On February 11, 2021, the Federal Energy Regulatory Commission (FERC) announced plans to create a senior position at the Commission to coordinate incorporation of environmental justice (EJ) concerns into the Commission’s decision-making process. FERC Chairman Richard Glick indicated that the newly created office would be a cross-cutting position and that its eventual occupant would be charged with working with experts across all FERC program offices to ensure that EJ and equity matters are integrated into Commission decisions. On May 20, Chairman Glick announced the appointment of Montina Cole to serve as Senior Counsel for Environmental Justice and Equity. The FERC press release describes Cole as a “seasoned executive and attorney” with an active consulting and legal practice, “where she works at the intersection of climate policy, racial equity and resilience.” Continue Reading FERC Fills Newly Created EJ Position
In an order dated May 20, 2021, the Federal Energy Regulatory Commission (FERC, or the Commission) terminated the hydropower licenses for three projects located on the Tittabawasee River in Michigan—the Secord (P-10809), Smallwood (P-10810) and Sanford (P-2785) dams. The termination by implied surrender follows a May 2020 breach at the Sanford dam and the breach and failure of the upstream Edenville dam, which was also operated by the same licensee before the Commission revoked the Edenville license in 2018 due to the licensee’s repeated noncompliance with FERC dam safety orders. The resultant floods caused significant damage in the communities surrounding the dams and have been estimated by the State of Michigan to have caused economic harm exceeding $190 million.
In the year that has passed since the dam breaches, the licensee failed to adequately respond or comply with numerous FERC orders to address the damage from the failures, declared bankruptcy on July 31, 2020, lost the projects through condemnation by Midland and Gladwin Counties in December 2020, and was assessed an unprecedented civil penalty of $15 million by the Commission in April 2021. The dams are now owned and operated by the Four Lakes Task Force, as agent to the counties, and are no longer operated for hydropower generation. The Task Force has consulted with both FERC and the Michigan Department of the Environment, Great Lakes, and Energy (EGLE) to begin restoring the reservoirs to a safe condition.
In its May 20, 2021 order, FERC explained that termination of a hydropower license by implied surrender is required under both Section 6 of the Federal Power Act and the license itself in cases where a licensee, by either action or inaction, has clearly indicated its intent to abandon a project and has not filed a surrender application with the Commission. FERC found implied surrender was appropriate in this case because the licensee is bankrupt and no longer has ownership of the properties, the new owner has already begun rehabilitation work at the dams, and Michigan EGLE, the agency responsible for dam safety in Michigan, supports the termination of the license.
FERC used the order terminating the license to express its “great disfavor” for the licensee’s” “deliberate abandonment of these projects following extensive harm…caused to the public.” FERC also made clear that it was willing to terminate the license by implied surrender only due to the unique situation presented, in which a local entity had already acquired the projects and was implementing plans to correct the licensee’s deficiencies and had no intent to generate hydropower, and where the state regulator had expressed support for the action.
FERC indicated that it was terminating the licenses by implied surrender “with some reluctance” and cautioned licensees that there was “no guarantee” that it would choose a similar resolution in future cases. FERC also took the opportunity, as it did in its April 2021 order assessing the $15 million civil penalty, to remind the public of its January 2021 Notice of Inquiry seeking public comment on the future imposition of financial assurance requirements on hydropower licensee, noting that the “financial viability of hydropower licensees, which can have significant impacts on the public and the environment, is a matter of great concern to us.”
On May 20, 2021, FERC issued a Show Cause Order directing GreenHat Energy, LLC (“GreenHat”) and its owners to show why they did not violate the Federal Power Act, FERC’s regulations, the PJM Interconnection, L.L.C. (“PJM”) Tariff, and the PJM Operating Agreement by manipulating PJM’s Financial Transmission Rights (“FTR”) market, generating $13 million in unjust profits and imposing $179 million in losses on PJM members. FERC also directed GreenHat and its owners to file an answer with FERC within 30 days showing why they should not be required to disgorge $13 million in unjust profits, plus interest, and to pay civil penalties totaling $229 million. FERC’s order is accompanied by a report from FERC’s Office of Enforcement (“OE Report”). Commissioner James Danly issued a separate concurring statement. Continue Reading FERC Issues Show Cause Order Directing GreenHat Energy to Respond to Market Manipulation Claims
On May 20, 2021, FERC issued two orders in which it authorized two pipeline companies to construct and abandon certain pipeline facilities, subject to conditions. In an exciting and sometimes tense Commission open-meeting, the Commission ultimately approved Northern Natural Gas Company’s (“Northern”) application to construct and operate certain pipeline compression and auxiliary facilities and abandon short segments of existing pipeline (“2021 Expansion Project”) in Minnesota.
