Troutman Pepper Locke

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On May 12, 2016, the EPA issued a final rule aimed at curbing methane emissions from new and modified sources of oil and gas. In addition to methane, the final rule regulates volatile organic compounds (“VOCs”) and several air pollutants that, according to the EPA, come “packaged” with methane when emitted from oil and gas infrastructure. EPA believes that the final rule will reduce methane emissions by 520,000 short tons by 2025, and thus help attain the Obama administration’s goal in the Climate Action Plan to reduce methane emissions from the oil and gas industry by 40 to 45% by 2025 from 2012 levels.

On May 10, 2016, the U.S. Commodity Futures Trading Commission (“CFTC”) proposed to amend (“Proposed Amendment”) its own 2013 order that generally exempted certain electricity transactions from the CFTC’s regulation (“RTO/ISO Exemption Order”). Specifically, the Proposed Amendment would clarify that the exemptions contained in the RTO/ISO Exemption Order would not include the private right of action under Commodity Exchange Act (“CEA”) section 22.

On April 29, 2016, FERC accepted, subject to condition, the Midcontinent Independent System Operator, Inc’s. (“MISO”) proposed revisions to its Open Access Transmission, Energy and Operating Reserve Markets Tariff (“Tariff”) that authorize MISO to extend or reopen the Day-Ahead Energy and Operating Reserve Market (“Day-Ahead Market”) when necessitated by unanticipated events.

In an April 29, 2016 order regarding cost allocation among the Entergy operating companies, FERC clarified and distinguished its approach to refunds in cost allocation and rate design cases, from its approach to refunds in cases of utility over-recovery (“April 29 Order”). Specifically, FERC clarified that it will generally decline to order refunds under disputes over cost allocation, whereas refunds will generally be awarded in cases involving allegations of a utility earning more than a just and reasonable rate during the refund period.

On April 22, 2016, FERC denied a complaint filed by the Maryland and Delaware Public Service Commissions (the “Complainants”) against PJM Interconnection LLC (“PJM”) alleging that PJM’s use of the solution-based distribution factor (“DFAX”) method to allocate the costs for a new transmission project in PJM was unjust and unreasonable. In denying the complaint, FERC accepted the proposed cost allocation for the “Artificial Island Project.”

On April 27, 2016, the Federal Energy Regulatory Commission (“FERC”) granted two concurrent complaints requesting FERC rescind waivers of its affiliate power sales restrictions that it previously granted to two Ohio franchised public utilities, as those waivers relate to particular power sales contracts (“Affiliate PPAs”). The utilities in question are AEP Generation Resources, Inc. (“AEP Generation”) and Ohio Power Company (“AEP Ohio,” and together with AEP Generation, the “AEP Respondents”) in Docket No. EL16-33; and FirstEnergy Solutions Corporation (“FE Solutions”) and FirstEnergy Corporation’s Ohio regulated utilities (“FE Ohio,” and together with FE Solutions, the “FE Respondents”) in Docket No. EL16-34. Going forward, FERC will evaluate the transactions contemplated in the Affiliate PPAs under the standards set forth in Boston Edison Co. Re: Edgar Electric Energy Co. and Allegheny Energy Supply Co. 

On April 21, 2016, FERC issued an order denying Viridity Energy, Inc.’s (“Viridity”) complaint alleging that PJM Interconnection, L.L.C.’s (“PJM”) Open Access Transmission Tariff (“OATT”) and the parallel provisions of the PJM Operating Agreement are unduly discriminatory as applicable to end users that register under PJM’s Emergency Load Response Program’s Capacity Only option, as opposed to the Full Program Option, because Capacity Only resources do not receive the guaranteed energy payment that Full Program Option participants receive despite being similarly situated. In the order, FERC found that the distinctions between the program participants are justified by the need to avoid errors in measurement and verification that may be caused by Capacity Only participants inadvertently submitting duplicate offers.

On April 28, 2016, FERC issued an Order to Show Cause and Notice of Proposed Penalty (“Order to Show Cause”) against Total Gas & Power North America, Inc. (“TGPNA”), Aaron Hall (“Hall”), and Therese Tran (“Tran”) for alleged natural gas market manipulation at four locations in the southwest United States between June 2009 and June 2012. The Order to Show Cause also directs these parties to show cause why TGPNA should not be required to disgorge $9.18 million (plus interest) in unjust profits, and the parties be assessed civil penalties in the amounts of $213,600,000 for TGPNA, $1,000,000 for Hall, and $2,000,000 for Tran. In addition, the Commission directed TGPNA’s ultimate parent company, Total, S.A. (“Total”), and TGPNA’s affiliate, Total Gas & Power, Ltd. (“TGPL”), to show cause why they should not be held liable for TGPNA’s, Hall’s, and Tran’s conduct and held jointly and severally liable for their disgorgement and civil penalties.

On April 19, 2016, the U.S. Supreme Court issued an opinion in Hughes v. Talen Energy Marketing, LLC affirming the decisions of the courts below that the Federal Power Act (“FPA”) vests in FERC exclusive jurisdiction over wholesale sales of electricity. As a result, the Supreme Court upheld the determination that Maryland’s state program to grant power plant subsidies was preempted by the FPA.

In two orders issued on April 21, 2016, FERC denied a complaint and upheld the Midwest Independent System Operator, Inc. (“MISO”) registration requirements for Entergy qualifying facilities (“QFs”), and also denied rehearing and upheld termination, in part, of Entergy’s mandatory purchase obligation for QFs with access to the MISO market under Section 210(m) of the Public Utility Regulatory Policies Act (“PURPA”).