FERC, CFTC, and State Energy Law Developments

Concurring and dissenting statements issued with the Federal Energy Regulatory Commission’s (FERC’s) February 21 order granting construction and operating authorization for a liquefied natural gas (LNG) export terminal highlight the increased scrutiny that gas construction projects are receiving concerning their potential effects on climate change. Despite misgivings from some Commissioners, FERC issued a 3-1 decision conditionally authorizing the construction and operation of the Calcasieu Pass Terminal and TransCameron Pipeline Project (Project), an LNG export terminal and an associated lateral pipeline project that will be located along the Calcasieu Ship Channel in Cameron Parish, Louisiana. The decision found that FERC Staff’s quantitative and qualitative assessments of greenhouse gas (GHG) emissions impacting the climate on a regional and global scale were sufficient.[1] However, even if FERC would like to use the decision as a blueprint to greenlight similarly stalled or pending terminal construction and expansion projects, it is unclear whether appellate courts might have the appetite to agree in analogous cases.

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.

On February 19 and 21, the Federal Energy Regulatory Commission (FERC) issued several more determinations concerning whether jurisdictional natural gas service providers’ cost-of-service rates are just and reasonable given the recent reduction to the federal corporate income tax rate under the Tax Cuts and Jobs Act (TCJA). The recently released determinations ended approximately 21 separate “one-time report” proceedings without further action[1] and initiated a Natural Gas Act Section 5 rate investigation into Southwest Gas Storage Company’s rates (RP19-257).[2] FERC required the entities to file FERC Form No. 501-G, referred to as a “one-time report,” in light of the reduction from 35% to 21% of the federal corporate income tax rate. Morgan Lewis has developed several publications describing the “one-time report” proceedings, the most recent of which included a status update on the more than 100 proceedings that were initiated based on those submissions.

As discussed in our January 18 LawFlash, the Federal Energy Regulatory Commission is continuing to investigate whether jurisdictional natural gas pipelines’ current cost-of-service rates are appropriate in light of reductions to the federal corporate income tax rate under the Tax Cuts and Jobs Act.

That publication also included a table providing the status of numerous pipeline rate proceedings associated with the “One-time Report” the Commission requires pipelines to file in order to facilitate its investigations. Please feel free to reach out to the authors with any questions.

The US Energy Information Administration (EIA) updated its website on January 7 to report that, once all its data is finalized, natural gas prices, production, consumption, and exports will reflect record increases in 2018. According to the preliminary release, the average annual Henry Hub natural gas spot price in 2018 went up 15 cents from the 2017 average. Simultaneously, consumption, production, and exports all saw a rise in 2018.

The passing of Federal Energy Regulatory Commission (FERC) Commissioner and former Chair Kevin McIntyre on January 2 is noted with regret, and with sympathy for his family, colleagues, and friends.

The US Government Accountability Office (GAO) issued a report on December 18, 2018, identifying significant weaknesses in the Department of Homeland Security’s (DHS) Transportation Security Administration’s (TSA) Pipeline Security Program management and recommending improvements to address those weaknesses. The report was driven by a recognition that “pipelines increasingly rely on sophisticated networked computerized systems and electronic data, which are vulnerable to cyber attack or intrusion,” and that “new threats to the nation’s pipeline systems have evolved to include sabotage by environmental activists and cyber attack or intrusion by nations.”

The New York State Public Service Commission (PSC) has issued an order establishing a statewide goal of 3.0 GW of energy storage deployments by 2030—with an interim target of 1.5 GW by 2025—and related reforms to encourage that development.

The order is the latest step in a broader plan being implemented by state authorities to dramatically boost the presence of energy storage in New York. In November 2017, the state legislature enacted a law directing the PSC to establish a statewide energy storage goal for 2030. In January 2018, Governor Andrew M. Cuomo announced a target of 1.5 GW of deployed energy storage by 2025. In mid-2018, PSC staff and the New York State Energy Research Development Authority (NYSERDA) jointly developed the New York State Energy Storage Roadmap (Roadmap) to provide the PSC with recommendations on the policies, regulations, and initiatives needed to meet those targets.

A new report by the National Infrastructure Advisory Council (NIAC) concludes that the nation is not prepared to adequately respond to a catastrophic power outage. The NIAC is a special advisory council composed of representatives from private industry, state and local government, and academia that is tasked with providing the president with advice on issues facing the nation’s 16 federally designated critical infrastructure sectors. The NIAC issued the report after it was tasked with examining the nation’s ability to respond to and recover from a “catastrophic power outage of a magnitude beyond modern experience, exceeding prior events in severity, scale, duration, and consequence.” The NIAC generally considers these to be limited- or no-notice events with a long duration (i.e., lasting weeks or months due to damage) impacting a broad geographic area (e.g., multiple states and affecting tens of millions of people) that could be further complicated by a cyber or physical attack.

Central to the NIAC’s report is examining the extent to which a catastrophic power outage that causes a failure in one critical infrastructure sector could lead to severe cascading impacts and force other critical sectors to operate in a degraded state for an extended period of time. The report reflects the NIAC’s view that, while the roles and responsibilities for emergency authorities are understood generally, the actual implementation of roles and responsibilities in response to a catastrophic power outage (e.g., cyber and physical attacks and larger-scale disasters) is still very much unclear. In this regard, the report stresses the importance of strong federal leadership in responding to and recovering from large-scale emergencies.