FERC, CFTC, and State Energy Law Developments

A proposed rule by the US Environmental Protection Agency (EPA) could reduce costs for oil and gas producers and processors by eliminating certain air emission requirements. The EPA issued a proposed rule on August 29 to roll back new source performance standards (NSPS) established in 2012 and 2016 by removing sources in the transmission and storage segment from the source category; rescind the NSPS applicable to those sources, including methane and volatile organic compounds requirements; and rescind the methane-specific requirements of the NSPS applicable to sources in the production and processing segments. The proposed rule also includes an alternate proposal to rescind the methane-specific requirements of the NSPS applicable to all oil and natural gas sources, without removing any sources from the source category.

Facing what it deems an “unprecedented number of FOIA requests” for nonpublic information related to utility violations of the North American Electric Reliability Corporation (NERC) critical infrastructure protection (CIP) requirements governing cybersecurity compliance for critical electric infrastructure, FERC Staff has issued a white paper proposing to make publicly available additional information regarding those violations, including the names of the utilities involved. If adopted, this proposal could increase the risk of a serious and successful attack on the nation’s electric infrastructure with no benefit other than a “name and shame” approach to CIP enforcement.

For the first time, FERC has found that significant investments in an existing licensed hydroelectric facility by a licensee will be considered when establishing the license term in a relicensing proceeding, potentially aiding the licensee in obtaining a longer license term.

Section 15(e) of the Federal Power Act (FPA) provides that any license issued shall be for a term that FERC determines to be in the public interest, but no less than 30 years or more than 50 years. Under its 2017 Policy Statement on Establishing License Terms for Hydroelectric Projects, FERC established a 40-year default license term policy for original and new licenses. The Policy Statement included exceptions to the 40-year license term under certain circumstances, including establishing a longer license term upon a showing by the license applicant that substantial voluntary measures were either previously implemented during the prior license term, or substantial new measures are expected to be implemented under the new license.

The Council on Environmental Quality (CEQ) published draft guidance on June 26 to address how agencies implementing environmental reviews under the National Environmental Policy Act (NEPA) should consider greenhouse gas (GHG) emissions. The new guidance would replace the Obama administration’s 2016 guidance, which has been on hold since April 5, 2017, pending “further consideration” pursuant to Executive Order 13783, Promoting Energy Independence and Economic Growth.

If adopted, the guidance could impact every federal agency proceeding that requires a NEPA analysis, including FERC natural gas pipeline certificate proceedings, liquefied natural gas (LNG) facility certificate proceedings, nuclear power plant decommissioning projects, and independent spent fuel storage installation facilities.

The guidance specifies that under the NEPA “rule of reason,” which defers to agency expertise in conducting NEPA analyses, as well as existing CEQ regulations, “[a]gencies preparing NEPA analyses need not give greater consideration to potential effects from GHG emissions than to other potential effects on the human environment.”

The Federal Energy Regulatory Commission (FERC or Commission) on July 18 issued a rule, initially proposed in July 2016,[1] restructuring the way it collects certain data for market-based rate (MBR) purposes and significantly expanding the information it collects from MBR holders. Under the Final Rule, FERC will now collect MBR application and certain compliance information in a new database with multiple data tables relating to one another via entity-specific, unique identification numbering (FERC’s new “relational database”), an intricate and entirely new electronic reporting system that will become compulsory in early 2021.[2] Order 860 also adopts changes to the ownership and the gas and electricity “affiliate” information required in an MBR Seller’s compulsory disclosures.

The Final Rule will take effect on October 1, 2020, and baseline submissions will be due by February 1, 2021.[3] As of February 1, 2021, prior to filing an application for initial MBR authority, a new Seller will be required to make a submission into the relational database, which will itself create the required asset appendices and indicative screens that filers had previously prepared independently. FERC affirmed that after January 31, 2021, a Seller will no longer report its affiliated generating and related electric and gas assets in the current .XLS format (an Appendix B Excel spreadsheet).[4] Instead, the information will now be submitted in XML format and the data to be collected in the relational database, which the Final Rule claims will generate an asset appendix.[5]

The Pennsylvania (PA) Supreme Court issued its unanimous decision on August 20 in PPL Electric Utilities Corp. v. City of Lancaster, invalidating a municipality’s efforts to impose annual fees on utilities to occupy public rights-of-way and adopt inspection, supervision, and enforcement measures underpinning those fees. The PA Supreme Court affirmed that the Public Utility Code (Code) and the authority of the Pennsylvania Public Utility Commission (PUC) to apply and enforce the Code preempt the field on all matters that relate to the regulation of public utilities in the commonwealth. In doing so, the court upheld the longstanding principle that public utilities should be regulated by one statewide agency, namely the PUC.

