Katherine O'Konski

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On January 30, 2024, FERC approved, subject to condition, PJM’s proposal to reform its Reliability Pricing Model, including resource adequacy risk modeling, capacity accreditation, testing requirements for capacity resources, and the Capacity Performance stop loss (“Modeling Enhancements Filing”). In that same order, FERC approved PJM’s proposal to replace its previously effective average Effective Load Carrying Capability (“ELCC”) capacity accreditation method with a marginal approach, effective December 12, 2023. The order directed PJM to submit a compliance filing to make certain revisions to its proposal, which PJM subsequently submitted on February 16, 2024. Additionally, on February 6, 2024, FERC rejected a companion PJM proposal to modify the rules governing its Market Seller Offer Cap and Capacity Performance construct and adopt a forward-looking Energy and Ancillary Service (“EAS”) offset for purposes of calculating the Minimum Offer Price Rule (“MOPR”) and offer cap.

On December 1, 2023, the United States Court of Appeals for the Third Circuit (“Third Circuit”) upheld PJM Interconnection, L.L.C.’s (“PJM”) latest minimum offer price rule (the “Focused MOPR”), denying challenges to both the substance of the rule and FERC’s “constructive” approval of the rule, which went into effect after the Commissioners deadlocked two-to-two and failed to issue a timely order accepting or denying the Focused MOPR. The Third Circuit held that a court’s review of FERC’s “action,” whether actual or constructive, proceeds under the same deferential standards in the Federal Power Act (“FPA”) and the Administrative Procedure Act (“APA”), and encompasses the Commissioners’ mandatory statements setting forth their reasoning for approving or denying the filing. On the merits, the Third Circuit held that FERC’s acceptance of PJM’s Focused MOPR policy was not arbitrary and capricious, pointing to arguments laid out in then-Chairman Glick’s and Commissioner Clements’ Joint Statement supporting the Focused MOPR.

On September 29, 2023, FERC accepted part of Arizona Public Service Company’s (“APS”) proposed interconnection queue reforms to transition from a first come, first served cluster study process to a first ready, first served cluster study process. Generally, FERC accepted APS’s proposals that would prevent speculative projects from moving through the queue, while rejecting proposals that were not consistent with or superior to the pro forma Large Generator Interconnection Procedures (“LGIP”). APS’s interconnection queue reform proposal was submitted before FERC issued Order No. 2023; the approved reforms do not constitute APS’s Order No. 2023 compliance filing and are based on FERC’s currently effective pro forma LGIP.

On October 19, 2023, FERC issued a final rule directing the North American Reliability Corporation (“NERC”) to develop or modify reliability standards to address reliability concerns attributable to inverter-based resources (“IBRs”)—i.e., solar photovoltaic, wind, fuel cell, and battery storage resources. FERC explained that the current reliability standards were designed for a grid mostly comprised of synchronous resources, where all generators are operating at the same frequency across the grid. In recent years, there has been a substantial increase in renewable generation, such as wind and solar, which is largely nonsynchronous, meaning generators that do not operate at the same frequency as the synchronized grid. Nonsynchronous resources are often programmed to trip offline during system disturbances, resulting in the potential loss of significant amounts of generation at one time. FERC issued this order in response to the “unprecedented proportion of nonsynchronous resources” expected to connect to the grid in the coming years and the “material impact” of IBRs on the Bulk Power System, including at least 12 documented events where IBRs responded “unexpectedly and adversely” to normally cleared line faults and the largest IBR-related disturbance NERC has ever recorded. The rule directs NERC to submit the updated standards by November 4, 2026.

On July 13, 2023, FERC on rehearing set aside its prior order that had accepted Southwest Power Pool, Inc.’s (“SPP”) proposal to establish a case-by-case process to allocate, on a regional, postage-stamp basis, all of the costs of a transmission facility with a voltage level between 100 kV and 300 kV (“Byway facility”).  In setting aside its prior approval, FERC found that SPP’s Proposal granted the SPP Board too much discretion in allocating the costs of Byway facilities. Commissioners Mark Christie and James Danly each concurred with separate statements.  FERC’s rejection marked the second time SPP’s proposal failed to obtain Commission approval.

