FERC, CFTC, and State Energy Law Developments

FERC Staff issued an October 4 report on Commission-led critical infrastructure protection (CIP) reliability audits completed during fiscal year 2019. The report provides lessons learned and identifies voluntary practices that FERC Staff observed during those audits that could improve the protection of electric infrastructure from cyberattacks.

In October 2018, Pennsylvania Governor Tom Wolf signed into law Act 120 of 2018 (Act 120), which grants the Pennsylvania Public Utility Commission (PaPUC) additional authority to support investor-owned water utilities’ efforts to protect Pennsylvania residents from lead entering their drinking water from customer-owned lead service lines. On October 3, the PaPUC, in its first exercise of this authority, approved Pennsylvania-American Water Company’s (PAWC’s) comprehensive plan for replacing customer-owned lead service lines in its service territory and established a working group to develop recommendations for the uniform implementation of Act 120 by all water companies in the commonwealth.

President Donald Trump announced on Monday his intention to nominate FERC General Counsel James Danly to fill the remaining Republican position at FERC. That position has been vacant since the untimely passing of former Chairman Kevin McIntyre.

Under FERC’s governing statute, no more than three of the five commission seats can be held by the members of a single party and FERC currently has two Republican commissioners. If Mr. Danly is confirmed as a Commissioner, FERC would have three Republican Commissioners and one Democratic Commissioner. As a result, a successful confirmation will ensure that even if a single Commissioner is recused from a proceeding or resigns as a Commissioner, FERC will continue to have a quorum and a Republican voting majority.

The nomination has not yet been submitted to the Senate and no hearings have been scheduled at this time. As a result, the timing of any potential confirmation remains unclear, as does the potential replacement of Mr. Danly as general counsel to FERC.

Interest in microgrids is on the rise in the United States as over half of states explore ways to modernize the grid and promote distributed energy resources (DER), including innovative renewable energy, storage, and demand response technologies. However, microgrids are not defined by law or regulation in most states and are more complex than other types of DER because they involve both the generation and distribution of energy. This raises several policy questions, including who should pay for microgrid development and use and whether microgrid operators that technically distribute energy to retail customers should be classified as public utilities and subject to regulations ordinarily imposed on such entities. California is currently exploring the potential benefits of microgrids and the role of state regulation.

FERC issued a notice of proposed rulemaking (NOPR) on September 19 announcing its intent to revise key rules governing the status and rights of Qualifying Facilities (QFs). These revisions include proposed changes to the rules for measuring QF size that could make it more difficult for certain projects to maintain QF status. The NOPR also proposes to provide greater flexibility to states in regulating the rates that QFs can receive from their interconnected utilities, as well as a number of other fundamental changes in the regulation of QFs.

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]