FERC Enforcement

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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.

On October 20, 2022, the Federal Energy Regulatory Commission (“FERC”) issued an Order rejecting a request by the California Public Utilities Commission (“CPUC”) seeking a rehearing of a Justification Order.  FERC’s Order declining rehearing comes after an October 7, 2020 filing where Tri-State Generation and Transmission Association, Inc. (“Tri-State”) filed its justification for spot market sales that exceeded the Western Electricity Coordinating Council (“WECC”) soft price cap of $1,000/MWh during the summer months of 2020.  On May 20, 2022, the Commission issued an order finding that Tri-State had sufficient justification for certain spot market sales above the soft price cap but had not justified amounts charged above the relevant index price.  Ultimately, the Commission rejected the CPUC’s rehearing request.

On September 30, the U.S. Court of Appeals for the Tenth Circuit issued an opinion in Save the Colorado, et al. v. Spellmon. The case arose from various conservation group challenges to the U.S. Army Corps of Engineers (Corps) and U.S. Fish and Wildlife Service’s (Service) decision to grant the city and county of Denver, acting through its Board of Water Commissioners (Denver Water or municipality), a discharge permit to expand the reservoir of its Gross Reservoir Hydroelectric Project, which is licensed by the Federal Energy Regulatory Commission (FERC or Commission). The central issue revolved around whether the U.S. courts of appeals have exclusive jurisdiction over challenges to non-FERC decisions arising under statutes related to the development of hydropower projects under the Federal Power Act (FPA). The Tenth Circuit ultimately held that petitions against orders by non-FERC agencies do not warrant exclusive jurisdiction in the U.S. courts of appeals.

On July 28, 2022, FERC proposed a new “duty of candor” rule that would broadly apply to “all entities communicating with the Commission or other specified organizations related to a matter subject to the jurisdiction of the Commission.” According to the Commission, the Notice of Proposed Rulemaking (“NOPR”) is intended to capture the types of communications that may not have been included in the Commission’s existing communication rules and policies, some of which have an existing duty of candor standard.

On June 24th and 27th, 2022 FERC approved two stipulations and consent agreements between FERC’s Office of Enforcement (“Enforcement”) and two separate project developers. First, sPower Development Company, LLC (“sPower Devco”) agreed to a civil penalty of $24,000 after Enforcement determined that sPower Devco violated PJM Interconnection, L.L.C.’s (“PJM’s”) Tariff by submitting inaccurate information in PJM’s interconnection process. Second, Salem Harbor Power Development LP (“Harbor Power Devco”) agreed to a civil penalty of $17 million, to disgorge $26.7 million in profits, and to submit to compliance monitoring after Enforcement found that it collected capacity revenues on a project that had not yet been built nor was in commercial operation.

On April 21, 2022, FERC issued an order assessing a civil penalty of $600,000 to Ampersand Cranberry Lake Hydro, LLC (“Ampersand”), licensee for the 595 kilowatt (kW) Cranberry Lake Hydroelectric Project in St. Lawrence County, New York, for violation of Article 5 of the project’s license, which requires a licensee to retain possession of all project property covered by the license.

On March 28, 2022 and March 29, 2022, FERC issued two orders approving stipulation and consent agreements between FERC’s Office of Enforcement and Dynegy Marketing and Trade, LLC (“Dynegy”) and Constellation NewEnergy Inc. (“Constellation”), respectively. Among other things, Dynegy agreed to pay a $450,000 civil penalty for alleged violations of PJM Interconnection, L.L.C. (“PJM”) capacity tariff requirements, and Constellation agreed to pay a $2.4 million civil penalty for alleged violations of California Independent System Operator Corp. (“CAISO”) resource adequacy tariff requirements.