On February 2, 2016, the General Counsel of the Federal Energy Regulatory Commission (“FERC”), Max Minzner, testified before the Committee on Energy and Commerce Subcommittee on Energy and Power for the United States House of Representatives (“Committee”) regarding two proposed bills that would amend the Federal Power Act (“FPA”). One bill would modify Section 203 of the FPA to set a minimum threshold value of $10 million on the merger or consolidation of facilities belonging to public utilities that would be subject to FERC approval. A second bill, H.R. 2984, would amend Section 205 of the FPA to permit a party to seek rehearing and subsequent appellate review of any rate change filed pursuant to that provision that takes effect without FERC action. Going forward, the Committee may consider the testimony in deciding how to act on the proposed bills.
FPA Section 203 Modifications
Currently, Section 203 of the FPA requires public utilities to seek FERC approval for several kinds of transactions involving utility assets, including “to merge or consolidate jurisdictional facilities.” While other provisions of Section 203 include a minimum threshold of $10 million, Section 203(a)(1)(B) includes no such minimum, and FERC has interpreted the provision to have no minimum threshold. The proposed bill would add a minimum dollar value to Section 203(a)(1)(B) of the FPA such that public utilities would only need prior FERC approval to merge or consolidate facilities subject to FERC’s jurisdiction if the facilities have a value in excess of $10 million. Mr. Minzner testified that he believes adding the proposed minimum threshold “could ease the administrative burden on [FERC] staff and the regulatory burden on industry without a significant negative effect on [FERC’s] regulatory responsibilities.” Mr. Minzner further testified that the time and effort expended by FERC staff to review applications for mergers and consolidations below the minimum threshold could be usefully redirected to other matters pending before FERC. Although Mr. Minzner noted that under the proposed bill FERC would no longer have the authority to review and approve mergers valued at less than $10 million, even in situations where the merger took place as one of a series of transactions that exceeded the limit in total, he added that such a concern would be mitigated by FERC’s authority to limit the exercise of market power and to initiate enforcement actions.
By way of background, Section 205 of the FPA requires public utilities to seek FERC’s approval of proposed rate changes for the jurisdictional services they provide. Following a Section 205 filing, FERC has a sixty-day statutory time period to issue an order on the proposed change. Any party aggrieved by the FERC order, either the public utility or an intervenor, may seek rehearing of the order. Once FERC has ruled on the request for rehearing, appellate review is available in the United States Courts of Appeals. If the sixty-day time period elapses without FERC issuing an order, then the change is deemed effective. According to Mr. Minzner, in this situation, neither rehearing nor appellate review would be available to an aggrieved party because FERC failed to issue an order.
H.R. 2984 proposes to modify Section 205 of the FPA to permit a party to seek rehearing and subsequent appellate review of any Section 205 rate change that takes effect without FERC action. Mr. Minzner noted that this has only occurred six times in FERC’s history, including, most recently, a filing by ISO-NE regarding the results of its forward capacity auction, upon which FERC was tied 2-2 (see November 3, 2014 edition of the WER). Mr. Minzner testified that the proposal has significant benefits because “appellate review is an important procedural avenue for those who do not prevail before an administrative agency.” Mr. Minzner raised the concern that appellate review under the proposed legislation might present difficulties because a federal appellate court won’t be able to rely on a record or order issued by FERC in reaching its decision. Mr. Minzner testified further however, that this concern is addressed by the fact that the proposed legislation first requires a rehearing order from FERC that the appellate court could rely on to inform its decision.
Mr. Minzner’s testimony is available here.