FERC, CFTC, and State Energy Law Developments

At its June 18 open meeting, FERC issued a notice of inquiry seeking public input on cybersecurity-related enhancements to the Critical Infrastructure Protection (CIP) reliability standards. In light of the constantly evolving nature of cybersecurity threats to the bulk power system, FERC is interested in determining whether the current CIP standards adequately address specific cyberrisk areas related to data security and cybersecurity incident detection, containment, and mitigation. In addition, FERC is seeking comment on the potential risk of a coordinated cyberattack on geographically distributed targets.

Our environmental and energy regulatory teams recently analyzed the US Supreme Court’s recent ruling that the US Forest Service is authorized to issue permits for pipelines going through public lands, even when those pipelines cross national trails. While the decision is a positive development for natural gas pipeline sponsors, recent rulings by courts and federal agencies suggest that there may be additional permitting considerations impacting natural gas pipeline project development.

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Following the declaration of a global pandemic due to the widespread transmission of the coronavirus (COVID-19), the issuance of shutdown and/or stay-at-home directives cascaded from commercial enterprises and state and local governments across the United States. During this period of extreme disruption to daily routine, the continuity and integrity of energy operations were necessary to ensure that the massive shift to home-based life could exist with minimal business disruption. Front- and back-office personnel engaged in trading energy commodities quickly transitioned to a work-from-home (WFH) posture, ensuring that their firms could preserve market access for production or output while also consummating the transactions needed to procure an adequate fuel source, managing price exposure to highly volatile commodity prices, or executing preexisting trading strategies.

The New Jersey Board of Public Utilities (BPU) has issued a straw proposal for electric vehicle (EV) infrastructure build out, to advance the statutory targets for the installation of EV chargers under a law signed earlier this year.

Gov. Phil Murphy signed S. 2252 into law in January 2020 to advance EV growth in the state by offering incentives for EV purchases and setting goals for the development of EV chargers throughout the state.[1]

The BPU’s proposal, issued on May 18, was developed after reviewing best practices from across the country, including California and New York, and addresses the following key policy issues associated with EV charging.

The IRS proposed a draft rule on May 28 covering the qualification for carbon capture and sequestration tax credits under Section 45Q of the Internal Revenue Code. The proposed regulations could provide financial benefits to energy projects that will enhance the spread of that technology and the reduced carbon release that it promises.

The Federal Energy Regulatory Commission (FERC) issued Order 569‑A on May 21, significantly revising the methodology used to analyze the base return on equity (ROE) of a public utility’s rates under the Federal Power Act. Because the order remains subject to further legal challenge and FERC had last revised its guidance on acceptable methodologies six months earlier in Order 569, uncertainty in acceptable methodologies may continue for some time.

FERC issued a proposal on May 21 to modify its policy regarding requests for waiver of public utility tariff provisions that are subject to FERC’s review and approval under the Federal Power Act and the Natural Gas Act.

In light of federal court opinions that have discussed FERC’s authority to change a filed rate, the Commission acknowledged that past orders approving tariff waivers have “drifted beyond the limits imposed by the filed rate doctrine” and the related rule against retroactive ratemaking.

The Federal Energy Regulatory Commission (FERC) issued a notice on May 20 that it will convene a Commissioner-led technical conference to consider the ongoing, serious impacts that the emergency conditions caused by the coronavirus (COVID-19) pandemic are having on the energy industry. The conference will be free, open to the public, and held remotely on Wednesday and Thursday, July 8-9, 2020. Attendees may preregister online here.

In mid-March the Commission began issuing guidance to address the immediate needs of FERC-jurisdictional entities, including various waivers and extensions necessary to assist energy companies with managing their regulatory responsibilities while dealing with the pandemic. The conference will be more forward-looking, and is expected to focus on the potential longer-term impacts from the pandemic on energy companies, energy markets, energy system reliability, and consumer protection.

The US Department of the Treasury issued a letter on May 7 stating that it plans to modify the continuity safe harbor for both the production tax credit (PTC) and the energy investment tax credit (ITC). Under the current law, taxpayers seeking to claim a PTC for electricity produced from qualifying facilities or an ITC for qualifying energy property must generally begin construction on the qualifying facility or property by specified dates.

To be considered to have begun construction, the taxpayer must start physical work of a significant nature, or must satisfy the safe harbor requirements by incurring 5% or more of the total cost of the facility or property. The taxpayer must then demonstrate continuous efforts to complete construction, and must place the facility or property in service within four years to meet the requirements for a continuity safe harbor.

In response to President Donald Trump’s declaration of a national emergency due to the coronavirus (COVID-19) pandemic, the Pipeline Hazardous Materials Safety Administration (PHMSA) issued a notice that it does not intend to take enforcement action related to certain new gas pipeline safety regulations with which gas pipeline operators must comply by July 1, 2020.

PHMSA stated that it will resume its normal enforcement processes and sanctions after December 31, 2020, but retains the discretion to enforce the July 1, 2020 compliance deadlines in the event of a significant safety issue or if otherwise warranted. Similar to PHMSA’s prior notice of enforcement discretion (which we discussed in our March 27 posting), this notice recognizes that gas pipeline operators may be facing personnel resource constraints due to the COVID-19 pandemic.