FERC, CFTC, and State Energy Law Developments

The supply chain risks facing electric utilities have long been a concern for industry stakeholders and regulators alike. Reflecting those concerns, NERC submitted a report on May 28 to FERC recommending the expansion of requirements addressing supply chain cybersecurity risks for electric utilities, concluding that the scope of those requirements needed to expand to match the scope of the cybersecurity risk. The development of such revised standards will itself be a lengthy process and subject to additional FERC review.

FERC Staff issued a report on March 29 on Commission-led critical infrastructure protection (CIP) reliability audits completed for fiscal years 2016 through 2018. The report provides lessons learned from those audits, as well as voluntary recommendations on cybersecurity practices to enhance the protection of electric infrastructure from cyberattacks. Even though many of these recommendations go beyond what is necessary for compliance with the mandatory CIP reliability standards, FERC is likely to view implementation of these recommendations as evidence of a strong cybersecurity culture that proactively addresses best cybersecurity practices and evolving threats. That can, in turn, have positive ramifications for utilities undergoing cybersecurity reviews by FERC, NERC, or the Regional Entities.

The North American Electric Reliability Corporation (NERC) petitioned the Federal Energy Regulatory Commission (FERC) on March 7 to approve a revised reliability standard for electric utilities aimed at enhancing existing cybersecurity incident reporting. The proposed CIP-008-6 reliability standard would expand the scope of the type of assets subject to incident reporting and the categories of incidents affecting those systems that must be reported. If FERC approves the standard as proposed, compliance will require more comprehensive internal controls for identifying, reviewing, and reporting cyber incidents affecting electric utilities.

As we reported in December 2018, to jumpstart the energy storage market as envisioned by Governor Andrew M. Cuomo, the New York Public Service Commission (NYPSC) issued an order establishing an aggressive 3 GW energy storage goal by 2030, with an interim target of 1.5 GW by 2025, and directing investor-owned electric utilities (IOUs) to engage in competitive procurements for energy storage. The IOUs will issue draft requests for proposals (RFPs) this summer following a stakeholder process that kicks off on March 29.

In response to state legislation enacted last year, the New Jersey Board of Public Utilities (BPU) is seeking comments concerning the state of and prognosis for energy storage development within the State of New Jersey. New Jersey enacted the Clean Energy Act on May 23, 2018. Among other things, the act requires the BPU, in consultation with the regional grid operator, PJM Interconnection, LLC, and other stakeholders, to conduct an energy storage analysis and submit a written report on energy storage to the governor and legislature by May 23, 2019.

The New Jersey Board of Public Utilities (BPU) recently released its first annual report on the development of offshore wind in New Jersey (the Report). The Report comes one year after Governor Phil Murphy released Executive Order No. 8, which directed the BPU and other agencies to implement the Offshore Wind Economic Development Act (OWEDA).

The New Jersey Board of Public Utilities (BPU) approved the nation’s largest single-state offshore wind solicitation in the United States on September 17, 2018, with an Order opening up an application window for the solicitation of 1,100 megawatts (MW) of offshore wind capacity. Stakeholders anticipate additional procurements in light of the BPU’s announcement that it intends to solicit an additional 2,400 MW, in two tranches of 1,200 MW, by 2022.

The first application window closed on December 28, 2018. Three applications were submitted to the BPU. Successful applicants in the current procurement will receive state subsidies in the form of Offshore Wind Renewable Energy Credits (ORECs). To be eligible for BPU approval, applicants will need to demonstrate that, among other things, their project (i) will have a positive net in-state economic and environmental benefit; (ii) will have a “reasonable ratepayer impact;” and (iii) is likely to be constructed on time and on budget.

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.”

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.