On November 19, 2020, FERC issued a Notice of Proposed Rulemaking (“NOPR”) proposing to reform its regulations and pro forma OATT to improve the accuracy and transparency of transmission line ratings. According to FERC, more accurate line ratings will reduce congestion costs and result in substantial cost savings for consumers, whereas inaccurate line ratings may result in unjust and unreasonable rates.
Commissioners Clash Over Proposed Policy Statement on Carbon Pricing
On October 15, 2020, FERC issued a notice of proposed policy statement on state-determined carbon pricing in wholesale markets that clarified the agency’s jurisdiction over wholesale market rules incorporating state-determined carbon prices and encouraged regional market operators to consider establishing such rules. FERC is seeking comment on the type of information it should consider when reviewing any such filings. While the Commissioners agree that FERC has jurisdiction to review these issues under 205 with respect to organized markets, they have signaled a divide with respect to the best course of action for addressing carbon pricing.
CAISO, CEC, and CPUC Conclude Several Factors Caused Mid-August Outages in California
On October 6, 2020, the California Independent System Operator (“CAISO”), California Public Utilities Commission (“CPUC”), and the California Energy Commission (“CEC”) (collectively, “Joint Entities”) announced that their preliminary analysis pointed to a number of factors that caused two mid-August electricity outages in CAISO. Specifically, the group’s Preliminary Root Cause Analysis report (“Preliminary Analysis”) concluded that the outages resulted from a convergence of factors, including (i) the extreme west-wide heat storm, (ii) shortfall in system planning, and (iii) certain day-ahead energy market practices. As directed by Governor Newsom, the Preliminary Analysis includes immediate, near, and longer-term actions that can be taken to minimize future power outages.
FERC Holds a Technical Conference on Carbon Pricing in Organized Markets
On September 30, 2020, FERC held a technical conference focusing on how state-adopted carbon pricing intersects with a Regional Transmission Organization/Independent System Operator (“RTO/ISO”) administered market, and specifically what considerations a carbon-pricing framework may raise for FERC and/or the markets it oversees. The conference included three panels focused on: (i) the legal considerations associated with the integration of state carbon prices in FERC-regulated markets, including FERC’s statutory authority to implement carbon pricing in RTO/ISO markets and prior FERC precedent on RTO/ISO proposals to incorporate costs associated with state cap-and-trade programs, (ii) carbon pricing mechanisms, including current RTO/ISO initiatives to consider the integration of state carbon pricing actions and challenges for carbon pricing in multi-state RTO/ISO markets, and (iii) market design considerations, such as methods to reduce leakage and the potential operational impacts arising from carbon pricing. Finally, the technical conference concluded with a roundtable discussion reflecting on key issues and insights raised during the conference (see September 10, 2020 edition of the WER).
Analyzing FERC’s Order Updating PURPA Regulations for First Time in Almost 40 Years
Executive Summary of FERC Order No. 872: Qualifying Facility Rates and Requirements Implementation Issues Under the Public Utility Regulatory Policies Act of 1978 [1]
I. Overview
On July 16, 2020, the Federal Energy Regulatory Commission (FERC or the Commission) issued Order No. 872, the Commission’s final order revising its regulations implementing Sections 201 and 210 of the Public Utility Regulatory Policies Act of 1978 (PURPA) [2]. This order, which follows a 2016 technical conference on PURPA issues and a September 2019 Notice of Proposed Rulemaking (NOPR) [3], is the first major set of revisions to FERC’s regulations implementing PURPA since they were established through Order No. 69 in 1980.
As FERC explained in the NOPR, the energy landscape has evolved in significant ways since the initial PURPA regulations were established, which includes increased supplies of natural gas, a more matured renewables industry, and the growing presence of non-Qualifying Facility (QF) independent power producers. These and other changes prompted FERC to revise its PURPA regulations, many of which are implemented by the states. These new changes provide additional guidance to state commissions regarding PURPA implementation and rests additional authority in state commissions regarding QF rates and contract terms.
