FERC, CFTC, and State Energy Law Developments

In a narrow 50-49 vote, the US Senate on December 6 confirmed Bernard L. McNamee, the current head of the US Department of Energy’s Office of Policy, to join the Federal Energy Regulatory Commission. Mr. McNamee, the third Republican on the five-member Commission, was nominated by President Donald Trump in October to fill the vacant seat formerly occupied by former Commissioner Robert Powelson, who stepped down earlier this year. Once Mr. McNamee is sworn in, the Commission will return to full strength, with two Democratic and three Republican appointees.

The Senate Energy and Natural Resources Committee on November 15 favorably advanced the nominations of Dr. Rita Baranwal (Assistant Secretary of Energy (Nuclear Energy)) and Bernard McNamee (Member, Federal Energy Regulatory Commission) to the full US Senate.

The US Court of Appeals for the Second Circuit on September 27 affirmed a decision of the US District Court for the Southern District of New York dismissing a complaint seeking to invalidate New York’s Zero Emissions Credit (ZEC) program. This decision comes on the heels of a Seventh Circuit decision affirming the validity of a similar ZEC program in Illinois. In its opinion, the Second Circuit noted that its conclusions accorded with the Seventh Circuit’s decision, which we wrote about in an earlier post. Read more.

The US Court of Appeals for the Seventh Circuit on September 13 affirmed a decision of the US District Court for the Northern District of Illinois that dismissed two complaints seeking to invalidate the Illinois Zero Emission Credits (ZEC) program.

Read more about the decision on Up & Atom.

The US Court of Appeals for the Eleventh Circuit on July 11 affirmed the dismissal of a putative class action complaint seeking disgorgement and other relief from two Florida utilities (Utilities). The complaint also sought to invalidate provisions of a Florida statute relating to rate recovery for nuclear power projects on constitutional dormant Commerce Clause and preemption grounds.

The statute at issue in the proceeding—the Florida Renewable Energy Technologies and Energy Efficiency Act (Florida Act)—authorized the state regulatory body to incentivize investment in nuclear power plant construction. Acting on that authority in 2007, the Florida Public Service Commission promulgated the Nuclear Cost Recovery System (NCRS), a program that allows utilities to preemptively recover costs related to the construction of new nuclear power plant projects. The plaintiffs had sued the Utilities, arguing that the provisions authorizing the NCRS are invalid under the dormant Commerce Clause, which limits states from regulating interstate commerce, and preempted by federal statute. Plaintiffs argued that the Atomic Energy Act expressly reserves the authority to regulate nuclear power plant construction with the federal government, and that the provisions of the Florida Act that led to the creation of the NCRS were therefore preempted by federal law. The lower court dismissed these claims, and also denied plaintiffs’ motion to amend the complaint to join the State of Florida as a defendant.

President Donald Trump signed an executive order on July 10 to except the position of Administrative Law Judge (ALJ) from the federal government’s competitive service. This removes ALJs from the traditional “merit” selection process used for most federal government employees.

ALJs had been appointed through a competitive examination and competitive service selection process. However, pointing to the “expanding responsibility” that ALJs have for federal agency adjudications, and expanding on the US Supreme Court’s recent decision in Lucia v. Securities and Exchange Commission, the president concluded that all ALJs should be considered “Officers of the United States” subject to the Appointments Clause of the US Constitution and therefore be appointed by and serve at the discretion of the president or the head of the relevant agency. In Lucia, the Court had held that Securities and Exchange Commission ALJs are “Officers of the United States,” and are thus subject to the Appointments Clause.

The Commissioners of the Federal Energy Regulatory Commission (FERC or the Commission) testified on June 12 at an oversight hearing before the Senate Committee on Energy and Natural Resources. They addressed FERC-jurisdictional issues, including grid modernization, resiliency, security, and enforcement, and President Donald Trump’s recent directive to US Department of Energy (DOE) Secretary Rick Perry to prepare immediate steps to stop the loss and retirement of nuclear and coal generation facilities. The Commissioners’ testimony provides an insight into the issues that FERC may prioritize in the near future.

The White House announced late last week that President Donald Trump has directed Energy Secretary Rick Perry to “prepare immediate steps to stop the loss” of “fuel-secure power facilities,” noting that near-term retirements of these facilities could lead to “a rapid depletion of a critical part of our nation’s energy mix, and impact the resilience of our power grid.” Although the federal government has not yet disclosed what those steps might be or which generators are at issue, press reports from CNN and Bloomberg, among others, have emerged suggesting that the US Department of Energy (DOE) is considering a directive that would require Independent System Operators and Regional Transmission Operators (ISOs/RTOs) to purchase energy from designated “fuel-secure” plants for a period of up to, and possibly more than, 24 months to avoid any near-term decommissioning.

The US Department of Justice (DOJ) and the Federal Energy Regulatory Commission (FERC) filed a joint brief on May 29 in the US Court of Appeals for the Seventh Circuit, stating that Illinois’ zero emission credit (ZEC) program for eligible nuclear plants in Illinois is not preempted by the Federal Power Act (FPA). Because the panel in a substantially similar case pending in the Second Circuit has indicated that it would review the government’s filing in the Seventh Circuit case, the views of FERC and DOJ could be critical as this issue plays out in the federal court system.

The Illinois legislature passed a law in 2016 requiring utilities to purchase ZECs at administratively set prices from nuclear plants in the state. Generators that compete with the ZEC-receiving nuclear plants challenged the law, arguing that the ZEC program is preempted by the FPA. The district court upheld the program, and the generators appealed the decision to the Seventh Circuit. FERC did not take a position in the trial court but has now done so after the Seventh Circuit invited the US government to file a brief.

On the heels of the news reports describing cyberattacks on the energy sector that have continued to accumulate over the last few years, the US Department of Homeland Security (DHS) and the Federal Bureau of Investigation (FBI) issued a technical alert on March 15 describing ongoing attacks on critical infrastructure by hackers associated with the Russian government. The alert described the cyberattacks as part of a “multi-stage intrusion campaign by Russian government cyber actors” that targeted the energy sector networks, as well as computer systems used by entities in the nuclear, water, aviation, and critical manufacturing sectors. The alert is the latest in a string of reported cyberattacks on industrial control systems (ICS) in recent years, and can only serve to ratchet up the regulatory pressure on these industries to demonstrate their resilience in the face of these well-organized attacks.