FERC, CFTC, and State Energy Law Developments

On March 17, 2011, the Federal Energy Regulatory Commission (Commission) issued an order affirming a notice of penalty filed By the North American Electric Reliability Corporation (NERC) regarding an alleged violation of Reliability Standard FAC-003-1 Requirement R2 (Annual Plan for Vegetation Management) By the Turlock Irrigation District (Turlock). Turlock’s alleged violation of FAC-003-1 Requirement R2 resulted in the loss of firm load due to tree contact with a 230 kV transmission line, combined with a human error related to a communication switch. The Commission affirmed the $80,000 penalty agreed upon By Turlock and the Western Electricity Coordinating Council (WECC), and provided guidance on how future penalties should be assessed for reliability violations that incur a loss of load.

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A combination of energy and environmental public policy initiatives has driven the rapid growth of variable energy resources (VERs) in the United States in recent years. The variability of VER generation output, however, makes it difficult to operate and plan bulk-power systems in real time, as well as in near-term and long-term operating and planning horizons. FERC and the industry have struggled to overcome these problems as more VERs have reached commercial operation.

On November 18, 2010, in Docket No. RM10-11-000, FERC promulgated a Notice of Proposed Rulemaking (NOPR) meant to facilitate the integration of VERs into the bulk-power systems in light of, among other issues, the above complications.

Our webinar discussed:

  • FERC's proposed revisions to the pro forma Open Access Transmission Tariff and Large Generator Interconnection Agreement to facilitate the integration of VERs into bulk-power systems
  • Subject areas for which FERC has sought industry comment and feedback in the NOPR
  • Potential business and regulatory implications of the VER NOPR

Comments on the NOPR must be filed with FERC By March 2, 2011.

A recording of the webcast and associated materials are available:

On February 17, the Federal Energy Regulatory Commission (FERC or the Commission) issued a Notice of Proposed Rulemaking to ensure just and reasonable compensation for the procurement of frequency regulation service in the Regional Transmission Organization (RTO) and Independent System Operator (ISO) organized wholesale electric markets. The Commission preliminarily found that, within the RTO and ISO markets, frequency regulation service for faster-ramping resources have been compensated at the same rate as frequency regulation service for slower-ramping resources, and as such, the current compensation practices for these services may result in unjust, unreasonable, and unduly discriminatory service compensation.

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On February 17, in Docket No. RM11-9-000, the Federal Energy Regulatory Commission (FERC) issued a Notice of Inquiry (NOI) seeking information on locational exchanges of electric power and comments on whether and under what circumstances such exchanges should be permitted. The NOI arose out of a petition for declaratory order filed in Docket No. EL10-71-000, in which Puget Sound Energy, Inc. (PSE) sought a finding that locational exchanges do not have to be conducted under an Open Access Transmission Tariff (OATT). With respect to PSE’s petition, FERC also issued an order on February 17 deferring action on the petition pending the outcome of the NOI.

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A combination of energy and environmental public policy initiatives has driven the rapid growth of variable energy resources (VERs) in the United States in recent years. The variability of VER generation output, however, makes it difficult to operate and plan bulk-power systems in real time, as well as in near-term and long-term operating and planning horizons. FERC and the industry have struggled to overcome these problems as more VERs have reached commercial operation.

On November 18, 2010, in Docket No. RM10-11-000, FERC promulgated a Notice of Proposed Rulemaking (NOPR) meant to facilitate the integration of VERs into the bulk-power systems in light of, among other issues, the above complications.

Our webinar discussed:

  • FERC’s proposed revisions to the pro forma Open Access Transmission Tariff and Large Generator Interconnection Agreement to facilitate the integration of VERs into bulk-power systems
  • Subject areas for which FERC has sought industry comment and feedback in the NOPR
  • Potential business and regulatory implications of the VER NOPR

Comments on the NOPR must be filed with FERC By March 2, 2011.

Associated materials are available

In an Order on Complaint issued November 18, the Federal Energy Regulatory Commission (Commission) made it clear that all long-term firm point-to-point transmission service must be provided pursuant to a transaction-specific service agreement. Such transmission service cannot be provided pursuant to an "umbrella" service agreement. The Commission's reiteration of its policy requiring transaction-specific service agreements reaffirms a longstanding requirement originally established in Order No. 888.

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The Federal Energy Regulatory Commission (FERC or Commission), in an order released on November 18, has directed changes to the definition of the term "Bulk Electric System," a definition that determines which facilities are subject to mandatory Reliability Standards. According to the order, the North American Electric Reliability Corporation (NERC) may either adopt the Commission's preferred approach and define all facilities operated at or above 100 kV as part of the Bulk Electric System, or develop its own recommendation to address the Commission's concerns with the present definition that would be "as effective, or more effective than, the Commission's proposed approach." The imposition of a 100 kV bright-line threshold within the Northeast Power Coordinating Council, Inc. (NPCC) Region and the Western Electricity Coordinating Council (WECC) Region will result in capturing a significant number of facilities that have previously been considered non-Bulk Electric System facilities.

On November 18, the Federal Energy Regulatory Commission (FERC) issued orders clarifying aspects of its policy on Return on Equity (ROE) determinations for electric transmission projects. FERC clarified its policy through orders on rehearing requests in four separate proceedings that concerned up-front rate incentives for new transmission facilities: Potomac-Appalachian Transmission Highline, L.L.C., 133 FERC ¶ 61,152 (2010); Atlantic Path 15, LLC, 133 FERC ¶ 61,153 (2010); Startrans IO, L.L.C., 133 FERC ¶ 61,154 (2010); and Nevada Hydro Co., Inc., 133 FERC ¶ 61,155 (2010).

In the rehearing requests, the parties had contested recent orders in which FERC appeared to mandate that the proxy group used in the development of an applicant's ROE must be composed of companies in geographic proximity to the applicant. Read more…

In a Notice of Proposed Rulemaking (NOPR) issued on November 18 in Docket No. RM10-11-000, the Federal Energy Regulatory Commission (FERC) proposes several reforms to the pro forma Open Access Transmission Tariff (OATT) that are intended to remove barriers to the integration of variable energy resources (VERs) into the transmission grid.Comments on the VER NOPR will be due 60 days after its publication in the Federal Register.

Through the NOPR, FERC responds to comments filed on its Notice of Inquiry on the Integration of VERs (NOI), where FERC sought comment on the state of VER integration in various regions of the country. Based on the comments it received concerning the NOI, FERC preliminarily finds in the NOPR that the practice of hourly scheduling, a lack of VER power production forecasting, and the lack of a clear mechanism to recover the cost of providing generator regulation service may be contributing to undue discrimination and unjust and unreasonable rates in light of the entry and increasing presence of VERs on the transmission grid. Read more…

On November 17th, Morgan Lewis and Ernst & Young presented a joint webcast on structuring your company’s compliance program to avoid repetitive reliability violations.

Topics included:

  • How to avoid repeat violations of NERC and Regional Entity Standards
  • Ways to properly structure your compliance program
  • Strategic, tactical, and operational approaches
  • How to develop appropriate monitoring tools

A recording of the webcast and associated materials are available: