FERC Enforcement

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On March 17, 2016, the Federal Energy Regulatory Commission (“FERC” or the “Commission”) issued an order approving Reliability Standard PRC-026-1 (Relay Performance During Stable Power Swings). According to the Commission, PRC-026-1 is “designed to ensure that applicable entities use protective relay systems that can differentiate between faults and stable power swings.” The Commission also approved the proposed violation risk factors, violation severity levels, and implementation plan for PRC-026-1. Under the approved implementation plan, Requirement R1 of PRC-026-1 will become effective 12 months after Commission approval, and Requirements R2, R3, and R4 will become effective 36 months after Commission approval.

On February 1, 2016, FERC denied a complaint filed by NRG Power Marketing LLC (“NRG”) against the Midcontinent Independent System Operator, Inc. (“MISO”) alleging that MISO violated its tariff when it modified the Commercial Pricing Nodes (“CPNodes”) in the MISO South region to reflect the incorporation of Entergy into MISO. In particular, NRG claimed MISO’s modifications to the CPNodes effectively nullified the results of the Financial Transmission Right (“FTR”) auctions and rendered the FTRs purchased by NRG in those auctions “valueless.”

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 December 23, 2015, FERC rejected the New York Independent System Operator, Inc.’s (“NYISO”) proposed revisions to the Public Policy Transmission Planning Process (“Public Policy Process”) portion of its Comprehensive System Planning Process (“CSPP”) reflected in Attachment Y of its Open Access Transmission Tariff (“OATT”). In rejecting the proposal, FERC found that NYISO proposed tariff revisions that would subject nonincumbent transmission developers to an interconnection process with different requirements than those applied to incumbent Transmission Owners.

On November 30, 2015, the Commission rejected proposed revisions to Southwest Power Pool, Inc’s (“SPP”) Open Access Transmission Tariff (“OATT”) that would have created a new category of transmission facility—called a “Seams Transmission Project”—eligible for approval under SPP’s transmission planning and cost allocation processes.

On November 24, 2015, the Commission accepted and suspended proposed amendments to PJM Interconnection L.L.C.’s (“PJM”) Open Access Transmission Tariff (“OATT”) that allocated cost responsibility for two transmission upgrades: the Bergen-Linden Corridor Project, and the Artificial Island Project. In suspending the proposed amendments, the Commission ordered staff to convene a technical conference on whether the use of the solution-based distribution factor (“DFAX”) cost allocation methodology results in rates that are just and reasonable when applied to transmission enhancements and expansions that address reliability violations that are not related to flow on the planned transmission facility, as approved by the Commission in Schedule 12 of the PJM OATT for assigning the costs of transmission upgrades.

On June 18, 2015, FERC issued an order granting in part and denying in part a complaint, and instituting a 206 proceeding to examine the justness and reasonableness of MISO’s Facilities Construction Agreement (“FCA”), Generator Interconnection Agreement (“GIA”), and Multi-Party Facilities Construction Agreement (“MPFCA”).  FERC determined that MISO’s pro forma FCA and GIA may be unjust, unreasonable, or unduly discriminatory or preferential because they treat customers of an affected system operator and those of a directly-connected transmission owner differently without providing any increased level of service.  The case deals with the means by which transmission owners are compensated for network upgrades associated with generator interconnection requests. 

On February 20, 2015, the Commission conditionally approved PJM Interconnection, L.L.C.’s (“PJM”) proposed modifications to the PJM Operating Agreement (“OA”) and the PJM Open Access Transmission Tariff (“OATT”) to allow for the planning and selection of “Multi-Driver” projects—i.e., transmission enhancements or expansions that address a combination of reliability, market efficiency, and public policy objectives—in the PJM Regional Transmission Expansion Plan (“RTEP”).  Additionally, the Commission approved an associated cost allocation method proposed by the PJM Transmission Owners for the newly adopted process.  Currently, PJM’s process selects projects based on one factor, but does not have a procedure in place for selecting projects based on a combination of factors.

On December 18, 2014, FERC granted a Petition for Declaratory Order filed by the Public Service Company of Colorado (“PSCo”) which requested certain clarifications regarding the application of FERC’s prior approval jurisdiction under section 203 of the Federal Power Act (“FPA”) in the context of the assertion of eminent domain by a political subdivision of a state over the transmission assets of a public utility.  In granting the Petition, FERC clarified that transfers by condemnation, regardless of the fact that they are involuntary, are appropriately within the domain of FERC’s 203 prior approval authority.