On September 20, 2018, FERC denied the Utah Board of Water Resources (“Utah Board”) and the Washington County Water Conservancy District’s petition for a declaratory order, asking FERC to find that its licensing jurisdiction under the Federal Power Act (“FPA”) extends to all of the Lake Powell Pipeline Project facilities identified in the Board’s license application for the project, including 89 miles of water delivery pipeline.
FERC, PHMSA Execute MOU on LNG Transportation Facilities
On August 31, 2018, FERC and the Pipeline and Hazardous Materials Safety Administration (“PHMSA”), an agency under the U.S. Department of Transportation (“DOT”), signed a Memorandum of Understanding (“MOU”) to coordinate the siting and safety review of FERC-jurisdictional Liquified Natural Gas (“LNG”) facilities.
Seventh Circuit Rejects Challenges to Illinois ZECs Program
On September 13, 2018, the U.S. Court of Appeals for the Seventh Circuit (“Seventh Circuit”) dismissed challenges to the Illinois “zero emission credit” (“ZEC”) program, a state law which compensates nuclear plants and other generators that do not produce carbon emissions (“ZEC Program”). In doing so, the Seventh Circuit ruled, among other things, that: (1) the ZEC Program is not preempted by the Federal Power Act (“FPA”) because eligibility to receive ZECs does not depend on the generator’s participation in a wholesale auction, and (2) the ZEC Program does not violate the dormant Commerce Clause because it does not discriminate against interstate commerce.
FERC Mostly Denies Rehearing of Order Accepting PJM Proposal to Reduce Bidding Points for Virtual Transactions
On September 6, 2018, FERC mostly denied rehearing of its February 20, 2018 order (“Proposal Order”) that accepted PJM Interconnection, L.L.C.’s (“PJM”) proposal to reduce the number of bidding points at which virtual transactions may be submitted by market participants (“Virtual Transactions Proposal”), finding PJM’s Virtual Transactions Proposal just and reasonable. However, FERC did grant rehearing with respect to PJM’s request to modify the effective date of the revisions accepted in the Proposal Order to February 22, 2018.
U.S. Senate Passes Bills Related to FERC Deadlock, Merger Review
On September 4, 2018, the U.S. Senate passed, by voice vote, two bills related to FERC’s authority under the Federal Power Act (“FPA”). One bill, S. 186, would allow challenges to rate changes that would automatically go into effect when FERC is deadlocked. The other bill, H.R. 1109, changes the monetary thresholds for determining when a proposed merger or acquisition requires FERC approval.
FERC Suggests Interstate Power Flows Could Be Coming to ERCOT
On July 26, 2018, FERC approved AEP Energy Partners, Inc.’s (“AEP Energy”) request that Sharyland Utilities, L.P., AEP Texas, Inc., and Electric Transmission Texas, LLC (collectively, “Tie Owners”) provide AEP Energy with transmission service across interconnections between the Electric Reliability Council of Texas (“ERCOT”) and the Mexican Comisión Federal de Electricidad (“CFE”) transmission system. In issuing that ruling, FERC seemingly went out of its way to suggest that if two proposed transmission projects – unrelated to AEP Energy’s request – are completed, the interconnections between ERCOT and the CFE system could result in interstate power flows in ERCOT. While the Commission did not go any further other than to point out this fact, if FERC finds that such interstate power flows exist, FERC could potentially subject utilities in ERCOT to FERC’s plenary Federal Power Act (“FPA”) jurisdiction.
FERC Approves Changes to CAISO’s Congestion Revenue Rights Auction
On June 29, 2018, FERC approved the California Independent System Operator, Inc.’s (“CAISO”) revisions to its congestion revenue rights (“CRR”) auction intended to address the shortfall between CRR auction revenues and amounts owed by CAISO to holders of auctioned CRRs. Specifically, CAISO proposed to (1) require CAISO transmission owners to submit all known transmission maintenance outages for the next year by July 1, rather than October 15; and (2) limit the allowable source and sink pairs eligible for the CRR auction to pairs associated with supply delivery and to exclude non-delivery CRR pairs.
D.C. Circuit Affirms Denial of Recovery of Gas Purchase Costs During 2014 Polar Vortex
On June 15, 2018, in separate opinions, the U.S. Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) affirmed two FERC rulings that denied utilities’ requests to be made whole for purchasing natural gas at inflated prices to comply with their PJM Interconnection, L.L.C. (“PJM”) capacity resource obligations during the 2014 Polar Vortex. Specifically, the D.C. Circuit upheld FERC’s holdings that (1) permitting the utility in one case to recover costs retroactively would violate the filed rate doctrine and the rule prohibiting retroactive ratemaking and (2) the utility in the second case was not entitled to indemnification for its losses resulting from PJM requesting the utility to comply with its capacity resource obligations.
D.C. Circuit Upholds FERC’s Changes to PJM’s FTR and ARR Designs
On June 12, 2018, the U.S. Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) rejected challenges to FERC orders modifying PJM’s financial transmission right (“FTR”) and auction revenue right (“ARR”) designs. FERC had ordered changes to PJM’s FTR/ARR designs to address PJM’s inability to make all of the payments owed to FTR owners.
FERC Limits Analysis of Upstream/Downstream Impacts of Proposed Gas Pipeline Projects
On May 18, 2018, FERC denied rehearing of its April 28, 2016 order (the “April 28 Order”) approving Dominion Transmission, Inc.’s (“Dominion”) New Market Project. Notably, FERC held that it is not required to analyze the upstream and downstream impacts of a proposed pipeline project unless those impacts are considered cumulative or indirect effects within the meaning of the National Environmental Policy Act (“NEPA”). Commissioners Cheryl LaFleur and Richard Glick dissented in part, instead finding that FERC is required to provide the public with information relating to the upstream and downstream impacts of a proposed project and stating that FERC should ask applicants to provide such information.