FERC, CFTC, and State Energy Law Developments

Last week, the North American Electric Reliability Corporation (NERC) released a revised draft of the proposed procedures that Responsible Entities would use to request a Technical Feasibility Exception (TFE) for Critical Infrastructure Protection (CIP) Reliability Standards. The revised procedures make several significant revisions to the draft TFE procedures released for comment this spring.

Under the revised TFE procedures, the responsibility for reviewing and approving TFE requests has been shifted back to the Regional Entities. Any Responsible Entity seeking a TFE must submit an electronic form to the appropriate Regional Entity containing the basic information regarding the TFE, including the relevant CIP Reliability Standard Requirement eligible for a TFE, the basis and justification for the request, the proposed mitigating measures, and the schedule for achieving Strict Compliance. The templates on which Responsible Entities will submit this information should be available from the Regional Entities beginning on September 17, 2009.  Read more…

On August 6, the Federal Trade Commission (FTC) issued a Final Rule prohibiting market manipulation in the petroleum industry. Under the terms of the Final Rule, persons that engage in fraud or deceit in wholesale petroleum markets or omit material information that is likely to distort petroleum markets are subject to significant civil penalties. In issuing the Final Rule, the FTC joins the Federal Energy Regulatory Commission and the Commodity Futures Trading Commission in regulating market manipulation in the energy industry.

The issuance of the Final Rule concludes a two-year process that was authorized By Title VIII of the Energy Independence and Security Act (EISA) of 2007. Under EISA, the FTC is authorized to issue any rule or regulation that prohibits any person from engaging in manipulative or deceptive behavior in connection with the purchase or sale of crude oil, gasoline, or petroleum distillates at wholesale. Accordingly, the FTC’s Final Order prohibits any person from (a) knowingly engaging in any act that operates as a fraud or deceit upon any person; and (b) intentionally failing to state a material fact that renders a statement made By that person misleading if the omission distorts or is likely to distort market conditions. In practice, paragraph (i) of the Final Rule prohibits fraudulent or deceptive overt conduct while paragraph (ii) of the Final Rule prohibits material omissions that are likely to distort market conditions.  Read more…

Today, the Federal Energy Regulatory Commission (FERC) and the Minerals Management Service (MMS) jointly issued a guidance document addressing many issues relating to the development and implementation of hydrokinetic and hybrid energy projects located on the Outer Continental Shelf (OCS). The issuance of the guidance document serves as an outline for entities seeking to develop hydrokinetic projects on the OCS, building on the Memorandum of Understanding issued By FERC and MMS on April 9, 2009.

The guidance document provides a succinct roadmap for nonfederal entities seeking to develop and implement hydrokinetic energy projects on the OCS. Such entities must obtain a lease from MMS authorizing access to the potential project site. After receiving a lease from MMS, entities are then required to obtain a license from FERC authorizing the construction and operation of the proposed project. As described By the guidance document, hydrokinetic projects are projects that generate electricity from the motion of waves or the unimpounded flow of tides, ocean currents, or inland waterways. The OCS encompasses all submerged lands, subsoil, and seabed lying between approximately three nautical miles and 200 nautical miles from a state shore.  Read more…

On July 29, U.S. Secretary of Energy Steven Chu announced two solicitations that are part of the Department of Energy’s (DOE’s) provision of several billion dollars in loan guarantees for various renewable energy initiatives. Collectively, funding for the DOE loan guarantee program announced By Secretary Chu is authorized and appropriated pursuant to the terms of the American Recovery and Reinvestment Act of 2009 (ARRA) and the Supplemental Appropriations Act of 2009 (FY09 Appropriations Act). The loan guarantee solicitations, which have been widely anticipated since President Barack Obama signed ARRA in February 2009 and the FY09 Appropriations Act in June 2009, are designed to promote energy transmission infrastructure projects and energy projects that employ innovative technologies.  Read more…

The North American Electric Reliability Corporation (NERC) has issued for comment a draft timeline for the implementation of mandatory Critical Infrastructure Protection (CIP) Reliability Standards at nuclear power plants. Previously, in Order No. 706-B, the Federal Energy Regulatory Commission (FERC) clarified that balance of plant systems, structures, and components (SSCs) within a nuclear power plant are subject to the eight CIP Reliability Standards approved By FERC in Order No. 706. NERC is now seeking stakeholder input regarding the appropriate schedule for bringing nuclear power plants into compliance with the CIP Reliability Standards.

