FERC, CFTC, and State Energy Law Developments

On May 17, the Federal Energy Regulatory Commission (FERC or Commission) issued Order No. 1000-A, upholding its Order No. 1000 reforms to transmission planning and cost allocation.[1] In Order No. 1000-A, the Commission (1) upheld the minimum criteria that a regional and interregional transmission planning process must satisfy, and reiterated general principles for cost allocation; (2) upheld its decision to remove from Commission-approved tariffs and agreements any federal right of first refusal for transmission facilities selected in a regional or interregional transmission plan for purposes of cost allocation; and (3) did not alter or otherwise extend the deadlines for Transmission Providers to submit compliance filings implementing Order No. 1000. Accordingly, each public utility Transmission Provider must submit a regional Order No. 1000 compliance filing By October 11, 2012. Compliance filings for interregional transmission coordination and interregional cost allocation are due on April 11, 2013.

At FERC’s open meeting on April 19, 2012, FERC approved several orders addressing core aspects of Reliability Standards compliance, including cybersecurity Reliability Standards, compliance registration, and contingency planning issues. The newly approved cybsersecurity Reliability Standards significantly increase the scope of facilities subject to those requirements, the compliance registration decisions clarify the jurisdictional boundary between distribution and transmission facilities, and the planning orders represent a rejection of NERC’s approach to planning for firm load loss following a single contingency.

In an order issued on March 30,[1] the Federal Energy Regulatory Commission (FERC or Commission) issued an order requiring "postage stamp" pricing to allocate the costs of new 500 kV and above transmission projects in the PJM Regional Transmission Organization Region. PJM Interconnection, L.L.C., 138 FERC ¶ 61,230 (2012). The Commission acknowledged that other just and reasonable cost allocation methodologies may exist to allocate the costs of high-voltage transmission facilities. It concluded, however, that PJM Interconnection, L.L.C.'s (PJM's) use of a static-flow-based model is unjust and unreasonable.

On March 9, the Federal Energy Regulatory Commission (FERC or Commission) approved a Stipulation and Consent Agreement (Settlement) between FERC's Office of Enforcement (OE) and Constellation Energy Commodities Group (CCG).[1] As set forth in the Settlement, CCG has agreed to pay a civil penalty of $135 million and to disgorge profits of $110 million, plus interest, to resolve an ongoing investigation into allegations that CCG violated FERC's prohibition of electric energy market manipulation. Additionally, CCG agreed that four of its employees at issue in the investigation would not hold any position involving physical or financial energy trading at CCG or any successor company at any time in the future.

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On January 19, 2012, Morgan Lewis presented the third and final part of a webinar series on hydraulic fracturing, "Private Litigation and Hydraulic Fracturing," discussed private litigation surrounding fracking, including tort and commercial lawsuits.

On November 10, 2011, Morgan Lewis presented the second part of a webinar series on hydraulic fracturing, "Regulatory, Enforcement, and Legislative Trends in Hydraulic Fracturing," discussed past, present, and expected future congressional and federal agency efforts to investigate and regulate fracking. This included enforcement examples as well as a discussion of where enforcement may be heading.

On October 26, 2011, Morgan Lewis energy attorneys discussed Federal Communications Commission (FCC) regulation of electric and natural gas utilities.

The webinar covered the FCC’s pre-approval requirements for transactions involving companies holding wireless licenses, which are commonly utilized By utilities to support operations, as well as the FCC’s revised rules relating to utility pole attachments By telecommunications and cable service providers.

On September 27, 2011, Morgan Lewis presented the first part of a webinar series on hydraulic fracturing, "Hydraulic Fracturing—What You Need to Know," provided a brief summary of the technical process for fracking along with an overview of the many rules that serve to regulate and control aspects of fracking activity—from federal rules designed to protect drinking water, to state and local transportation rules, to local zoning regimes, to voluntary industry practices.

On August 18, 2011, Morgan Lewis partners John McGrane, Floyd L. Norton, IV, and Steve Spina discussed FERC's Final Rule on Transmission Planning and Cost Allocation in a Morgan Lewis webinar. Issued July 21, this rulemaking will have major implications for the energy industry and implementation will require filings with the Commission. The webinar reviewed the major changes required By this final rule and the steps companies will need to take to comply with it.

FERC has relied on Form 2 data to initiate proceedings under Section 5 of the Natural Gas Act (NGA) to change prospectively the transmission rates of natural gas companies. In the coming years, FERC may start taking a similar approach to electric transmission rates, relying on Form 1 data to initiate proceedings under Section 206 of the Federal Power Act (FPA) to change electric transmission rates.

Morgan Lewis Energy partners Mark R. Haskell and Stephen M. Spina, and associate Bryan L. Clark presented a one-hour webinar, which compared and contrasted FERC's authority under Section 5 of the NGA to its authority under Section 206 of the FPA and discussed the structure and framework of a FERC-initiated rate complaint.