FERC, CFTC, and State Energy Law Developments

On November 17, 2015, the Federal Energy Regulatory Commission (FERC) issued an order terminating its inquiry on potentially requiring jurisdictional sellers to submit quarterly reports on natural gas transactions.[1]

Three years ago, FERC issued a Notice of Inquiry and requested comments on its proposal to require quarterly reporting of every natural gas transaction within its jurisdiction under the Natural Gas Act (NGA) that entails physical delivery for the next day (or, next day gas) or for the next month (or, next month gas).[2] Section 23 of the NGA directs FERC “to facilitate price transparency in markets for the sale or transportation of physical natural gas in interstate commerce” and grants FERC the authority to require market participants to submit information on the availability and prices of natural gas sold at wholesale and in interstate commerce.

[1] Enhanced Natural Gas Market Transparency, 153 FERC ¶ 61,174 (2015).

[2] Enhanced Natural Gas Market Transparency, 141 FERC ¶ 61,124 (2012).

The reforms are aimed to address natural gas and electric scheduling concerns resulting from the increase in gas-fired generation, to provide greater flexibility to industry participants, and to better ensure reliable and efficient operation of the electric and interstate gas pipeline systems.

On April 16, the Federal Energy Regulatory Commission (the Commission) issued Order No. 809, revising its regulations relating to scheduling transportation service on interstate natural gas pipelines.[1] Order No. 809 is the latest of the Commission’s efforts over the last three years to address certain coordination issues with the scheduling practices of the wholesale natural gas and electric industries that arise from electric generators’ increased reliance on natural gas.

The Final Rule adopts portions of the Commission’s March 20, 2014 Notice of Proposed Rulemaking (NOPR) in which the Commission proposed the following three changes to the nationwide natural gas scheduling practices: (1) moving the start of the natural gas operating day from 9:00 a.m. to 4:00 a.m. central time to better align with the electric operating day, (2) moving the start of the first gas nomination cycle for day-ahead pipeline scheduling from 11:30 a.m. to 1:00 p.m. central time (Timely Nomination Cycle), and (3) modifying the intraday nomination timeline to provide additional intraday nomination cycles. Following the NOPR’s issuance, the Commission provided the electric and natural gas industries with six months to reach consensus on the NOPR proposals through the North American Energy Standards Board (NAESB).

FERC proposes to establish a framework that allows pipelines to use surcharge or tracker cost-recovery mechanisms to accelerate system improvements associated with new safety and environmental compliance regulations.

On November 20, the Federal Energy Regulatory Commission (FERC) issued a proposed policy statement setting forth guidance that, if adopted, would permit natural gas pipelines to use cost trackers or surcharges to recover certain costs that pipelines incur in connection with facility and infrastructure upgrades undertaken in response to regulatory requirements.[1] Comments will be due within 30 days of the date the notice is published in the Federal Register.

Electric generators’ increased reliance on natural gas in recent years prompted the Federal Energy Regulatory Commission (the Commission) to issue a set of three orders on March 20, 2014 addressing the interdependency of the gas and electric markets. The result of two years of industry outreach and multiple technical conferences, the orders represent a preliminary milestone in the Commission’s continued effort to improve the coordination and scheduling of natural gas pipeline capacity with electricity markets.

On February 16, 2012, FERC issued a Notice of Proposed Rulemaking proposing to amend its standards for pipeline business operations and communications[1] to incorporate By reference Version 2.0 of the business practice standards adopted By the Wholesale Gas Quadrant (WGQ) of the North American Energy Standards Board (NAESB) for natural gas pipelines.[2] FERC found that incorporating the new standards will help update and improve NAESB’s business practice standards to benefit the wholesale gas market and further the coordination between the natural gas and electric industries. Certain proposed standards addressing record retention requirements and posting information on operationally available and unsubscribed capacity will not be incorporated By reference because FERC found that they are inconsistent with existing regulations.[3]

On February 15, 2012, FERC issued a notice announcing that it is establishing a docket to solicit comments exploring the extent to which the natural gas and electricity markets are interdependent and how FERC should oversee coordination between such markets. FERC explained that the creation of Docket No. AD12-12-000 is in response to a request for comments issued By Commissioner Philip Moeller on February 3, 2012.

FERC explains in its notice that electricity generation will increasingly rely on natural gas. As a result, the interdependence of the electricity and natural gas markets warrants careful attention.

In a move that will save the industry about $400,000 each year, on January 19, 2012, FERC eliminated the semiannual storage reporting requirements for (i) interstate pipelines transacting under the Natural Gas Act and (ii) intrastate and Hinshaw pipelines that provide interstate services under section 311 of the Natural Gas Policy Act of 1978 and section 284.224 of the Commission’s regulations, respectively, finding them duplicative with other reporting requirements.[1] This elimination was the result of FERC’s continuing effort to streamline and update its regulations.

On January 6, 2012, FERC issued an order rejecting Portland Natural Gas Transmission System’s (Portland Natural) compliance filing addressing certain nonconforming service agreements.[1] In an order issued in October 2010, FERC found that the firm transportation (FT) agreement between Portland Natural and EnergyNorth Natural Gas (EnergyNorth) contained an impermissible deviation from Portland Natural’s FERC Gas Tariff.[2] Specifically, the agreement granted the shipper the option to reduce its firm Maximum Daily Quantity “in the event that Transporter enters into a . . . contract for firm transportation service with any other shipper, excluding Crown Vantage . . . that calls for delivery at the Berlin Station.”[3] FERC directed Portland Natural to either remove the provision or offer the right to reduce contract demand on a nondiscriminatory basis because such a provision could enable a shipper to avoid significant liability for future reservation charges.

On October 24, the United States Court of Appeals for the Fifth Circuit in Texas Pipeline Association v. Federal Energy Regulatory Commission held that the Federal Energy Regulatory Commission (FERC) exceeded its statutory authority in issuing Order Nos. 720 and 720-A, which required certain intrastate natural gas pipelines to post information on scheduled flow and design capacity. These posting requirements were established to (1) improve market participants' ability to assess supply and demand and to price physical natural gas transactions, (2) help market participants better understand the impact of disruptions to the natural gas delivery system on the industry and economy, and (3) allow market participants to identify potentially manipulative activity.

Read more…

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.