The litigation culminating in the PA Supreme Court’s decision arose from the 2013 enactment of a local ordinance that implemented a comprehensive program for management of municipal rights-of-way. The key provision of the ordinance at issue authorized the City of Lancaster (City) to impose perpetual, annual occupancy fees on utilities for their presence in municipal rights-of-way. The ordinance also included provisions purporting to grant the City authority to inspect public utility facilities located in the right-of-way, order the relocation of such facilities, and enforce the Code and the ordinance itself.

The National Labor Relations Board (NLRB) has had a busy year of significant decisions for employers, including one in Entergy Mississippi, addressing the supervisory status of certain electric utility transmission and distribution dispatchers and resulting ineligibility to vote in a union election. This important decision is discussed further in our recent edition of Labor & Employment NOW.

For the second time, PJM Interconnection, LLC (PJM) has suspended its 2019 Base Residual Auction (BRA) as directed by the Federal Energy Regulatory Commission (FERC). FERC found that delaying the auction until the Commission establishes a replacement rate would provide greater certainty to the market than conducting the auction under the existing rules.

PJM previously suspended the 2019 BRA when FERC granted PJM’s request to waive the auction timing requirements of its tariff to allow for a delay from May to August 2019.

Read FERC’s order.

Wholesale electricity sellers that are not government owned are subject to regulation by the Federal Energy Regulatory Commission. Obtaining FERC approval to sell wholesale electricity at “market-based rates” (which is nearly any sale regulated under the Federal Power Act that is not based on cost-of-service accounting) can be an intricate exercise, requiring the applicant to submit statistical horizontal market power screens. Within the FERC-regulated organized markets, the independent system operators and regional transmission organizations (ISOs/RTOs), monitoring staff and procedures, and transparent real-time and long-term demand and pricing information have led many market participants to conclude that the required market power statistical screen studies are of little value and function merely as an administrative impediment to doing business. On July 18, FERC issued a final rule, Refinements to Horizontal Market Power Analysis for Sellers in Certain Regional Transmission Organization and Independent System Operator Markets, Order No. 861, that relieves market-based rate (MBR) entities of the statistical screen requirements in some—but not all—of the ISO/RTO markets. This should streamline both the regulatory approval process for prospective MBR entities and the ongoing compliance process for MBR entities that file notices, triennial renewal applications, and similar documents with FERC.

Order No. 861 relieves MBR entities (most of which are independent generating companies and/or power marketers, and some of which are traditional franchised utilities) of the need to prepare and submit statistical screen analyses if the MBR applicant or holder is within the Northeastern and Central ISO/RTO markets—that is, ISO New England, New York ISO, PJM Interconnection, or Midcontinent Independent System Operator. In these ISO/RTOs, FERC found that the existence of both capacity and energy markets and the vigor of market monitoring and mitigation were sufficient to permit applicants to dispense with the horizontal screen studies.

On June 24, the US Supreme Court issued its opinion in Food Marketing Institute v. Argus Leader Media, expanding the scope of information protected under Exemption 4 of the Freedom of Information Act (FOIA). FOIA establishes an expansive right for the public to access records from executive agencies to hold the government accountable. Limiting that broad right, FOIA includes several broadly worded exceptions whereby the release of certain information may not be compelled under FOIA. One such exemption, Exemption 4, states that “trade secrets and commercial or financial information obtained from a person” that are “privileged or confidential” are protected from mandatory public disclosure. The statute does not define “confidential,” so the question of what “commercial or financial information” is protected from disclosure has resulted in much litigation.