FERC, CFTC, and State Energy Law Developments

The US Court of Appeals for the Seventh Circuit on September 13 affirmed a decision of the US District Court for the Northern District of Illinois that dismissed two complaints seeking to invalidate the Illinois Zero Emission Credits (ZEC) program.

Read more about the decision on Up & Atom.

The Environmental Protection Agency (EPA) proposed the Affordable Clean Energy (ACE) rule on August 21. The proposed rule would replace the Obama administration’s Clean Power Plan, establishing alternative guidelines for states to develop plans to reduce carbon dioxide emissions from existing fossil fuel-fired electric power plants. The ACE rule departs from the Clean Power Plan, among other ways, by removing incentives for natural gas and renewable energy use, limiting averaging and trading in state plans, giving states more flexibility in creating plans, slowing down state plan development and submission schedules, and proposing a new industry friendly test for the New Source Review permitting process. Overall, EPA has projected that the ACE rule will result in similar carbon dioxide emissions reductions in comparison to the Clean Power Plan.

Read the full LawFlash.

Public comments made last week by Federal Energy Regulatory Commission (FERC) Chief of Staff Anthony Pugliese before the American Nuclear Society indicate that the agency is working with other federal government officials to identify power plants that are “absolutely critical” to the grid, E&E News reported. In particular, Mr. Pugliese revealed that the US Department of Energy and the National Security Council are coordinating with FERC to classify those generators that are vital to ensuring that critical infrastructure, such as hospitals and military bases, remain online and operational. The comments also reflect a related concern that many large gas-fired generators could pose reliability and resiliency risks, as the natural gas infrastructure supporting those plants could be susceptible to physical attacks or cyberattacks.

The US Court of Appeals for the Eleventh Circuit on July 11 affirmed the dismissal of a putative class action complaint seeking disgorgement and other relief from two Florida utilities (Utilities). The complaint also sought to invalidate provisions of a Florida statute relating to rate recovery for nuclear power projects on constitutional dormant Commerce Clause and preemption grounds.

The statute at issue in the proceeding—the Florida Renewable Energy Technologies and Energy Efficiency Act (Florida Act)—authorized the state regulatory body to incentivize investment in nuclear power plant construction. Acting on that authority in 2007, the Florida Public Service Commission promulgated the Nuclear Cost Recovery System (NCRS), a program that allows utilities to preemptively recover costs related to the construction of new nuclear power plant projects. The plaintiffs had sued the Utilities, arguing that the provisions authorizing the NCRS are invalid under the dormant Commerce Clause, which limits states from regulating interstate commerce, and preempted by federal statute. Plaintiffs argued that the Atomic Energy Act expressly reserves the authority to regulate nuclear power plant construction with the federal government, and that the provisions of the Florida Act that led to the creation of the NCRS were therefore preempted by federal law. The lower court dismissed these claims, and also denied plaintiffs’ motion to amend the complaint to join the State of Florida as a defendant.

Regional transmission operator PJM Interconnection, L.L.C. imposed a new requirement that generating entities experiencing direct or indirect changes in ownership or control notify PJM of such changes immediately. The new requirement is effective as of June 1 and, while it may add to the paperwork of generators in the region, it is not likely to be significantly burdensome so long as the documentation requirements are carefully tracked. Whether and how these submissions will affect PJM’s regular involvement in Federal Power Act Section 203 proceedings at FERC remains to be seen. 

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The Federal Energy Regulatory Commission (FERC) issued an order on the Minimum Offer Price Rule (MOPR) in the PJM Interconnection, L.L.C. (PJM) tariff on June 29, addressing recent controversies over the capacity market impact of some generators receiving state rate subsidies. In the June 29 order, FERC rejected two alternative proposals by PJM to modify the MOPR in response to concerns of state subsidization of new generation resources, granted a complaint filed by market participants against the MOPR, and instituted a paper hearing proceeding under Section 206 of the Federal Power Act (FPA) to determine the just and reasonable revisions to the PJM tariff that would be necessary to address the subsidization issues. The resulting FERC proceeding promises to significantly reshape the PJM capacity market, which has struggled for years to address in a manner that FERC would accept the market impacts of subsidies to specific resources. FERC’s decision, although limited to PJM, could also lead to widespread changes in other capacity markets dealing with the same issues.

Background

The MOPR is a feature of PJM’s Reliability Pricing Model (RPM), which is PJM’s capacity market. Through the RPM, PJM conducts a series of auctions to procure resources to meet regional reliability reserve requirements. A variety of resources may participate, including fossil-fuel, renewable, and demand response resources. Winners of the auction are awarded a fixed price for their capacity in exchange for a commitment to make their capacity available for dispatch by PJM.

The Commissioners of the Federal Energy Regulatory Commission (FERC or the Commission) testified on June 12 at an oversight hearing before the Senate Committee on Energy and Natural Resources. They addressed FERC-jurisdictional issues, including grid modernization, resiliency, security, and enforcement, and President Donald Trump’s recent directive to US Department of Energy (DOE) Secretary Rick Perry to prepare immediate steps to stop the loss and retirement of nuclear and coal generation facilities. The Commissioners’ testimony provides an insight into the issues that FERC may prioritize in the near future.

The Nuclear Regulatory Commission (NRC) and the Federal Energy Regulatory Commission (FERC) entered into a Memorandum of Understanding (MOU) on June 6 regarding the care and protection of critical energy/electric infrastructure information (CEII). The MOU delineates how the two agencies will cooperate to identify, process, and protect CEII that the NRC holds, explaining that the two independent agencies “mutually agree that it is important to protect CEII to ensure the safety and security of the electric grid.” Under the MOU, the NRC will be able to consult with FERC to designate certain NRC-held information as CEII—and therefore FOIA-exempt—if requested by a third-party under that open records law.

The MOU is another step in the US government’s attempt to address growing concerns about physical and cybersecurity threats to the electricity grid. Congress, recognizing these threats, directed the US Department of Energy and FERC to identify and protect CEII when it passed the “Fixing America’s Surface Transportation Act” (FAST Act) in 2015. FERC issued its CEII regulations in late 2016.

The commissioners from the Federal Energy Regulatory Commission (FERC) and the Nuclear Regulatory Commission (NRC) held a joint meeting on June 7 to discuss grid reliability and cybersecurity. FERC and NRC staff provided presentations on the recent and ongoing activities of both agencies to promote a stable, resilient, and secure grid. The presentations were largely a summary of recent agency activities and served to continue the practice of both independent regulatory agencies meeting to discuss items of common interest.

The White House announced late last week that President Donald Trump has directed Energy Secretary Rick Perry to “prepare immediate steps to stop the loss” of “fuel-secure power facilities,” noting that near-term retirements of these facilities could lead to “a rapid depletion of a critical part of our nation’s energy mix, and impact the resilience of our power grid.” Although the federal government has not yet disclosed what those steps might be or which generators are at issue, press reports from CNN and Bloomberg, among others, have emerged suggesting that the US Department of Energy (DOE) is considering a directive that would require Independent System Operators and Regional Transmission Operators (ISOs/RTOs) to purchase energy from designated “fuel-secure” plants for a period of up to, and possibly more than, 24 months to avoid any near-term decommissioning.