FERC, CFTC, and State Energy Law Developments

On February 19 and 21, the Federal Energy Regulatory Commission (FERC) issued several more determinations concerning whether jurisdictional natural gas service providers’ cost-of-service rates are just and reasonable given the recent reduction to the federal corporate income tax rate under the Tax Cuts and Jobs Act (TCJA). The recently released determinations ended approximately 21 separate “one-time report” proceedings without further action[1] and initiated a Natural Gas Act Section 5 rate investigation into Southwest Gas Storage Company’s rates (RP19-257).[2] FERC required the entities to file FERC Form No. 501-G, referred to as a “one-time report,” in light of the reduction from 35% to 21% of the federal corporate income tax rate. Morgan Lewis has developed several publications describing the “one-time report” proceedings, the most recent of which included a status update on the more than 100 proceedings that were initiated based on those submissions.

As discussed in our January 18 LawFlash, the Federal Energy Regulatory Commission is continuing to investigate whether jurisdictional natural gas pipelines’ current cost-of-service rates are appropriate in light of reductions to the federal corporate income tax rate under the Tax Cuts and Jobs Act.

That publication also included a table providing the status of numerous pipeline rate proceedings associated with the “One-time Report” the Commission requires pipelines to file in order to facilitate its investigations. Please feel free to reach out to the authors with any questions.

With many companies focused on analyzing transactions for applicability of the Committee on Foreign Investment in the United States’ pilot program mandatory declaration requirements, transacting parties should not lose sight of the need to continue to analyze deals under traditional CFIUS standards.

Read the full LawFlash.

The US Energy Information Administration (EIA) updated its website on January 7 to report that, once all its data is finalized, natural gas prices, production, consumption, and exports will reflect record increases in 2018. According to the preliminary release, the average annual Henry Hub natural gas spot price in 2018 went up 15 cents from the 2017 average. Simultaneously, consumption, production, and exports all saw a rise in 2018.

The passing of Federal Energy Regulatory Commission (FERC) Commissioner and former Chair Kevin McIntyre on January 2 is noted with regret, and with sympathy for his family, colleagues, and friends.

The New Jersey Board of Public Utilities (BPU) approved the nation’s largest single-state offshore wind solicitation in the United States on September 17, 2018, with an Order opening up an application window for the solicitation of 1,100 megawatts (MW) of offshore wind capacity. Stakeholders anticipate additional procurements in light of the BPU’s announcement that it intends to solicit an additional 2,400 MW, in two tranches of 1,200 MW, by 2022.

The first application window closed on December 28, 2018. Three applications were submitted to the BPU. Successful applicants in the current procurement will receive state subsidies in the form of Offshore Wind Renewable Energy Credits (ORECs). To be eligible for BPU approval, applicants will need to demonstrate that, among other things, their project (i) will have a positive net in-state economic and environmental benefit; (ii) will have a “reasonable ratepayer impact;” and (iii) is likely to be constructed on time and on budget.

The US Government Accountability Office (GAO) issued a report on December 18, 2018, identifying significant weaknesses in the Department of Homeland Security’s (DHS) Transportation Security Administration’s (TSA) Pipeline Security Program management and recommending improvements to address those weaknesses. The report was driven by a recognition that “pipelines increasingly rely on sophisticated networked computerized systems and electronic data, which are vulnerable to cyber attack or intrusion,” and that “new threats to the nation’s pipeline systems have evolved to include sabotage by environmental activists and cyber attack or intrusion by nations.”

The New York State Public Service Commission (PSC) has issued an order establishing a statewide goal of 3.0 GW of energy storage deployments by 2030—with an interim target of 1.5 GW by 2025—and related reforms to encourage that development.

The order is the latest step in a broader plan being implemented by state authorities to dramatically boost the presence of energy storage in New York. In November 2017, the state legislature enacted a law directing the PSC to establish a statewide energy storage goal for 2030. In January 2018, Governor Andrew M. Cuomo announced a target of 1.5 GW of deployed energy storage by 2025. In mid-2018, PSC staff and the New York State Energy Research Development Authority (NYSERDA) jointly developed the New York State Energy Storage Roadmap (Roadmap) to provide the PSC with recommendations on the policies, regulations, and initiatives needed to meet those targets.

A new report by the National Infrastructure Advisory Council (NIAC) concludes that the nation is not prepared to adequately respond to a catastrophic power outage. The NIAC is a special advisory council composed of representatives from private industry, state and local government, and academia that is tasked with providing the president with advice on issues facing the nation’s 16 federally designated critical infrastructure sectors. The NIAC issued the report after it was tasked with examining the nation’s ability to respond to and recover from a “catastrophic power outage of a magnitude beyond modern experience, exceeding prior events in severity, scale, duration, and consequence.” The NIAC generally considers these to be limited- or no-notice events with a long duration (i.e., lasting weeks or months due to damage) impacting a broad geographic area (e.g., multiple states and affecting tens of millions of people) that could be further complicated by a cyber or physical attack.

Central to the NIAC’s report is examining the extent to which a catastrophic power outage that causes a failure in one critical infrastructure sector could lead to severe cascading impacts and force other critical sectors to operate in a degraded state for an extended period of time. The report reflects the NIAC’s view that, while the roles and responsibilities for emergency authorities are understood generally, the actual implementation of roles and responsibilities in response to a catastrophic power outage (e.g., cyber and physical attacks and larger-scale disasters) is still very much unclear. In this regard, the report stresses the importance of strong federal leadership in responding to and recovering from large-scale emergencies.

In a narrow 50-49 vote, the US Senate on December 6 confirmed Bernard L. McNamee, the current head of the US Department of Energy’s Office of Policy, to join the Federal Energy Regulatory Commission. Mr. McNamee, the third Republican on the five-member Commission, was nominated by President Donald Trump in October to fill the vacant seat formerly occupied by former Commissioner Robert Powelson, who stepped down earlier this year. Once Mr. McNamee is sworn in, the Commission will return to full strength, with two Democratic and three Republican appointees.