FERC Enforcement

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On December 16, 2024, the Federal Energy Regulatory Commission (“FERC”) directed American Efficient, LLC, its subsidiaries, and corporate parents (collectively, “American Efficient”) to show cause why American Efficient should not be found to have violated anti-manipulation rules. The order alleges that American Efficient engaged in a manipulative scheme to extract millions of dollars in capacity payments from Midcontinent Independent System Operator, Inc. (“MISO”) and PJM Interconnection, L.L.C. (“PJM”) for energy efficiency projects that did not actually reduce energy use. FERC also requested American Efficient to show cause why they should not disgorge over $253 million in unjust profits and pay a civil penalty of $722 million.

On December 5, 2024, the Federal Energy Regulatory Commission (“FERC”) approved Public Service Electric and Gas Company’s settlement agreement (“PSE&G”) to pay a $6.6 million civil penalty to resolve an ongoing investigation with FERC’s Office of Enforcement (“FERC Enforcement”). According to FERC’s order, the underlying investigation involved PSE&G’s alleged failure to provide full and accurate information when seeking approval from PJM Interconnection, L.L.C. (“PJM”) to replace a transmission line in New Jersey as part of the PJM Regional Transmission Expansion Plan (“RTEP”) process. PSE&G also agreed to submit to annual compliance monitoring for up to two years as part of the approved Stipulation and Consent Agreement (“Stipulation”).

On November 21, 2024, FERC issued an Order partially accepting NorthWestern Energy Corporation’s (“NorthWestern”) compliance filing, effective July 10, 2024.  FERC found that NorthWestern’s filing partially complies with the requirements of Order Nos. 2023 and 2023-A and directed NorthWestern to submit a further compliance filing within 60 days.

Executive Summary

On March 21, the Federal Energy Regulatory Commission (FERC or the Commission) issued Order No. 2023-A (Final Rule), which reaffirmed aspects of Order No. 2023 — the Commission’s landmark order updating its generator interconnection procedures. As detailed further in this summary, the Commission largely upheld Order No. 2023, including some of the more controversial aspects of the order, such as penalties and the transmission capacity “heat map,” and provided further clarity on other aspects.

On December 19, 2023, the U.S. Court of Appeals for the Sixth Circuit (“Sixth Circuit”), in Electric Power Supply Association; PJM Power Providers Group v. FERC, held that the former Chair of the Federal Energy Regulatory Commission (“FERC”), Richard Glick, exceeded his authority when he reinstated market design features including a stepped demand curve and an $850/MWh price ceiling for the PJM Interconnection, L.L.C. (“PJM”) Reserve Market, without the backing of his colleagues.  This ruling was made by a split Sixth Circuit.  In addition, on February 7, the Sixth Circuit denied Petitioners’ request for panel rehearing of the opinion.

On October 19, 2023, FERC issued a Notice of Proposed Rule Making (“NOPR”) proposing various changes to its Electric Quarterly Report (“EQR”) filing requirements. According to FERC, the proposed changes are designed to update the data collection process, improve data quality, increase market transparency, decrease costs of preparing necessary data for submission, and streamline compliance with future filing requirements. The following is a summary of the primary reforms proposed.

On September 21, 2023, the Commission issued separate orders on show cause proceedings finding that the existing tariffs of the California Independent System Operator Corporation (“CAISO”), ISO New England Inc. (“ISO-NE”), and the New York Independent System Operator, Inc. (“NYISO”) remain just and reasonable as to their collateral requirements for financial transmission rights (“FTR”) market participants. On the contrary, the Commission continued to find that Southwest Power Pool, Inc.’s (“SPP”) tariff appears to be unjust, unreasonable, and unduly discriminatory and therefore directed further briefing on a list of specific questions or for SPP to explain what changes to its tariff it believes would remedy the concerns identified by the Commission, within 60 days of the order.

On January 23, 2023, FERC set New York Power Authority’s (“NYPA”) proposed revisions to its Formula Rate Template for hearing, including changing NYPA’s allocation methodology for administrative and general (“A&G”) costs to a multi-factor, modified Massachusetts method (“Massachusetts Method”). In doing so, FERC found that NYPA had not supported its claim that the Massachusetts Method is appropriate for its specific circumstances and organizational structure or how the change would affect rates. FERC also conditionally accepted proposed changes to NYPA’s Formula Rate Protocols implementing transmission rate incentives and cost containment mechanisms for the Smart Path Connect Project.

On November 2, 2022, FERC denied a complaint brought by the Iowa Coalition for Affordable Transmission (“ICAT”) alleging that ITC Midwest, LLC’s (“ITC Midwest”) capital structure, with a targeted 60%-40% equity-to-debt ratio, is unjust and unreasonable. FERC found that ICAT failed to demonstrate that ITC Midwest’s use of its actual capital structure to determine its equity ratio is unjust and unreasonable and that ICAT’s reliance on prior FERC precedent was misplaced. Given these findings, FERC declined to address ICAT’s arguments for a 53% equity ratio.