FERC, CFTC, and State Energy Law Developments

President Donald Trump signed an executive order on May 1 declaring that the use of bulk-power system equipment supplied by companies controlled by certain foreign nations poses an extraordinary threat to the US power grid. The order observes that the bulk-power system is a valuable target for malicious actors, and any attack on that system could pose serious risks to the economy, public health and safety, and national security.

In light of those risks, the executive order declares a national emergency with respect to the power grid and moves to ban the unrestricted import or use of bulk-power system electric equipment from foreign adversaries. Although the order calls for coordination among multiple executive branch heads, including the Director of National Intelligence and the Secretary of Homeland Security, it primarily tasks the Secretary of Energy with fulfilling the President’s directives.

Read our recent LawFlash discussing the Federal Energy Regulatory Commission’s (FERC) plan to assist regulated entities in managing enforcement- and compliance- related burdens during the ongoing coronavirus (COVID-19) pandemic, particularly FERC plan to exercise prosecutorial discretion regarding events arising during the pandemic.

Read the full LawFlash >>

Commission Chairman Neil Chatterjee held a press conference on March 19 to discuss FERC’s work during the current pandemic, provide updates regarding the coronavirus (COVID-19), and respond to questions from the media. According to today’s announcements, FERC plans to keep operating as usual but will provide extensive flexibility to the regulated industry in addressing the effects of the pandemic on FERC-jurisdictional activities.

The US Court of Appeals for the Fourth Circuit  resolved a question of first impression on February 11 on when the statute of limitations period commences for civil enforcement claims brought by the Federal Energy Regulatory Commission (FERC) under the Federal Power Act (FPA or the Act) when the alleged violator opts for adjudication in federal district court instead of an administrative proceeding. Siding with FERC, the Fourth Circuit held in FERC v. Powhatan Energy Fund that when an alleged violator decides to pursue adjudication in court, FERC’s claim accrues, and thus the statute of limitations commences, when the alleged violator fails to pay within 60 days the amount set forth in FERC’s Penalty Assessment Order. The decision means that when an alleged violator opts for the district court, FERC can enforce civil penalties for an FPA violation up to 10 years after the date of alleged unlawful conduct.

Legal Framework

The FPA creates two procedural options by which FERC can assess civil penalties. Under one option, the “Default Option,” a FERC Administrative Law Judge (ALJ) will hear the dispute. Under the second option, the “Alternate Option,” adjudication occurs in federal district court. The alleged violator may chose the path.

A declaratory order issued by the Federal Energy Regulatory Commission (the Commission) on January 30 in Docket No. RP20-41-000 grants pipeline developers greater certainty in planning and siting construction. The order was issued after a split 2-1 vote. It may also significantly reduce pipeline developers’ expenses by avoiding costly disputes with states over the possession of state-owned land. The order resulted from a petition filed by a company (Pipeline) seeking to construct an approximately 116-mile greenfield natural gas pipeline designed to provide firm natural gas transportation service from receipt points in the eastern Marcellus Shale region, in Luzerne County, Pennsylvania, to delivery points in New Jersey and Pennsylvania (the Project). The petition requested the Commission’s interpretation of the scope of the eminent domain authority in Section 7(h) of the Natural Gas Act (NGA).

A notice of proposed rulemaking (NPRM) titled, “Update to the Regulations Implementing the Procedural Provisions of the National Environmental Policy Act,” published today by the White House’s Council on Environmental Quality (CEQ), is likely to have far-reaching effects for the energy and public infrastructure sectors, and could facilitate more efficient implementation of energy production/generation projects for all major energy sources (i.e., renewable, fossil, nuclear, and hydroelectric sources) as well as transportation projects.

The proposed rule has four major elements: (1) to modernize, simplify, and accelerate the NEPA process; (2) clarify terms, application, and scope of NEPA review; (3) enhance coordination with states, tribes, and localities; and (4) reduce unnecessary burdens and delays.

It will be important for industry entities that depend on federal agency action when advancing projects and securing permits to actively participate in the proposed rulemaking, and to provide meaningful comments that will help the CEQ build a sufficient agency record to defend against any later litigation challenges to new regulations.

Read the full LawFlash.

The Federal Energy Regulatory Commission (FERC) on December 19, 2019, directed PJM Interconnection to extend its minimum offer price rule (MOPR) from new natural gas–fired electric generators to also cover any generator that receives or is entitled to receive certain types of state subsidies. The rule aims at preserving competitive capacity auctions by preventing resources that receive subsidies from submitting bids that would otherwise be uneconomical—and therefore likely to “capture” a PJM capacity award based on a below-market capacity rate—if not for state support. The order means that existing or planned resources that expected to clear capacity markets with rates made economical by state subsidies will have to identify alternate strategies to generate revenue; so too will states seeking to promote the development or prevent the retirement of preferred but noncompetitive resources.

FERC issued guidance on October 17, 2019, that may significantly aid hydroelectric developers in planning and siting potential projects. FERC issued a list, jointly developed with the secretary of the US Army, secretary of the US Department of the Interior, and secretary of the US Department of Agriculture (collectively, the Secretaries), of 230 existing nonpowered federal dams that FERC and the Secretaries agree have the greatest potential for nonfederal hydropower development. FERC also issued guidance to assist applicants for licenses or preliminary permits for closed-loop pumped storage projects at abandoned mine sites. These actions fulfill FERC’s requirements under the America’s Water Infrastructure Act of 2018 (AWAI) and are intended to encourage development of renewable energy resources by developing hydroelectric power at sites where the addition of hydroelectric capabilities would not add significant additional environmental impacts.

FERC has provided specific, detailed guidance for the first time on the use of voting trusts to eliminate ownership affiliation.

Direct and indirect owners of 10% or greater voting interests in FERC-regulated “public utilities” are typically treated by FERC as “affiliates” and as “holding companies” of their public utilities. These owners become subject to FERC regulation with respect to some mergers, acquisitions, divestitures, and changes in control, and with respect to their and their affiliates’ FERC-conferred right to sell electricity at wholesale.