On May 11, 2023, FERC notified Mankato Energy Center, LLC and Mankato Energy Center II, LLC (“Mankato Companies”) that it will release certain privileged information included in the initial brief that Mankato Companies submitted in an ongoing proceeding section 206 of the Federal Power Act (“FPA”) to determine whether Mankato companies and J.P. Morgan Investment Management, Inc. (“J.P. Morgan Investment”) are affiliated for purposes of the FPA.  FERC reasoned that disclosing certain privileged information is necessary to carry out the Commission’s jurisdictional responsibilities in evaluating whether the Mankato Companies’ upstream ownership raises market power concerns.  Commissioner Danly dissented in a separate statement, arguing that FERC could instead release a redacted order.

On March 16, 2023, FERC approved a new cybersecurity reliability standard, CIP-003-9 (along with associated violation risk factors and violation security levels), proposed by the North American Electric Reliability Corporation (“NERC”).  CIP-003-9 focuses on supply chain risk management for low impact Bulk Electric System (“BES”) Cyber Systems and requires: (1) responsible entities to include the topic of “vendor electronic remote access security controls” in their cyber security policies; (2) entities with low impact BES facilities to have methods for identifying and disabling vendor remote access; and (3) entities with low impact BES facilities to have methods for detecting malicious communications for vendor remote access.  The new standard aims to prevent compromises to cyber systems in the event of a known or suspected malicious communication and will become effective 36 months after FERC’s approval.

On February 21, 2023, FERC accepted PJM Interconnection, L.L.C.’s (“PJM”) proposed tariff revisions governing the Locational Deliverability Area Reliability Requirement (“LDA Reliability Requirement”) calculation, effective December 24, 2022, and applicable to the 2024/2025 Base Residual Auction (“BRA”), which was in progress at the time that PJM submitted its filing. Specifically, FERC accepted tariff changes that would allow PJM, during the BRA process, to exclude Planned Generation Capacity Resources from the LDA Reliability Requirement calculation if the addition of such resources materially increases the reliability requirement and such resources do not participate in the capacity auction. The February 21 Order also dismissed as moot a complaint filed by PJM challenging the justness and reasonableness of the existing LDA Reliability Requirement. Finally, the February 21 Order stated that FERC would soon convene a forum to examine the functioning of the PJM capacity market. Commissioner Danly issued a separate dissenting statement.

On February 16, 2023, FERC approved two new extreme cold weather Reliability Standards—EOP-011-3 (Emergency Operations) and EOP-012-1 (Extreme Cold Weather Preparedness and Operations)—filed by the North American Electric Reliability Corporation (“NERC”) and aimed at implementing the recommendations resulting from a joint inquiry into the circumstances surrounding Winter Storm Uri. However, FERC also directed modifications to EOP-012-1 to address what FERC characterized as concerns over the Standard’s applicability, ambiguity, lack of objective measures and deadlines, and prolonged, indefinite compliance periods. The new Reliability Standards constitute the first phase of NERC’s effort to implement the recommendations resulting from the joint inquiry into the 2021 winter storm. NERC stated that it will address the remaining recommendations in the second phase of the project.

On January 27, 2023, FERC approved the Midcontinent Independent System Operator, Inc. (“MISO”) Transmission Owners’ (“TOs”) proposal to terminate reactive power charges and compensation under MISO’s Open Access Transmission, Energy, and Operating Reserve Markets Tariff (“Tariff”), effective December 1, 2022.  As a result, MISO will no longer charge transmission customers for reactive power service within the standard power range, and no generators, whether affiliated with the MISO TOs or not, will receive compensation for providing reactive power service within the standard power factor range.  Nevertheless, FERC’s determination does not affect MISO generators’ ongoing obligation to provide reactive power.  If MISO directs a generator to provide reactive power outside of the standard power factor range, the generator will be compensated based on existing mechanisms already included in MISO’s Tariff.