Troutman Pepper Locke

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On January 21, 2016, the Federal Energy Regulatory Commission (“FERC”) concurrently issued an order and a letter order related to a dispute between Southwest Power Pool, Inc. (“SPP”) and Midcontinent Independent System Operator, Inc. (“MISO”) stemming from MISO’s use of the SPP transmission system for real-time energy transfers between MISO Midwest and MISO South. In the order, FERC accepted MISO’s proposed revisions to its Open Access Transmission, Energy and Operating Reserve Markets Tariff (“Tariff”) to remove the “hurdle rate” mechanism (“Hurdle Rate”). In the letter order, FERC approved an offer of settlement (“Settlement Agreement”) whereby MISO will provide SPP compensation related to available system capacity usage and firm point-to-point transmission service between MISO Midwest and MISO South on SPP’s transmission system. Going forward, the Hurdle Rate will be superseded by the terms of the Settlement Agreement.

On January 21, 2016, FERC issued two separate orders largely approving the termination of the Public Utilities Regulatory Policies Act (“PURPA”) mandatory purchase obligation for the Entergy Operating Companies (“Entergy”) and Arkansas Electric Cooperative Corporation (“Arkansas Coop.”). Both orders were issued in response to applications submitted under Section 210(m) of PURPA, which provides utilities with a method for petitioning FERC to terminate the obligation of a utility to purchase a qualifying facility’s (“QF”) power under PURPA.

On January 21, 2016, the Commission approved revisions to seven Critical Infrastructure Protection (“CIP”) Reliability Standards developed and submitted by the North American Electric Reliability Corporation (“NERC”), all of which were previously proposed for approval in a July 16, 2015 FERC Notice of Proposed Rulemaking (“NOPR”). According to the Commission, the revised Reliability Standards are “designed to mitigate cybersecurity risks to bulk electric system facilities, systems, and equipment, which, if destroyed, degraded, or otherwise rendered unavailable as a result of a cybersecurity incident, would affect the reliable operation of the Bulk-Power System.”

On December 31, 2015, FERC issued an order applying the seven-factor test to exclude certain transmission facilities owned by Southern California Edison Company (“SoCal Edison”) from North American Electric Reliability Corporation (“NERC”) regulation. SoCal Edison filed an application under Section 215 of the Federal Power Act (“FPA”) and FERC Order No. 773, seeking a determination from FERC that certain of its 115 kV facilities were “facilities used in the local distribution of electric energy,” and therefore, were exempt from NERC regulation under the plain language contained in Section 215 of the FPA. In its application, SoCal Edison presented seven transmission and substation facility configurations for FERC consideration. Using the seven-factor test set forth in Order No. 888, FERC determined that five of the seven facilities were “facilities used in local distribution” and were exempt.

On January 12, 2016, the Federal Energy Regulatory Commission (“FERC”) issued an order rejecting without prejudice Louisiana Generating LLC’s (“Louisiana Generating”) request to recover costs associated with performing its obligations as a local balancing authority (“LBA”) under the Midcontinent Independent System Operator, Inc’s (“MISO”)  Open Access Transmission, Energy and Operating Reserve Markets Tariff (“Tariff”) Schedule 24 and Schedule 24-A. Going forward, Louisiana Generating may resubmit its request for cost recovery in accordance with FERC’s explicit expectations set forth in the order.

On January 8, 2016, the Commission approved proposed values submitted by ISO New England, Inc. (“ISO-NE”) to develop a demand curve for the tenth Forward Capacity Auction (“FCA 10”), which is scheduled to be held in February, 2016. One of the values—the Installed Capacity Requirement (“ICR”)—for the first time accounted for behind-the-meter solar resources, as a reduction in total load forecast. In its order accepting the proposed demand curve values for FCA 10, the Commission upheld ISO-NE’s inclusion of these distributed solar resources in the ICR.

On January 4, 2016, the United States Court of Appeals for the Fifth Circuit (the “Fifth Circuit”) vacated a federal district court’s indefinite stay of proceedings before it involving disputed Public Utility Regulatory Policies Act (“PURPA”) issues while awaiting administrative action from FERC, and instead ordered a definite period of 180 days for FERC to act.

The district court had supported its indefinite stay by applying the doctrine of primary jurisdiction—a doctrine that permits a federal court with non-exclusive jurisdiction over a proceeding to, under appropriate circumstances, defer to another forum (such as an administrative agency like FERC) that also has non-exclusive jurisdiction over the issue, based on the court’s determination that the benefits of obtaining aid from the other forum outweigh the need for expeditious litigation. While the Fifth Circuit found the doctrine applicable in the circumstances presented, it determined that the indefinite nature of the stay would unfairly harm the interests of one of the litigants.

On December 28, 2015, the Federal Energy Regulatory Commission (“FERC”) instituted two separate Federal Power Act Section 206 proceedings based on findings that ISO-NE Inc.’s (“ISO-NE”) Transmission Markets and Services Tariff (“Tariff”) is unjust, unreasonable, unduly discriminatory or preferential. One Section 206 proceeding (FERC Dockets Nos. EL16-15-000 and ER14-1639-000) seeks to require ISO-NE to submit Tariff revisions by March 31, 2016 that implement zonal sloped demand curves in its Forward Capacity Market (“FCM”) rules (“FCM Rules Proceeding”). The other Section 206 (FERC Docket No. EL16-19-000) proceeding seeks to develop just and reasonable formula rate protocols to be included in the ISO-NE Tariff and to examine the justness and reasonableness of the ISO-NE’s regional network service (“RNS”) rates and local network service (“LNS”) rates (“Formula Rates Proceeding”).

On January 6, 2016, FERC issued an order directing Coaltrain Energy, L.P. (“Coaltrain”), Coaltrain’s co-owners Peter Jones and Shawn Sheehan, and traders/analysts Robert Jones, Jeff Miller, Jack Wells, and Adam Hughes (collectively, “Respondents”), to show cause why they should not be found to have violated FERC’s Anti-Manipulation Rule and section 222 of the Federal Power Act (“FPA”) by engaging in fraudulent Up To Congestion (“UTC”) transactions in PJM Interconnection L.L.C.’s (“PJM”) energy markets. The order to show cause follows FERC’s Office of Enforcement’s (“Enforcement”) report alleging that Respondents inflated trade volumes of UTCs through transactions designed to collect large amounts of Marginal Loss Surplus Allocations (“MLSA”).

The Federal Energy Regulatory Commission (FERC) has issued an order granting a petition for declaratory order in Starwood Energy Group Global, Docket No. EL15-87-000, 153 FERC ¶ 61,332 (2015). The order found that transfer of certain passive interests would not require FERC authorization under section 203 of the Federal Power Act (FPA), such passive interests do not create affiliation requiring inclusion in certain market-based rate filings under FPA section 205, and holders of those passive interests alone would not result in the entities being considered public utilities under FPA section 201 or holding companies under the Public Utility Holding Company Act of 2005 (PUHCA).