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By Stephen M. Spina, Lawrence J. Chandler, Jonathan M. Rund, and J. Daniel Skees

On July 16, the Federal Energy Regulatory Commission (FERC) issued an order directing market operators in New York and neighboring regions to submit a long-term solution to loop flow issues. In the order, FERC also adopted the findings of an investigation By its enforcement staff into allegations that loop flow issues between the New York Independent System Operator (NYISO) and neighboring markets were a result of market manipulation.

The FERC investigation grew out of a referral By the NYISO’s internal market monitor, who alleged that market participants had submitted circuitous transmission schedules that traversed the systems of multiple Regional Transmission Organizations (RTOs) when more direct routes were available. The internal market monitor claimed that the circuitous scheduling, which utilized paths in the Lake Erie region, increased loop flows and associated uplift costs borne By customers, and violated the rule against market manipulation.  Read more…

On July 16, the Federal Energy Regulatory Commission (FERC) issued a policy statement providing guidance on the development of smart grid technology for the electric transmission system and adopting an interim rate policy to encourage investment in smart grid technology. According to FERC Chairman Jon Wellinghoff, the new policy statement will “inform and accelerate the smart grid standards development process” while also “providing cost recovery assurances to early moving utilities that invest in smart grid technologies that meet specified criteria.”  Read more…

Since early 2009, the U.S. House of Representatives and the U.S. Senate have been separately drafting legislation that, if enacted, would fundamentally alter the way that the United States generates, transmits, and consumes energy. Morgan Lewis's Energy Practice hosted a webinar discussing the energy-related legislation presently pending in Congress.

The Senate's bill, the American Clean Energy Leadership Act of 2009, addresses U.S. energy policy, including various aspects relating to the Federal Energy Regulatory Commission's regulation of electric, gas, and renewable energy. The House's bill, the American Clean Energy and Security Act of 2009, addresses both U.S. energy policy and U.S. climate change policy.

Morgan Lewis partners Ronald J. Tenpas, Michael C. Griffen, and Floyd L. Norton, IV and associate Levi McAllister discussed the House and Senate bills, including the present status of each bill, with a summary of the most recent legislative actions relating to either bill; highlights of notable provisions contained in the House and Senate bills; differences between the House and Senate bills; and next steps: potential legislative developments that may arise as Congress works to enact comprehensive energy legislation in 2009.

On July 1, the North American Electric Reliability Corporation issued draft security guidelines providing guidance to entities that are required to identify Critical Cyber Assets under NERC Standard CIP-002 R3. Under that standard, certain entities must develop a list of Critical Cyber Assets that are essential to the operation of the entities’ Critical Assets.

As stated in the draft guidelines, CIP-002 R3 is applicable to Responsible Entities, which include reliability coordinators, balancing authorities, interchange authorities, transmission service providers, transmission and generator owners and operators, load serving entities, regional entities, and nuclear facilities that have non-safety Critical Assets not subject to the Nuclear Regulatory Commission’s cyber security regulations.  Read more…

On July 1, the North American Electric Reliability Corporation issued draft security guidelines providing guidance to entities that are required to identify Critical Cyber Assets under NERC Standard CIP-002 R3. Under that standard, certain entities must develop a list of Critical Cyber Assets that are essential to the operation of the entities’ Critical Assets.

As stated in the draft guidelines, CIP-002 R3 is applicable to Responsible Entities, which include reliability coordinators, balancing authorities, interchange authorities, transmission service providers, transmission and generator owners and operators, load serving entities, regional entities, and nuclear facilities that have non-safety Critical Assets not subject to the Nuclear Regulatory Commission’s cyber security regulations.  Read more…