC’s various organic statutes contain a variety of other miscellaneous civil penalty provisions as well, all of which were raised.

These adjustments were formally implemented through Order No. 826 in response to the Federal Civil Penalties Inflation Adjustment Act of 2015 and were the first modifications to the significant civil penalty authority given to FERC in the Energy Policy Act of 2005. Under the law, FERC will be required to update its monetary penalty amounts every January 15.

On December 7, the Energy Bar Association sponsored a discussion on FERC-led audits of entities’ compliance with the North American Electric Reliability Corporation’s (NERC’s) critical infrastructure protection (CIP) Reliability Standards. Staff members from FERC and NERC led the discussion and fielded questions from industry participants. This session provided the first public peek into the process for the CIP audits.

While FERC has the authority to conduct its CIP audits with or without NERC and the regional entities charged with front-line enforcement of the Reliability Standards, the panelists explained that FERC wanted to coordinate with NERC and the regional entities to leverage their collective compliance and enforcement experience.

On November 17, FERC adopted regulations to enhance the protection of Critical Energy Infrastructure Information (CEII) using its new statutory authority from the Fixing America’s Surface Transportation Act (FAST Act), which added Section 215A to the Federal Power Act.

In addition to finalizing the new protections for CEII promised in the initial notice of proposed rulemaking, the final rule also adopts a prohibition on the disclosure of CEII under the Freedom of Information Act (FOIA). The FAST Act had, for the first time, exempted CEII from FOIA disclosure. In the past, FERC had taken the position that it would not disclose CEII in response to FOIA requests, but there was no explicit statutory basis for doing so. With the new statute and implementing regulations, there is no longer any legal doubt regarding the FOIA-exempt nature of CEII.

Despite the apparent strict nature of these protections, the degree to which CEII will be protected remains to be seen. Although CEII is FOIA-exempt under the FAST Act, FERC continues to provide procedures whereby interested parties can submit requests for CEII and be granted access if such interested parties show a legitimate need and commit to non-disclosure. In the past, FERC has generally been willing to share CEII upon request; the new regulations provide modest additional regulatory procedures for such requests, but it is possible that FERC will continue its policy of making CEII easily available to interested parties. The language in the FAST Act does allow FERC to decline to disclose CEII, but—so far—FERC has not chosen to take that route.

FERC has requested comments on whether to revise its policy for establishing the length of license terms for hydroelectric projects located at non-federal dams. If FERC ultimately makes longer license terms easier to achieve, not only would it revise extremely longstanding policy, but it could significantly reduce the economic burden of licensing hydro projects. Given the number of hydro projects up for renewal in the coming years, an extension of the license term could make relicensing more financially attractive.

Under FERC’s current policy, projects at non-federal dams receive a 30-year term where there is little or no authorized redevelopment, new construction, or environmental mitigation and enhancement. A 40-year term is provided for a license involving a moderate amount of such activity, and for projects with an extensive amount of such activity, a 50-year license term is applied. This tiered licensing policy is intended to balance a number of economic and environmental factors that arise in the context of hydroelectric project development.

Recent proceedings have called into question the length of a new license and the factors FERC weighs when setting a license term. While FERC has yet to deviate from its policy, the agency now appears open to doing so and is actively seeking comment on whether it should embrace any of the following options:

  • Retain the existing license term policy.
  • Add to the existing license term policy the consideration of measures implemented under the prior license such that the expense of prior investments receives some weight.
  • Replace the existing license term with a 50-year default license term, which is the standard term for projects at federal dams.
  • Add a more quantitative cost-based analysis to the existing license term policy.
  • Accept longer license terms negotiated in an applicable settlement agreement.

FERC’s request for comments asks for comments on specific questions related to each possible policy change.

Comments are due January 24, 2017.

Moving to embrace and encourage the role of energy storage resources in energy markets, FERC is proposing to require each RTO and ISO to enable the participation of electric storage resources in their organized wholesale markets. Under FERC’s proposal, each RTO and ISO would develop market rules that recognize the physical and operational characteristics of electric storage resources and ensure that they are eligible to provide all capacity, energy, and ancillary services that they are technically capable of providing in electric markets. As part of the same proposal, FERC is also proposing to require each RTO and ISO to establish distributed energy resource aggregators as a type of market participant to reduce barriers to their participation in organized electric markets. Read our full LawFlash for more details: FERC Proposes to Integrate Electric Storage into Organized Markets.

We will discuss this NOPR in further detail during an upcoming webinar on November 29.