FERC, CFTC, and State Energy Law Developments

The May 16 Order on Rehearing affirms FERC’s jurisdictional authority, and refuses calls for state opt-outs.

The Federal Energy Regulatory Commission (FERC or Commission) issued Order No. 841 early last year, a final rule amending FERC’s regulations to facilitate participation of electric storage resources in the capacity, energy, and ancillary service markets operated by regional transmission organizations (RTOs) and independent system operators (ISOs). Several entities have since challenged key aspects of the final rule, urging the Commission on rehearing to reverse course or modify its approach on a number of issues. On May 16, the Commission issued Order No. 841-A, denying those requests for rehearing, thereby upholding the initial rulemaking while providing some additional clarification.

Electric power generation and sale customarily fall within the scope of FERC jurisdiction under the Federal Power Act, as amended, as do generator investment and ownership. Qualifying small power production facilities (Small Power QFs) of no larger than 20 MW (net AC) are usually exempt from FERC regulation of mergers, acquisitions, divestitures, power sale rates, and related regulation under the Public Utility Holding Company Act. Small Power QFs are also normally exempt from state utility commission regulation of corporate, financial, and power sales rate matters. These Small Power QF regulatory exemptions are widely viewed as helpful and appropriate by industry stakeholders ranging from generation investors to traditional franchised utilities, and residential and commercial generation users.

The Federal Energy Regulatory Commission (FERC or Commission) appears to be inching closer toward a resolution on grid operators’ proposals to facilitate electric storage participation in organized capacity, energy, and ancillary service markets. On April 1, FERC’s Office of Energy Market Regulation (Staff) directed each of the Independent System Operators (ISOs) and Regional Transmission Organizations (RTOs) that submitted compliance filings in response to FERC’s Order No. 841 to submit additional information on the mechanics of their proposed energy storage market rules. Those latest actions by Staff break FERC’s recent silence on the grid operators’ proposals, which were submitted to the Commission over four months ago and which must be implemented as early as December 2019.

Although tailored to each ISO’s and RTO’s proposal, Staff’s requests were largely centered on the same general areas and directed the ISOs and RTOs to further explain how the mechanics of their proposed storage participation models meet compliance with Order No. 841. For example, among other things, Staff sought more information on how the ISOs and RTOs will:

As we reported in December 2018, to jumpstart the energy storage market as envisioned by Governor Andrew M. Cuomo, the New York Public Service Commission (NYPSC) issued an order establishing an aggressive 3 GW energy storage goal by 2030, with an interim target of 1.5 GW by 2025, and directing investor-owned electric utilities (IOUs) to engage in competitive procurements for energy storage. The IOUs will issue draft requests for proposals (RFPs) this summer following a stakeholder process that kicks off on March 29.

A recent advisory published by the Commodity Futures Trading Commission’s Division of Enforcement and comments of the division director have highlighted the CFTC’s attention toward investigating potential violations of the Commodity Exchange Act (CEA) that involve foreign corrupt practices. On March 6, CFTC Director of Enforcement James M. McDonald addressed this very issue in remarks before the ABA National Institute on White Collar Crime. At the same time, the division issued an Enforcement Advisory providing guidance on how the CFTC will treat instances of self-reporting and cooperation concerning CEA violations that also involve foreign corrupt practices.

Read the full LawFlash.

In response to state legislation enacted last year, the New Jersey Board of Public Utilities (BPU) is seeking comments concerning the state of and prognosis for energy storage development within the State of New Jersey. New Jersey enacted the Clean Energy Act on May 23, 2018. Among other things, the act requires the BPU, in consultation with the regional grid operator, PJM Interconnection, LLC, and other stakeholders, to conduct an energy storage analysis and submit a written report on energy storage to the governor and legislature by May 23, 2019.

On February 21, FERC issued an order[1] on rehearing and clarification of Order No. 845,[2] 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.

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.[1]

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.[2] 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.”[3] 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.[4] 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[1] 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:[2]
    • 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.


[1] Implementation of Amended Section 203(a)(1)(B) of the Federal Power Act, Order No. 855, 166 FERC ¶ 61,120 (2019).

[2] 18 C.F.R. § 33.12 (2019).