On May 23, 2024, FERC approved the North American Electric Reliability Corporation’s (“NERC”) proposed Critical Infrastructure Protection (“CIP”) Reliability Standard, CIP-012-2 (Cyber Security – Communications between Control Centers), which is intended to improve upon and expand existing reliability standards to mitigate risks posed by loss of availability of communication links and certain data transmitted between bulk electric system (“BES”) Control Centers. FERC also approved NERC’s associated implementation plan, violation risk factors and violation severity levels, and the retirement of Reliability Standard CIP-012-1.
FERC Proposes to Largely Eliminate Compensation for Reactive Power
On March 21, 2024, FERC proposed to prohibit transmission providers from being compensated through their transmission rates charges for reactive power that is within the standard power factor range from generating facilities. Similarly, FERC proposed to revise both the large generator interconnection agreement (“LGIA”) and small generator interconnection agreement (“SGIA”) to remove the requirement that a transmission provider pay an interconnection customer for reactive power within the standard power factor range if the transmission provider pays its own or affiliated generators for the same service. If the Notice of Proposed Rulemaking (“NOPR”) becomes final as proposed, transmission providers would only be required to pay an interconnection customer for reactive power when the transmission provider asks the interconnection customer to operate its facility outside the standard power factor range set forth in its interconnection agreement.
Troutman Pepper Summary of FERC Order No. 2023-A on Generator Interconnections
Executive Summary
On March 21, the Federal Energy Regulatory Commission (FERC or the Commission) issued Order No. 2023-A (Final Rule), which reaffirmed aspects of Order No. 2023 — the Commission’s landmark order updating its generator interconnection procedures. As detailed further in this summary, the Commission largely upheld Order No. 2023, including some of the more controversial aspects of the order, such as penalties and the transmission capacity “heat map,” and provided further clarity on other aspects.
FERC Opens Inquiry into Upstream Investment Interests in Public Utilities
On December 19, 2023, FERC issued a Notice of Inquiry (“NOI”) to examine whether and how to revise its policy on providing blanket authorizations for holding companies, including investment companies, to acquire securities in electric utilities and their upstream owners pursuant to section 203(a)(2) of the Federal Power Act (“FPA”). Specifically, the Commission is soliciting comment on what constitutes control of a public utility in evaluating holding companies’ requests for authorization and what factors it should consider when evaluating control. Commissioner Mark Christie concurred with a separate statement, stating that FERC should examine whether investment companies are truly acting as passive investors in electric utilities and whether FERC’s blanket authorization practices are still sufficient to protect the interests of the electric utilities’ customers.
DOE Proposes to Limit NEPA Review for Transmission, Storage, and Solar
On November 16, 2023, the U.S. Department of Energy (“DOE”) issued a Notice of Proposed Rulemaking (“NOPR”) to update its National Environmental Policy Act (“NEPA”) implementing regulations to add a categorical exclusion for specific energy storage systems and revising categorical exclusions for upgrading and rebuilding transmission lines and solar photovoltaic (“PV”) systems. Comments on the NOPR are due January 2, 2024.
FERC Finds Affiliation Between J.P. Morgan Investment and Mankato Companies
On September 21, 2023, the Commission found that J.P. Morgan Investment Management Inc. (“J.P. Morgan Investment”) is an affiliate of Mankato Energy Center, LLC and Mankato Energy Center II, LLC (“Mankato Companies”) through their upstream owner, IIF US Holding 2 LP (“IIF US Holding 2”) because there is liable to be an absence of arm’s-length bargaining in transactions between Mankato Companies and J.P. Morgan Investment. In doing so, FERC considered, among other things, the power delegated by IIF US Holding 2 to J.P. Morgan Investment, which serves as IIF US Holding 2’s investment advisor. Commissioner Danly concurred in the result in a separate statement, and Chairman Willie Phillips concurred in a separate statement.
FERC Revisits Kimball Wind’s Entitlement to Reimbursement for WAPA Substation Expansion
On September 6, 2023, the Commission affirmed the determinations made in a May 4 Order, which found that Kimball Wind, LLC (“Kimball Wind”) was not entitled to reimbursement of funds paid to Western Area Power Administration (“WAPA”) for expansion of WAPA’s Kimball Substation, located in Kimball, Nebraska.
FERC Reverses Course, Rejects SPP Byway Cost Allocation Proposal for Second Time
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.
FERC Approves SPP Proposal for Energy Storage to Be Considered Transmission-Only Assets
On May 26, 2023, the Commission accepted Southwest Power Pool, Inc.’s (“SPP”) proposed revisions to its Tariff to establish the “framework under which an electric storage resource may be considered a transmission asset.”
FERC Requires Disclosure of Privileged Material Regarding JP Morgan’s Relationship with Mankato
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.