FERC has issued its final rule paving the way for incentive-based rate treatment for electric utilities that make certain voluntary cybersecurity investments. As we first noted in 2020 when describing the proposed rule, the final rule provides a new mechanism for promoting cybersecurity of the bulk-power system by rewarding utilities for proactively enhancing their cybersecurity programs beyond the mandatory requirements of the North American Electric Reliability Corporation (NERC) Critical Infrastructure Protection (CIP) reliability standards.
FERC, CFTC, and State Energy Law Developments
There are no unimportant North American Electric Reliability Corporation (NERC) reliability standards, but from time to time, NERC and the Regional Entities (Regions) place greater emphasis on certain reliability standards in response to events affecting the grid. With headline-grabbing physical attacks on power substations across the country in recent months, one of NERC’s greatest current priorities is evaluating the effectiveness of its physical security standards, most notably CIP-014.
On January 1, 2023, newly constructed standalone energy storage facilities became eligible for an investment tax credit (ITC) under Section 48 of the Internal Code of 1986, as amended (Code), pursuant to provisions of the recently enacted Inflation Reduction Act (IRA). Storage facilities placed in service before 2023 generally were only eligible for an ITC when constructed as part of a combined renewable generation (typically solar) plus storage facility and the storage system was charged by the paired renewable generation system at least for the 5-year initial operating period. Storage developers and owners will now be able to take advantage of new and significant tax credit opportunities, whether or not the storage system is paired with a renewable generation energy facility.
FERC issued three orders focused on increasing regulations for inverter-based resources (IBRs) in fulfillment of one of its primary goals to protect the reliability of the bulk-power system. FERC ensures this reliability through the North American Electric Reliability Corporation (NERC), an independent Electric Reliability Organization that develops and enforces mandatory reliability standards. The reliability standards are only mandatory for certain entities registered with NERC, but most IBRs are not required to register and therefore are not obligated to follow the reliability standards.
The Federal Energy Regulatory Commission (Commission) issued an order on September 22, 2022, informing sellers with market-based rate (MBR) authorization that have not complied with Order No. 860’s requirements to submit data describing their ownership and affiliates that their MBR authorizations will be revoked unless they come into compliance within 15 days.
FERC recently held a Staff-led technical conference to discuss whether, and if so, how, the Commission should require additional financial assurance mechanisms in the licenses and other authorizations it issues for hydroelectric projects, to ensure that licensees have the capability to carry out license requirements and, particularly, to maintain their projects in safe condition. The feedback received during the conference, as well as the comments to be filed, will likely shape the ultimate FERC rule on financial assurance requirements currently under consideration.
As an example of its renewed focus on dam safety, FERC recently issued an order assessing a $600,000 civil penalty to Ampersand Cranberry Lake Hydro LLC for a violation of Ampersand’s hydro license for the 500 kW Cranberry Lake Project No. 9658. The violation is related to Ampersand’s failure to complete known dam safety repairs over multiple years and its loss of property rights needed for the Cranberry Lake Project, located on the Oswegatchie River in St. Lawrence County, New York.
At the March open meeting, FERC issued an order extending the existing deadline for power sellers making sales above the energy price cap in the Western Electricity Coordinating Council (WECC) region. As a result of the order, sellers will have 30 days after the month in which the sales occurred to submit cost justification filings to FERC.
In an order denying a request to waive filing requirements triggered by changes in ownership of qualifying facility (QF) projects, the Federal Energy Regulatory Commission reiterated the importance of ensuring QF filings, specifically Form 556, are up to date.
The North American Electric Reliability Corporation (NERC) filed its 2022 NERC Standards Report, Status and Timetable for Addressing Regulatory Directives summarizing the progress made and plans for addressing the reliability standard-related directives issued by applicable governmental authorities. NERC reported that since March 29, 2021, the date of NERC’s last annual report, it filed petitions with the Federal Energy Regulatory Commission (FERC) addressing four reliability standards-related directives.