On May 19, 2021, FERC issued an order dismissing requests for rehearing of an order directing briefing (“Briefing Order”) about the operation of Algonquin Gas Transmission, LLC’s Atlantic Bridge project after finding that requesting parties were not “aggrieved” under court precedent interpreting Section 19(a) of the Natural Gas Act (“NGA”). Commissioner James Danly wrote separately in dissent explaining his view that FERC’s request for briefing means that the determinations made in the Atlantic Bridge certificate order are no longer settled and that the certificate order is in fact no longer final. Continue Reading FERC Maintains Order Directing Briefing Long After Authorizing Gas Facilities to Begin Operations, Prompting Dissent from Commissioner Danly
On April 30, 2021, FERC accepted the California Independent System Operator Corporation’s (“CAISO”) submission of two proposals to revise its Tariff to amend provisions for its Energy Imbalance Market (“EIM”). In its first set of EIM enhancements, CAISO proposed to require EIM participants to settle deviations in their base schedules through CAISO’s market at a common location and price, eliminating EIM participants’ option to settle deviations in their base schedules bilaterally. In its second set of EIM enhancements, CAISO proposed to allow EIM participants the option not to have CAISO settle unaccounted for energy within an EIM participant’s balancing authority area (“BAA”), which results in a charge or credit to the affected EIM entity and can cause potential cost shifting in an EIM entity’s unaccounted for energy settlement. FERC accepted CAISO’s first proposal to be effective May 1, 2021, and the second set to be effective October 1, 2021. Continue Reading FERC Accepts Proposed Enhancements to CAISO Energy Imbalance Market
On May 4, 2021, FERC issued Order No. 871-B, clarifying that the rule established in Order No. 871, which precludes FERC from authorizing natural gas pipeline companies to proceed with construction of approved pipeline projects, only applies until the earlier of either (a) the date that a qualifying rehearing request is no longer pending before FERC or (b) 90 days following the date that a qualifying request for rehearing may be deemed denied by operation of law. FERC also limited the application of this rule to requests for rehearing that raise issues reflecting opposition to project construction, operation, or need. Finally, FERC announced a general policy to stay Natural Gas Act (“NGA”) section 7 certificate orders during the rehearing period and pending resolution of any timely requests for rehearing. Commissioner James Danly dissented, arguing that the need for Order No. 871 is obviated by further developments on appeal of FERC’s practice of indefinite tolling orders before the U.S. Court of Appeals for the D.C. Circuit (“D.C. Circuit”) and that presumptively staying pipeline project construction is contrary to the NGA and is “bad policy.” Commissioner Mark Christie concurred with Order No. 871-B.
On April 30, 2021, FERC rejected PJM Interconnection, L.L.C.’s (“PJM”) proposed revisions to both its Tariff and its Reliability Assurance Agreement (“RAA”) to implement an Effective Load Carrying Capability (“ELCC”) construct for determining capacity values for Variable Resources, Limited Duration Resources, and Combination Resources. PJM also proposed to update its capacity value analysis annually based on variations in resource deployment and load. To account for changes in capacity values from one year to the next, PJM had proposed a transition mechanism that would establish ELCC floor values for resources on a rolling annual basis for 13 years after they enter the PJM capacity market. FERC rejected PJM’s ELCC proposal, finding the proposed transition mechanism to be unjust and unreasonable. However, FERC found that aside from the transition mechanism, other portions of the ELCC framework appear to be just and reasonable for determining accredited capacity values. FERC lifted its previously-established abeyance on the paper hearing procedures addressing PJM’s capacity valuation method, and established a briefing schedule. FERC acknowledged that PJM is under no obligation to implement its ELCC proposal prior to the next Base Residual Auction (for Delivery Year 2022/2023), but emphasized that it “specified an expedient paper hearing schedule to investigate the justness and reasonableness of PJM’s existing capacity valuation methods as soon as possible.” Commissioner Christie issued a separate concurring statement. Continue Reading FERC Rejects PJM ELCC Proposal Based on Transition Mechanism; Establishes Paper Hearing Procedures
On April 15, 2021, FERC issued a long-awaited policy statement providing guidance on incorporating state-determined carbon pricing into organized markets operated by Regional Transmission Organizations (“RTOs”) and Independent System Operators (“ISOs”). The non-binding policy statement explains how FERC will review and consider rate filings submitted under section 205 of the Federal Power Act (“FPA”) to establish market rules for incorporating state-determined carbon pricing into RTOs and ISOs. Continue Reading FERC Issues Policy Statement on Carbon Pricing in Organized Wholesale Electric Markets
On April 15, 2021, FERC issued a Notice of Proposed Rulemaking (“NOPR”) to supplement the March 2020 NOPR regarding its electric transmission incentive policy under Federal Power Act (“FPA”) section 219 (see March 23, 2020 edition of the WER). While FERC’s March 2020 NOPR proposed to provide all utilities that turn over their wholesale transmission facilities to a Regional Transmission Organization (“RTO”) a fixed 100 basis-point increase in return on equity (“ROE”) (“RTO Participation Incentive”), the Supplemental NOPR proposes instead to codify its current practice of granting a 50 basis-point RTO Participation Incentive for utilities that join an RTO. In addition, FERC proposes that a utility will only be eligible for the incentive for the first three years after transferring operational control of its facilities to an RTO. The Supplemental NOPR also seeks comment on whether the RTO participation adder should be available solely to utilities that join an RTO voluntarily, and if so, how FERC should determine that the decision to join was voluntary. Commissioner Mark Christie issued a separate concurring statement, and Commissioners Neil Chatterjee and James Danly each issued separate dissenting statements. Continue Reading FERC Proposes Reforms to RTO Participation Incentive in Supplemental NOPR