FERC, CFTC, and State Energy Law Developments

On September 17, the Federal Energy Regulatory Commission (FERC or the Commission) issued a Revised Policy Statement on Penalty Guidelines (Revised Policy Statement), 132 FERC ¶ 61,216 (2010), which addresses comments received concerning the Commission’s Policy Statement on Penalty Guidelines issued on March 18, 2010. The Commission also issued revised Penalty Guidelines attached to the Revised Policy Statement. FERC reiterated that the purpose of the Penalty Guidelines is to ensure fairness, consistency, and transparency. The Commission directed its Office of Enforcement (Enforcement) to hold a technical conference one year from the issuance of the revised Penalty Guidelines to discuss how they have worked and to receive comments.

The Revised Policy Statement begins By noting that the Penalty Guidelines would continue to be based on the U.S. Sentencing Guidelines, and that the Penalty Guidelines would not affect Enforcement Staff’s exercise of discretion to close investigations or self-reports without sanctions. The Commission states that the Penalty Guidelines come into effect only after the Enforcement Staff determines that a violation has been committed and that such violation warrants the imposition of a penalty By the Commission. Read more…

In a Guidance Order issued on August 27, the Federal Energy Regulatory Commission (FERC or the Commission) provided guidance on how the North American Electric Reliability Corporation (NERC) and the Regional Entities responsible for the enforcement of mandatory Reliability Standards should assess repeated violations By the same or affiliated companies. The Commission expressed concern that NERC and the Regional Entities have not sufficiently considered repeated violations as an aggravating factor in approving monetary sanctions. To address this concern, the Commission provided new guidance that broadens the category of what will be considered a “repetitive” violation of a Reliability Standard in the future. As a result, the compliance risk presented By many Reliability Standards, particularly those dependent on human judgments and procedures, will significantly increase. Read more…

As new high-voltage transmission increasingly becomes a stand-alone business, the structures for ownership and financing of that business continue to evolve. Drivers for new high-voltage transmission include the need for reliability and for delivery from energy sources under renewable portfolio standards, the availability of federal stimulus funds or loan guaranties, the support of the Federal Energy Regulatory Commission with rate incentives, and other mechanisms including the adoption of the anchor-customer structure for merchant transmission.

Utilities and merchant transmission companies are currently exploring a whole host of creative structures and financing options for the development and construction of new transmission. While a number of difficult issues — including thorny issues associated with siting and cost allocation — remain to be addressed before these transmission projects are built, it is clear that the need for new transmission coupled with FERC’s incentives and ARRA funding are providing the impetus for new transmission proposals. Read more…

Our panelists discussed issues relating to FERC’s proposed rulemaking, including the specific reforms under consideration:

  • Greater regional coordination in transmission planning
  • Consideration of public policy requirements in transmission planning processes
  • Removal of obstacles to nonincumbent transmission provider participation in transmission planning processes
  • Increased interregional coordination in transmission planning through interregional planning agreements
  • Cost allocation of new transmission projects on an intra- and interregional basis and potential jurisdiction issues

A recording of the webcast and the associated materials are available.

The U.S. Department of Justice and the Federal Trade Commission recently issued proposed revisions to their horizontal merger guidelines. Because the Federal Energy Regulatory Commission’s analytical framework for assessing the competitive effects of horizontal electric utility mergers is based on the current DOJ/FTC horizontal merger guidelines, proposed revisions to the guidelines could trigger changes to FERC’s horizontal electric utility merger analysis and potentially lead to a significant divergence of merger analysis between FERC and the antitrust enforcement agencies. Read more…

On July 6, the North American Electric Reliability Corporation (NERC) filed with the Federal Energy Regulatory Commission (FERC or the Commission) the first batch of Notices of Penalty describing violations of Critical Infrastructure Protection (CIP) Reliability Standards By users, owners, and operators of the bulk-power system. Most of these notices involved inappropriate access to Critical Cyber Assets, and all of the violations were settled for small amounts. Notably, these Notices of Penalty also utilized an abbreviated, confidential format that removed the name of the registered entity and most of the detail regarding the violations at issue. Read more…

Following its March 2010 Open Meeting, the Federal Energy Regulatory Commission issued a series of orders that represent significant modifications in the way mandatory reliability standards are developed and enforced By the North American Electric Reliability Corp. (NERC).

Read more…

On June 17, the Federal Energy Regulatory Commission (FERC) issued a Notice of Proposed Rulemaking (NOPR) in which it proposes to amend the transmission planning and cost allocation requirements for public utility transmission providers established in Order No. 890. FERC states that there have been significant changes in the electric power industry since Order No. 890 and the NOPR's purpose is to address deficiencies in the current transmission planning and cost allocation processes.

In the NOPR, FERC proposes to require public utility transmission providers to submit compliance filings implementing several reforms to their planning processes. Read more...

On March 18, 2010, the Federal Energy Regulatory Commission (FERC or the Commission) issued several orders that portend a significant expansion of FERC control over the development and drafting of mandatory Reliability Standards By the North American Electric Reliability Corporation (NERC). On June 11, FERC denied requests for rehearing of one of these orders, which had directed NERC to propose By June 30, 2010, modifications to Reliability Standard TPL-002-0, to prevent transmission planners from planning to permit the loss of nonconsequential load under single contingency conditions. However, FERC granted an extension of time until March 31, 2011 for the requested modification, and clarified that the modification may permit transmission planners to plan for the loss of firm service at the fringes of their system, so long as these exceptions are technically justified and case-specific.

NERC and others had challenged FERC’s March 18 order, arguing that it does not allow NERC to develop alternatives, that it threatens to impose costs that far exceed the benefit to bulk electric system reliability, and that it fails to give “due weight” to the technical expertise of NERC as required By the Federal Power Act. The Commission rejected all of these arguments.  Read more…

On June 9, the U.S. House of Representatives passed the Grid Reliability and Infrastructure Defense Act (GRID Act), which is intended to strengthen the U.S. electrical grid against terrorist attacks, cyber threats, electromagnetic pulse weapons, and solar storms. The GRID Act authorizes the Federal Energy Regulatory Commission (FERC) to issue emergency orders to protect critical electric infrastructure, and to take other measures to address current and potential vulnerabilities.

The GRID Act amends the Federal Power Act to permit FERC to issue orders for emergency measures to protect the reliability of either the bulk-power system or critical electric infrastructure whenever the President issues a written directive or determination identifying an imminent grid security threat. FERC’s authority to take such action can be employed without notice or hearing. However, FERC, to the extent practicable in light of the nature of the grid security threat and the urgency for emergency measures, is instructed to consult with certain governmental authorities, including the governments of Canada and Mexico, regarding implementation of such emergency measures. Any orders issued By FERC that implement emergency measures must be discontinued within 30 days of (i) the President providing a directive that an imminent security threat no longer exists, or (ii) FERC determining that the need for emergency measures no longer exists. In no case may a Commission order implementing emergency measures continue for longer than one year.  Read more…