On January 1, 2023, newly constructed standalone energy storage facilities became eligible for an investment tax credit (ITC) under Section 48 of the Internal Code of 1986, as amended (Code), pursuant to provisions of the recently enacted Inflation Reduction Act (IRA). Storage facilities placed in service before 2023 generally were only eligible for an ITC when constructed as part of a combined renewable generation (typically solar) plus storage facility and the storage system was charged by the paired renewable generation system at least for the 5-year initial operating period. Storage developers and owners will now be able to take advantage of new and significant tax credit opportunities, whether or not the storage system is paired with a renewable generation energy facility.
FERC, CFTC, and State Energy Law Developments
The Commodity Futures Trading Commission (CFTC or the Commission) released its enforcement results for fiscal year 2022 on October 20, 2022. The enforcement results detail the 82 enforcement actions the CFTC filed in 2022 and show that orders secured by the Commission imposed more than $2.5 billion in restitution, disgorgement, and civil monetary penalties, either through settlement or litigation.
Not Just Boilerplate
Authored by litigators from our energy team, the Not Just Boilerplate series on Power & Pipes provides real-world examples of the impact that certain contract clauses can have on energy companies. Whether in repeat form agreements, employment agreements, or heavily negotiated one-off deals or mergers, there can sometimes be a tendency to just “grab” clauses from prior agreements, with the thinking that “it has always worked before . . .”
On March 24, FERC granted a public utility’s petition for declaratory order regarding the treatment of a master license agreement for communications equipment under the public utility’s previously approved revenue sharing mechanism (Revenue Sharing Mechanism).
On March 18, FERC issued a highly anticipated order denying the petition for declaratory order filed by several electric public utilities addressing the extent to which equity ownership of multiple utility holding companies by certain institutional investors creates affiliation between those holding companies. The institutional investors in question hold specific blanket authorizations to acquire up to 20% of the voting equity in public utilities without seeking transaction-specific authorizations from FERC, in contrast to the existing blanket authorization available to all entities that allows acquisitions below 10% without prior authorization.
FERC issued a Notice Seeking Comments on March 18 on its proposal to collect additional data from market-based rate (MBR) Sellers whose ultimate upstream affiliate(s) own their voting securities under a Federal Power Act Section 203(a)(2) blanket authorization. FERC proposes changes to the MBR Data Dictionary so that the relational database rolling out in 2021 can more accurately reflect ultimate upstream affiliates (or the lack thereof) among Sellers that have an ultimate upstream affiliate that is an institutional investor who acquired their securities pursuant to a Section 203(a)(2) blanket authorization specific to that investor.
FERC has issued an order setting aside in part its prior order on New York Independent System Operator, Inc.’s (NYISO’s) buyer-side market power mitigation rules by reversing its decision not to exempt payments received under the Commercial System Distribution Load Relief Programs (CSRPs) submitted for consideration from the calculation of Special Case Resource (SCR) offer floors.
The Federal Energy Regulatory Commission (FERC) announced on February 22 that its Office of Enforcement would examine wholesale natural gas and electricity market activity during last week’s extreme cold weather “to determine if any market participants engaged in market manipulation or other violations.” FERC’s brief press release explained that its examination is part of its existing surveillance program for market participant behaviors in the wholesale natural gas and electric markets.
FERC has issued an order revising its prior order on PJM’s Minimum Offer Price Rule (MOPR) by vacating a footnote that suggested the New Jersey Basic Generation Service default service auction—and by extension other state default service auctions shaped by state resource policy—were not “fuel neutral” or “nondiscriminatory” as required by Commission precedent. As a result of this clarification, resources selected through the New Jersey default service auction will not be presumed to be subject to the MOPR and may be eligible for the MOPR exclusion for independently evaluated, nondiscriminatory, fuel-neutral, competitive state-directed default service auctions.
The secretary of the US Department of Energy (DOE) issued an order on December 17 prohibiting electric utilities from installing equipment or components provided by Chinese companies in electric facilities serving designated “Critical Defense Facilities.” Relying on authority from Executive Order 13920 on Securing the United States Bulk-Power System, the order identified threats to the electric supply chain from China and concluded that prohibiting Chinese equipment in these sensitive facilities is necessary to respond to the Chinese government’s plans to undermine the bulk-power system.