In response to concerns regarding the changing nature of the nation’s energy supply portfolio and the emergence of promising energy storage technologies, the Commission in recent years issued several notices of inquiry, notices of proposed rulemaking, and policy statements regarding various energy storage and ancillary service supply issues. Additionally, the Commission considered but ultimately declined to pursue the Department of Energy-initiated rulemaking on grid resiliency and reliability. On February 15, 2018, however, the Commission took concrete action by issuing a pair of Final Rules, addressing (i) storage participation in regional markets; and (ii) the provision of primary frequency response, a critical grid support service.
White House Releases Outline for Legislative Infrastructure Plan
On February 12, 2018, the White House issued its proposed framework for an infrastructure bill to Congress. Notably, the White House’s infrastructure plan proposes to (1) establish a firm deadline of 21 months for lead agencies to complete their National Environmental Policy Act (“NEPA”) reviews and an additional 3 months thereafter to approve or deny a permit (i.e., a decision on an interstate natural gas pipeline project or hydropower license application must be made within 2 years of the application); and (2) amend the Clean Water Act (“CWA”) to set a deadline for a state agency to determine whether a CWA section 401 certificate application is complete.
D.C. Circuit Remands FERC Decision Upholding ISO-NE FCM Rules Locking in Prices for New Entrants
On February 2, 2018, the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) remanded FERC’s decision denying complaints that the ISO New England, Inc.’s (“ISO-NE”) rules locking in prices for new entrants to ISO-NE’s Forward Capacity Market (“FCM”) result in price suppression and discriminatory rates for existing suppliers. In doing so, the D.C. Circuit held that FERC did not adequately explain why its prior decision to reject a similar proposal did not apply to ISO-NE’s rules.
FERC Enforcement Staff Argues Claims Against BP Are Not Time-Barred due to Differences Between NGA and FPA
On January 25, 2018, as amended on January 31, 2018, FERC Office of Enforcement Staff (“OE Staff”) answered BP America Inc., BP Corporation North America Inc., BP America Production Company, and BP Energy Company’s (collectively, “BP”) arguments that FERC must dismiss its order assessing civil penalties and disgorgement against BP for violating FERC’s anti-market manipulation rule due to the five-year statute of limitations for civil penalties. Among other things, OE Staff argued that (1) enforcement actions under the Natural Gas Act (“NGA”) are distinct from the enforcement process under the Federal Power Act (“FPA”), and thus similar federal district court precedent in the FPA context is inapplicable to BP; and (2) FERC’s issuance of disgorgement is more remedial than punitive and thus not subject to the statute of limitations.
FERC Staff Directs Rover Pipeline to Cease HDD Activity at the Tuscarawas River Site
On January 24, 2018, FERC staff directed Rover Pipeline LLC (“Rover”) to stop horizontal directional drilling (“HDD”) activity—which involves using a drill to bore horizontally underground and drilling mud to remove drill cuttings and maintain the bore for a newly constructed pipeline to “cross” beneath rivers and other areas—at the Tuscarawas River site due to inadvertent losses of drilling mud. Although FERC staff found that Rover had complied with its HDD contingency plans and that drilling mud had not impacted sensitive resources, FERC staff requested Rover to provide information to assess alternate methods of crossing the Tuscarawas River.
FERC Approves PennEast Pipeline Project Despite Need and Environmental Impact Protests
On January 19, 2018, FERC approved PennEast Pipeline Company, LLC’s (“PennEast”) proposal to construct its 116-mile pipeline project from Pennsylvania to New Jersey (“Project”). FERC approved the Project despite protesters challenging the Project’s need given that affiliated shippers subscribed to most of the Project’s capacity, as well as FERC’s limited environmental impact analysis after PennEast could not complete certain surveys along the Project’s route due to landowners denying PennEast access to their property. Commissioners Cheryl A. LaFleur and Neil Chatterjee issued separate concurrences, while Commissioner Richard Glick issued a separate dissent.
FERC Approves Changes to CAISO’s Resource Adequacy Program
On January 18, 2018, FERC approved California Independent System Operator Corporation’s (“CAISO”) changes to its resource adequacy program to, among other things, (1) allow capacity located in a local capacity area, but procured as system capacity, to provide system substitution capacity during forced outages and (2) cap a load serving entity’s (“LSE”) monthly local capacity requirement at its monthly system capacity requirement.
Ninth Circuit Holds Utilities Are Ineligible for RTO Membership Adder When Membership Is Involuntary
On January 8, 2018, the U.S. Court of Appeals for the Ninth Circuit (“Ninth Circuit”) ruled that FERC acted arbitrarily and capriciously in approving a 50 basis-point incentive adder to Pacific Gas & Electric Company’s (“PG&E”) return on equity (“ROE”) for its participation in the California Independent System Operator Corporation (“CAISO”). In particular, the Ninth Circuit held that FERC did not follow its precedent by approving PG&E’s incentive adder while dismissing arguments that PG&E’s ongoing membership in CAISO was required by a California Public Utilities Commission (“CPUC”) order and thus was not voluntary.
Virginia District Court Orders Discovery in FERC Enforcement Case Against Powhatan
On December 28, 2017, the U.S. District Court for the Eastern District of Virginia (“District Court”) held that Powhatan Energy Fund LLC, Dr. Houlian Chen, and two funds owned by Dr. Chen (collectively, “Respondents”) are entitled to a full civil trial in FERC’s action to enforce penalties against Respondents for allegedly manipulating electricity markets. Notably, the District Court held that a plenary civil trial was required because Respondents elected to forego a formal hearing before a FERC Administrative Law Judge (“ALJ”). In lieu of a hearing before a FERC ALJ, Respondents instead elected to have FERC assess penalties upon finding a violation occurred, based on the investigative record. Thus, according to the District Court, a proper administrative record was never developed and Respondents were never permitted an opportunity to conduct their own independent discovery.
BP Argues FERC Must Dismiss Market Manipulation Claims due to Five-Year Statute of Limitations
On December 11, 2017, BP America Inc., BP Corporation North America Inc., BP America Production Company, and BP Energy Company (collectively, “BP”) requested FERC to dismiss its July 11, 2016 order (“July 11 Order”) assessing civil penalties against BP and requiring BP to disgorge profits for violating FERC’s anti-market manipulation rule. In doing so, BP argued that, due to recent federal court cases, the law had changed regarding the statute of limitations for actions imposing civil penalties and disgorgement. Therefore, according to BP, FERC’s August 5, 2013 order to show cause issued to BP failed to commence a “proceeding” within the meaning of the statute of limitations for enforcing civil fines and penalties, and thus FERC’s assessment of civil penalties and disgorgement was time-barred. Rather, BP argued that the statute of limitations began to run on November 25, 2008 at the latest, and thus FERC was required to commence a “proceeding” by November 25, 2013, but FERC did not commence a “proceeding” until May 15, 2014 at the earliest when it set the matter for hearing.