DOE Requests Information on Bulk Power System Vulnerabilities Pursuant to Executive Order
On July 8, 2020, the U.S. Department of Energy (“DOE”) issued a request for information (“RFI”) seeking public input on the energy industry’s current risk mitigation practices with regard to the bulk-power system supply chain. The DOE issued the RFI pursuant to Executive Order No. 13920 (“Executive Order”), wherein the Secretary of Energy was directed, among other things, to investigate the bulk power system for equipment presenting a risk from foreign adversaries (see May 5, 2020 edition of the WER). In the RFI, DOE asks stakeholders to identify potential vulnerabilities in the bulk-power system supply chain that could have national security implications and the estimated economic costs of implementing the Executive Order.
FERC to Convene Technical Conferences on Carbon Pricing and Offshore Wind Integration
On June 17, 2020, FERC issued two notices of upcoming technical conferences. First, a Commissioner-led technical conference is scheduled for Wednesday, September 30, 2020 to discuss considerations related to state adoption of mechanisms to price carbon dioxide emissions, commonly referred to as “carbon pricing,” in regions with FERC-jurisdictional organized wholesale electricity markets. Second, a staff-led technical conference will be held on October 27, 2020 to: (i) discuss whether existing transmission, interconnection, and merchant transmission facility frameworks in Regional Transmission Organizations/Independent System Operators (“RTOs/ISOs”) can accommodate anticipated growth in offshore wind generation in a manner that safeguards open access transmission principles; and (ii) consider possible changes or improvements to the current framework should they be needed to accommodate such growth.
FERC to Block LNG, Pipeline Project Construction Until After Rehearing Process is Complete
On June 9, 2020, FERC ordered amendments to its regulations to prohibit natural gas projects authorized under Sections 3 and 7 of the Natural Gas Act (“NGA”) from commencing construction activities until after (i) the deadline for filing a request for rehearing has lapsed without a request being filed, or (ii) FERC has acted upon the merits of any timely-filed request for rehearing (“Order No. 871”). The new regulation will become effective, without any opportunity to file comments, 30 days after the Final Rule is published in the Federal Register. Because FERC’s orders on rehearing sometimes take several months, and in some cases more than a year to be issued, both liquefied natural gas (“LNG”) and natural gas pipeline projects approved by FERC could be significantly delayed from commencing construction as a result of Order No. 871.
FERC Accepts PJM’s Credit Risk Evaluation Proposal After GreenHat’s 2018 Default
On May 29, 2020, FERC accepted PJM Interconnection, L.L.C.’s (“PJM”) and PJM Settlement, Inc.’s (“PJM Settlement”) proposed revisions to its Open Access Transmission Tariff (“Tariff”) and the Amended and Restated Operating Agreement establishing updated credit risk evaluation criteria and processes for market participants in PJM. These revisions, which enhance PJM’s rules for evaluating and managing the posed credit risk of current and potential PJM market participants, were developed in response to GreenHat Energy LLC’s (“GreenHat”) 2018 default on a large portfolio of Financial Transmission Rights (“FTRs”). The proposed revisions went into effect on June 1, 2020, as requested. Commissioners James Danly and Richard Glick issued concurring opinions.
FERC Finds PJM Tariff Lacks Transparency for Pseudo-Tied Resources
On May 21, 2020, FERC issued three orders denying, or denying in part, complaints against PJM Interconnection, L.L.C. (“PJM”), finding that the complainants failed to demonstrate that PJM’s pseudo-tie rules are unjust, unreasonable, or unduly discriminatory or that such rules had been applied in a manner inconsistent with the PJM Tariff. With respect to PJM’s market-to-market flowgate test and its electrical distance requirement, however, FERC granted the complaints in part, finding that PJM’s Tariff fails to provide an open and transparent process regarding PJM’s administration of those requirements.