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FERC, CFTC, and State Energy Law Developments

The US Department of Energy (DOE) has released the Hydrogen Program Plan, a strategic framework that intends to “accelerate research, development, and deployment (RD&D) of hydrogen and related technologies in the United States.” The plan communicates DOE’s plan to focus on conducting coordinated RD&D activities to enable the adoption of hydrogen across multiple domestic applications and sectors. DOE will implement those efforts through the DOE Hydrogen Program, an existing program that facilitates hydrogen research and development activities and that spans multiple DOE offices.

Read our recent LawFlash analyzing the Federal Energy Regulatory Commission’s (FERC’s) Order No. 2222, which directs wholesale electric market operators to facilitate the participation of distributed energy resource (DER) aggregators under one or more participation models. The new rule vastly expands the opportunities for DERs, such as grid-enabled water heaters, small solar installations, and electric vehicles, to aggregate and compete alongside traditional generators for a slice of wholesale market revenues. ISOs/RTOs will have 270 days from the date the rule is published in the Federal Register to submit their compliance filings and propose implementation dates for their regions.

Read the full LawFlash.

FERC has issued an order extending the blanket waivers of all requirements to hold meetings in person and/or to provide or obtain notarized documents in open-access transmission tariffs through January 29, 2021. The order continues the blanket waivers first issued on April 2, 2020, in response to requests from regulated entities, which were set to expire on September 1, 2020. FERC cites the coronavirus (COVID-19) national emergency proclamation issued by President Trump on March 13, 2020; the continued risk to health and safety currently presented by personal contact; and guidance from public health officials on social distancing as good cause for the waivers.

FERC has issued a final rule, Order No. 872, revising the Commission’s regulations governing qualifying small power producers and co-generators (collectively, qualifying facilities or QFs) under the Public Utility Regulatory Policies Act of 1978 (PURPA). The Commission stated that the rule addresses significant changes that have occurred in the US energy markets and the Commission’s desire to modernize its PURPA regulations to protect consumers and preserve competition while meeting the Commission’s statutory obligations. The revisions will have significant implications for all utilities required to purchase the output of QFs, as well as generators that rely on PURPA rates and obligations. The final rule takes effect 120 days after publication in the Federal Register.

FERC recently dismissed the New England Ratepayers Association’s petition for declaratory order requesting FERC to exert jurisdiction over certain net-metering transactions. The decision leaves some key legal and jurisdictional questions about net metering unanswered. For now, FERC’s existing view that net-metering transactions are subject to state commissions’ retail sales jurisdiction, unless a customer sells more power back to the utility than it consumes in the applicable retail billing period (usually one month), remains intact.

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On July 10, the US Court of Appeals for the DC Circuit found that the Federal Energy Regulatory Commission was well within its rights to prevent states from prohibiting energy storage resources from participating in wholesale (i.e., sales for resale) energy markets. The court’s order is the latest judicial affirmation of FERC’s authority to regulate activities on wide portions of the electric grid, including facilities reserved to state regulators, if those activities affect wholesale rates.

Background

The case arose following challenges to FERC’s Order No. 841 (and its order on rehearing), a 2018 rulemaking requiring grid operators (i.e., regional transmission organizations (RTOs) and independent system operators (ISOs)) to implement rules to facilitate the participation of electric storage resources in wholesale capacity, energy, and ancillary service markets.

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 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.

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 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.