Concurring and dissenting statements issued with the Federal Energy Regulatory Commission’s (FERC’s) February 21 order granting construction and operating authorization for a liquefied natural gas (LNG) export terminal highlight the increased scrutiny that gas construction projects are receiving concerning their potential effects on climate change. Despite misgivings from some Commissioners, FERC issued a 3-1 decision conditionally authorizing the construction and operation of the Calcasieu Pass Terminal and TransCameron Pipeline Project (Project), an LNG export terminal and an associated lateral pipeline project that will be located along the Calcasieu Ship Channel in Cameron Parish, Louisiana. The decision found that FERC Staff’s quantitative and qualitative assessments of greenhouse gas (GHG) emissions impacting the climate on a regional and global scale were sufficient. However, even if FERC would like to use the decision as a blueprint to greenlight similarly stalled or pending terminal construction and expansion projects, it is unclear whether appellate courts might have the appetite to agree in analogous cases.
On February 21, FERC issued an order on rehearing and clarification of Order No. 845, which was issued in April 2018, and reformed certain parts of the large generator interconnection rules. As we previously reported, the reforms of Order No. 845 were intended to improve the efficiency of processing interconnection requests, maintain reliability, balance the needs of interconnection customers and transmission owners, and remove barriers to resource development. In Order No. 845-A, FERC generally affirmed Order No. 845 and denied most of the rehearing requests, but did grant clarification and rehearing in limited respects. The revisions and clarifications in Order No. 845-A largely preserve the reforms and explain how certain reforms should be implemented. Order No. 845-A will become effective 75 days after publication in the Federal Register. Transmission providers are required to submit compliance filings by May 22, 2019.
Effective April 1, energy storage resources will have more options to participate in ISO New England’s (ISO-NE’s) markets, subject to new rules accommodating storage resources that were approved by the Federal Energy Regulatory Commission (FERC) on February 25. The new market rules reflect a first of their kind in ISO-NE, and are a product of ISO-NE’s work to build on existing rules initially designed for pumped storage hydroelectric resources.
Sales of electric vehicles (EVs) continued to increase at the end of 2018, drawing renewed focus at state legislatures and local governments on the availability of public EV charging facilities and whether existing infrastructure can meet consumer demand.
The infrastructure for EV charging in the United States is typically classified by charging rate, with charging rates ranging from less than 20 minutes to 20 hours or more. EV charging infrastructure generally falls within one of three categories: (i) alternating current (AC) Level 1 charging, which uses standard residential 120V AC plugs and can provide about two to five miles of range for every one hour of charging; (ii) AC Level 2 charging, which relies on higher voltages (240V) commonly used at residential or commercial locations and can provide 10–20 miles of range for every one hour of charging; and (iii) direct current (DC) charging, which enables rapid charging at high-traffic commercial locations and can provide 60–80 miles of range for every 20 minutes of charging. The US Department of Energy estimates that there are approximately 21,000 public charging stations in the country, the vast majority of which are Level 2 chargers.
In a decision with significant implication for international organizations as well as project opponents and counterparties, the US Supreme Court ruled on February 27 that, rather than an international organization’s immunities being at the zenith of those ever held by any foreign government, an international organization’s immunities can be no greater than those held by foreign governments, under US law, when those immunities are asserted.
FERC adopted a new rulemaking on February 21 that will substantially simplify requirements applicable to persons holding “interlocking” director and/or officer positions involving more than one public utility, or a public utility and an electric equipment supplier.
Under the Federal Power Act, a person may not hold a director or officer position with one public utility and simultaneously hold another “interlocking” director or officer position with (1) any other public utility; or (2) certain suppliers of electrical equipment, without first receiving FERC authorization. Pre-incumbency applications to FERC are required for interlocks, except in cases in which only certain positions with affiliated public utilities are held, and in those cases pre-appointment affidavit filings and disclosures must be publicly submitted to FERC as “informational reports.” In general, even affiliated utility appointments must also be annually reported to FERC; FERC’s interlock requirements include both initial application (or informational reports) and annual disclosure filings. If an incumbent position-holder is to be appointed to a new entity within a group of affiliated public utilities, then new affidavit filings and “informational reports” will typically be required.
An amendment to FERC’s M&A statute, Section 203 of the Federal Power Act (FPA), was signed into law on September 28, 2018. (See our prior blog post.) Public Law 115-247 (PL 115-347 or the Amendment) makes a minor but helpful change to one provision of FPA Section 203 by immunizing one particular class of transactions from pre-consummation FERC M&A application and approval requirements.
On February 21, 2019, FERC adopted the rulemaking that the Amendment directs:
- Mergers or consolidations of public utility facilities that are valued at under $1 million may be undertaken without the parties first obtaining FPA Section 203 authorization from FERC
- Likewise, mergers or consolidations of public utility facilities that are valued above $1 million but not above $10 million may be undertaken without the parties first obtaining FPA Section 203 authorization from FERC, but are subject to a reporting requirement
- The reporting requirement applicable to those merger transactions falling within the $1 million to $10 million range directs that the form of notice to the Commission be submitted within 30 days following the facility merger or consolidation, and include the following information:
- The exact name of the public utility and its principal business address
- A narrative description of the transaction, including
- the identity of all parties involved in the transaction, whether such parties are affiliates, and all jurisdictional facilities associated with or affected by the transaction;
- the location of such jurisdictional facilities involved in the transaction;
- the date on which the transaction was consummated;
- the consideration for the transaction; and
- the effect of the transaction on the ownership and control of such jurisdictional facilities.
- Mergers or consolidations of public utility facilities that are valued above $10 million will continue to require formal, pre-consummation FPA Section 203 applications and orders, unless some other exemption or blanket authorization applies in a particular case
- The new rulemaking will become effective 30 days after its publication in the Federal Register, or likely in late March 2019.
The new rulemaking will simplify certain asset transfers but does not in any way change or relax Commission Section 203 requirements relating to changes in the voting ownership interests of a public utility, and to direct and indirect “dispositions” of control. Those requirements were not affected by the Amendment.
The New Jersey Board of Public Utilities (BPU) recently released its first annual report on the development of offshore wind in New Jersey (the Report). The Report comes one year after Governor Phil Murphy released Executive Order No. 8, which directed the BPU and other agencies to implement the Offshore Wind Economic Development Act (OWEDA).
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 and initiated a Natural Gas Act Section 5 rate investigation into Southwest Gas Storage Company’s rates (RP19-257). 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.