On September 9, 2020, FERC issued a Notice of Proposed Rulemaking (“NOPR”) proposing updated regulations that will establish a one-year period for state agencies or other certifying authorities (“Certifying Agencies”) to act on requests for water quality certifications related to sections 3 and 7 of the Natural Gas Act (“NGA”). Under the Clean Water Act (“CWA”), should a Certifying Agency fail to act on such a request within one year, they are deemed to have waived the certification requirements.
Continue Reading FERC Proposes to Modify Water Quality Certification Waiver Period for Natural Gas Projects

On July 17, 2020, FERC issued three orders relating to the executed cost-of-service agreement (“Mystic Agreement”) among Constellation Mystic Power, LLC (“Mystic”), Exelon Generation Company, LLC (“Exelon”), and ISO New England Inc. (“ISO-NE”).  The Mystic Agreement provides for cost-of-service compensation to Mystic for the continued operation of two gas-fired generating units.  In the first two orders, FERC addressed requests for rehearing of its 2018 orders accepting the Mystic Agreement (the “July 2018 Order” and the “December 2018 Order”), including its conclusion that Mystic should recover from ratepayers 91% of the operating costs of the Everett Marine Terminal (“Everett”), a non-jurisdictional liquified natural gas import terminal.  In its third order, FERC accepted in part a Mystic compliance filing submitted in response to the December 2018 Order.  Commissioner Glick issued dissents to each of the July 17 orders.  Commissioner Glick concluded that FERC was forcing consumers to pay the full cost of service for Mystic in order to “bail out” Everett, and that each of the orders exceeded FERC’s jurisdiction under the Federal Power Act (“FPA”).

Continue Reading Divided FERC Permits Mystic to Recover Operating Costs of Non-Jurisdictional LNG Terminal

On July 23, 2020, the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) granted FERC’s motion for a ninety-day stay of the court’s mandate in Allegheny Defense Project v. FERC. In Allegheny, the D.C. Circuit rejected FERC’s long-used practice of issuing “tolling orders” to grant itself more time to consider

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.
Continue Reading DOE Requests Information on Bulk Power System Vulnerabilities Pursuant to Executive Order

On June 18, 2020, FERC issued an order finding that PJM Interconnection, L.L.C. (“PJM”) has been inconsistently implementing Order No. 1000’s immediate need reliability project exemption and directed PJM to implement certain aspects of the exemption more fully and transparently. Concurrently, in separate orders, FERC concluded there was insufficient evidence to find that either Southwest Power Pool, Inc.’s (“SPP”) or ISO New England Inc.’s (“ISO-NE”) implementation of the immediate need reliability project exemption was unjust, unreasonable, or unduly discriminatory or preferential.
Continue Reading FERC Finds PJM Not In Compliance With Order No. 1000 Immediate Need Reliability Project Exemption

On June 4, 2020, President Trump issued an Executive Order directing federal agencies to take all reasonable measures to speed infrastructure investments and requiring the heads of all federal agencies to identify projects that can be exempted from the requirements of the National Environmental Policy Act (“NEPA”), Endangered Species Act (“ESA”), or the Clean Water Act (“CWA”), pursuant to the emergency procedures within each act, among other requirements.
Continue Reading President Trump Issues Executive Order Directing the Expedition of NEPA Reviews

On May 29, 2020, FERC accepted the California Independent System Operator Corporation’s (“CAISO”) proposed update to its capacity procurement mechanism (“CPM”) compensation for offers above the soft offer cap, where a participating resource will be compensated at the resource’s going-forward fixed costs plus a 20 percent adder. The new CPM compensation formula will go into effect June 1, 2020. Commissioner Richard Glick dissented, stating that while he agreed that CPM compensation should be determined by a resource’s going-forward fixed costs, CAISO had failed to show that the 20 percent adder was just and reasonable.
Continue Reading CAISO Updates Capacity Procurement Mechanism Compensation for Offers Above the Soft Cap

On May 21, 2020, FERC issued Opinion No. 569-A, which revised the Commission’s methodology for determining whether an established rate of return on equity (“ROE”) is just and reasonable under section 206 of the Federal Power Act (“FPA”). Among other things, Opinion No. 569-A accepts the use of a third financial model for establishing just and reasonable ROE for Transmission Owners (“TOs”)—the “Risk Premium Model” (which was rejected in an earlier opinion)—in addition to the previously accepted two-step discount cash flow (“DCF”) model and capital asset pricing model (“CAPM”). Commissioner Richard Glick dissented in part, arguing that FERC was “once again changing course and revamping [its] ROE methodology” to the detriment of regulatory certainty among TOs and investors. In a related action, FERC contemporaneously issued a Policy Statement clarifying that the newly revised ROE methodology in Opinion No. 569-A applies to natural gas and oil pipelines, with certain exceptions.
Continue Reading FERC Revises Public Utility ROE Methodology; Sets Policy for Natural Gas, Oil Pipelines

Due to the unprecedented and rapidly changing landscape caused by the COVID-19 pandemic, FERC has provided multiple resources and notices over the last two weeks. Three of those relevant releases include an Epidemic/Pandemic Response Plan Resource, a policy statement providing guidance to oil pipelines impacted by the pandemic, and a notice that FERC is temporarily delaying the processing of all hardcopy submissions.
Continue Reading Update on FERC’s COVID-19 Response

On April 30, 2020, FERC granted Tennessee Gas Pipeline Company, L.L.C.’s (“Tennessee Gas”) petition for declaratory order that requested authorization to charge market-based rates for its proposed firm flexible storage (“FS Flex”) service. In reaching its decision, FERC reviewed whether Tennessee Gas held significant market power in the relevant product and geographic markets where the FS Flex service was to be offered, with the geographic market including east Texas, Louisiana, Mississippi, and Alabama (“Gulf Coast Production Area”). FERC found that Tennessee Gas’s small market share and market concentration in the relevant markets adequately demonstrated that Tennessee Gas lacked market power and that there were no other factors indicating that Tennessee Gas would be able to exercise market power when providing the FS Flex service.
Continue Reading FERC Grants Tennessee Gas Market-Based Rate Authority for Proposed FS Flex Service