FERC, CFTC, and State Energy Law Developments

With the degree of scrutiny applied to H-1B petitions at an all-time high, it is important for employers, including those in the energy industry, to begin assessing their H-1B needs. Read the LawFlash prepared by our immigration lawyers for guidance on immigration status assessments.

At its open meeting on November 21, FERC announced organizational changes to enhance the agency’s focus on cybersecurity threats and challenges to electric infrastructure. Commission staff unveiled five “focus areas” related to grid cybersecurity and announced organizational changes within the Office of Energy Projects (OEP) and Office of Electric Reliability (OER) designed to better position Commission resources to address cybersecurity concerns.

New Strategic Focus Areas

Commission staff developed the following five focus areas based on their review of threat reports (public and nonpublic), global cybersecurity events, North American Electric Reliability Corporation (NERC) CIP standards, and OEP’s specialized security program for hydropower projects.

  1. Supply Chain/Insider Threat/Third-Party Authorized Access

    This is not the first time the Commission has made supply chain and third-party (or vendor) management security a priority. In 2016, the Commission directed NERC to develop mandatory supply chain risk management controls, which have since been approved and are set to take effect next year.

In an effort to address anticipated electricity shortages and reliability challenges in California, the California Public Utilities Commission (CPUC) voted on November 7 to authorize the procurement of 3,300 MW of energy by 2023. The CPUC also intends to seek extensions of certain compliance deadlines from the State Water Resources Control Board for almost 4,800 MW of gas generation units due to retire soon because they use ocean water for so-called “once-through cooling,” which can have a detrimental impact on marine life.

For more details on the CPUC’s actions, read the full LawFlash.

FERC issued guidance on October 17, 2019, that may significantly aid hydroelectric developers in planning and siting potential projects. FERC issued a list, jointly developed with the secretary of the US Army, secretary of the US Department of the Interior, and secretary of the US Department of Agriculture (collectively, the Secretaries), of 230 existing nonpowered federal dams that FERC and the Secretaries agree have the greatest potential for nonfederal hydropower development. FERC also issued guidance to assist applicants for licenses or preliminary permits for closed-loop pumped storage projects at abandoned mine sites. These actions fulfill FERC’s requirements under the America’s Water Infrastructure Act of 2018 (AWAI) and are intended to encourage development of renewable energy resources by developing hydroelectric power at sites where the addition of hydroelectric capabilities would not add significant additional environmental impacts.

The Commodity Futures Trading Commission (CFTC) recently released its Annual Report on the Whistleblower Program and Customer Education Initiatives for fiscal year (FY) 2019. The report, which details the operation of the whistleblower program and the CFTC’s initiatives to educate consumers about fraud or other violations of the Commodity Exchange Act (CEA), showed that during FY 2019, the CFTC awarded more than $15 million in five whistleblower awards. These whistleblowers had provided information that prompted the CFTC to open an investigation and/or provided substantial assistance to the CFTC during the course of the investigation. The report results serve as a reminder to energy companies to review and assess their compliance programs and policies to ensure that employees are encouraged to bring compliance concerns to management’s attention, and that such concerns are addressed in a timely manner.

FERC has provided specific, detailed guidance for the first time on the use of voting trusts to eliminate ownership affiliation.

Direct and indirect owners of 10% or greater voting interests in FERC-regulated “public utilities” are typically treated by FERC as “affiliates” and as “holding companies” of their public utilities. These owners become subject to FERC regulation with respect to some mergers, acquisitions, divestitures, and changes in control, and with respect to their and their affiliates’ FERC-conferred right to sell electricity at wholesale.

The Commodity Futures Trading Commission (CFTC) filed and settled charges on October 24 against Upstream Energy Services LLC (Upstream Energy) for acting as an unregistered futures commission merchant. The Commission’s order raises several important points for energy companies. First, while energy companies may view the Federal Energy Regulatory Commission (FERC) as their primary federal regulatory agency, certain types of transactions involving energy resources may fall under the purview of another regulatory authority, such as the CFTC. Second, a company that accepts and places futures and options order on behalf of another party must register as a futures commission merchant. Third, voluntary and full cooperation with an enforcement action can reduce greatly the nature and severity of any penalty sought.

FERC recently issued a pair of orders approving the electric storage market participation proposals of PJM Interconnection, Inc. (PJM) and Southwest Power Pool, Inc. (SPP). PJM and SPP submitted those proposals to comply with the directives of Order No. 841, FERC’s final rule addressing the participation of electric storage resources in the capacity, energy, and ancillary service markets operated by independent system operators and regional transmission organizations. The October 17 orders represent the agency’s first two approvals of Order No. 841 compliance filings, which have been under review since late last year.