Katherine O'Konski

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On January 19, 2023, FERC issued an order upholding its decision to exercise primary jurisdiction over emergency energy sales between Southwest Power Pool, Inc. (“SPP”) and Associated Electric Cooperative, Inc. (“AECI”) during Winter Storm Uri and FERC’s decision that SPP properly compensated AECI pursuant to its Open Access Transmission Tariff (“Tariff”).

On December 15, 2022, FERC issued an order accepting Arizona Public Service Company’s (“APS”) revisions to its Open Access Transmission Tariff (“Tariff”) that would allow APS to begin using the Flowgate Methodology for calculating Available Transfer Capability (“ATC”) instead of its current Rated System Path Methodology. In addition, FERC denied APS’s request to waive the requirement to post its Total Transfer Capability (“TTC”) values on the Open Access Same Time Information System (“OASIS”).

On November 2, 2022, FERC denied a complaint brought by the Iowa Coalition for Affordable Transmission (“ICAT”) alleging that ITC Midwest, LLC’s (“ITC Midwest”) capital structure, with a targeted 60%-40% equity-to-debt ratio, is unjust and unreasonable. FERC found that ICAT failed to demonstrate that ITC Midwest’s use of its actual capital structure to determine its equity ratio is unjust and unreasonable and that ICAT’s reliance on prior FERC precedent was misplaced. Given these findings, FERC declined to address ICAT’s arguments for a 53% equity ratio.

On September 22, 2022, FERC denied a complaint filed on October 14, 2020 by Cricket Valley Energy Center LLC and Empire Generating Company, LLC. Complainants alleged that the New York Independent System Operator, Inc.’s (“NYISO’s”) capacity market offer floor rules—termed buyer-side market power mitigation rules (“BSM Rules”)—were unjust and unduly discriminatory because they failed to address price suppression in NYISO’s installed capacity (“ICAP”) spot market auctions. Complainants requested that FERC require NYISO to implement a minimum offer price rule (“MOPR”) that applies to all new and existing resources that receive out-of-market subsidies, with few or no exceptions. In denying the complaint, FERC relied on a May 2022 order accepting changes to NYISO’s BSM Rules to automatically exclude wind, solar, hydroelectric, geothermal, fuel cells that do not use fossil fuel, and demand response resources from adhering to an offer floor when bidding into NYISO’s capacity market. Commissioner James Danly issued a dissenting statement and Commissioner Mark Christie issued a concurring statement.

On September 16, 2022, a panel of three judges on the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) issued a decision in United Power, Inc. v. FERC affirming FERC’s exclusive jurisdiction over exit fees charged by Tri-State Generation and Transmission Association, Inc. (“Tri-State”), a Colorado generation and transmission cooperative.

On August 26, 2022, Commissioner James Danly issued a statement in the FERC docket addressing PJM Interconnection, L.L.C.’s (“PJM”) replacement, focused Minimum Offer Price Rule (“Focused MOPR”). Commissioner Danly argued that the FERC Solicitor’s Office should not have filed its brief defending the Focused MOPR in the United States Court of Appeals for the Third Circuit (“Third Circuit”), and that doing so violated the Department of Energy Organization Act (“DOE Organization Act”) and the Administrative Procedure Act (“APA”). Following the statement, on September 7, 2022, certain Petitioners in the Third Circuit appeal proceedings filed a motion to strike FERC’s brief. Their motion argues that FERC’s brief should not have been filed because the Commission never voted to accept the Focused MOPR, and that filing the brief violates both the DOE Organization Act and constitutional limitations on the authority of executive officials. The Third Circuit has not yet acted on the motion.

On August 31, 2022, FERC issued two orders regarding two proposals to revise the Midcontinent Independent System Operator’s (“MISO”) resource adequacy requirements. In the first order, FERC accepted MISO’s proposal to move to seasonal resource adequacy requirements rather than a single requirement based on the summer peak. MISO proposed this seasonal resource adequacy construct to address significant increases in emergency events that occur year-round, driven by factors including generation retirements, reliance on intermittent resources, outages resulting from extreme weather events, and declining excess reserve margin. MISO will implement the new seasonal resource adequacy construct in the next Planning Resource Auction (“Auction”) to be held in April 2023. In the second order, FERC rejected MISO’s proposal to require a Minimum Capacity Obligation for participants in MISO’s Auction (“MCO Proposal”).

On July 28, 2022, FERC issued a show cause order indicating that several regional transmission organization (“RTO”) and independent system operator (“ISO”) tariffs appear to be unjust and unreasonable because they lack certain credit risk management practices.  FERC also issued a related Notice of Proposed Rulemaking (“NOPR”) to allow all market operators to share credit-related information among themselves so that they can more accurately assess market participants’ credit risks.  Both actions aim to improve credit risk management in organized wholesale electric power markets.

On July 28, 2022, FERC upheld changes to PJM Interconnection, L.L.C.’s (“PJM”) Reserve Market that it first required in a December 2021 order on voluntary remand from the U.S. Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”). FERC’s July 28 order continues to require PJM to: (1) consolidate its Tier 1 and Tier 2 Synchronized Reserve Products; (2) align reserve procurement in the day-ahead and real-time markets by establishing two 10-minute reserve requirements and one 30-minute reserve requirement in each market; (3) revert back to a stepped Operating Reserve Demand Curve (“ORDC”) and $850/MWh Reserve Penalty Factors; and (4) revert to a backward-looking Energy & Ancillary Services (“E&AS”) Offset in the Net Cost of New Entry calculation. The July 28 order also addressed challenges to the December 2021 order on the basis that the motion for voluntary remand was not filed in the D.C. Circuit pursuant to FERC’s tradition of polling the Commissioners for major litigation decisions. The order makes certain clarifications on the Chairman’s role to oversee the executive and administrative operation of FERC, including the direction of litigation. Commissioner James Danly filed a separate dissenting statement.

On July 28, 2022, FERC proposed changes to its Uniform System of Accounts (“USofA”) in response to the growth of non-hydro renewable generation such as wind, solar, and storage and to codify accounting for renewable energy credits (“RECs”). FERC’s Notice of Proposed Rulemaking (“NOPR”) follows a Notice of Inquiry issued in January 2021 seeking comment on the appropriate accounting treatment for certain renewable energy assets (see January 28, 2021 edition of the WER). Comments on the NOPR are due 45 days from its publication in the Federal Register.