FERC Practice

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On October 19, 2023, FERC issued a final rule directing the North American Reliability Corporation (“NERC”) to develop or modify reliability standards to address reliability concerns attributable to inverter-based resources (“IBRs”)—i.e., solar photovoltaic, wind, fuel cell, and battery storage resources. FERC explained that the current reliability standards were designed for a grid mostly comprised of synchronous resources, where all generators are operating at the same frequency across the grid. In recent years, there has been a substantial increase in renewable generation, such as wind and solar, which is largely nonsynchronous, meaning generators that do not operate at the same frequency as the synchronized grid. Nonsynchronous resources are often programmed to trip offline during system disturbances, resulting in the potential loss of significant amounts of generation at one time. FERC issued this order in response to the “unprecedented proportion of nonsynchronous resources” expected to connect to the grid in the coming years and the “material impact” of IBRs on the Bulk Power System, including at least 12 documented events where IBRs responded “unexpectedly and adversely” to normally cleared line faults and the largest IBR-related disturbance NERC has ever recorded. The rule directs NERC to submit the updated standards by November 4, 2026.

On September 29, 2023, FERC approved Tennessee Gas Pipeline Company, L.L.C.’s (“TGP”) proposal to lease intrastate capacity from Kinder Morgan Texas Pipeline LLC (“Kinder Morgan”) to offer a new hourly transportation “PowerServe” service. According to the parties’ joint application, PowerServe will offer increased flexibility to shippers serving gas-fired power generation facilities that backstop renewable energy sources. Commissioner Danly concurred in part and dissented in part with a separate statement that has not been issued at the time of this article.

On September 21, 2023, the Commission found that J.P. Morgan Investment Management Inc. (“J.P. Morgan Investment”) is an affiliate of Mankato Energy Center, LLC and Mankato Energy Center II, LLC (“Mankato Companies”) through their upstream owner, IIF US Holding 2 LP (“IIF US Holding 2”) because there is liable to be an absence of arm’s-length bargaining in transactions between Mankato Companies and J.P. Morgan Investment.  In doing so, FERC considered, among other things, the power delegated by IIF US Holding 2 to J.P. Morgan Investment, which serves as IIF US Holding 2’s investment advisor.  Commissioner Danly concurred in the result in a separate statement, and Chairman Willie Phillips concurred in a separate statement.

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 September 21, 2023, the Commission approved, in part, PJM Interconnection L.L.C.’s (“PJM”) proposed tariff revisions regarding the calculation of the Financial Transmission Right (“FTR”) credit requirement (“September Order”). PJM’s revisions, among other things, would calculate collateral based on a historical simulation model (“HSIM”) instead of a historical value model. FERC accepted the proposal with the exception of PJM’s proposed 97% confidence interval in the HSIM model, and instead required PJM to use a 99% confidence interval.

On August 10, 2023 in response to incentives made available through the Bipartisan Infrastructure Law and the Inflation Reduction Act, the U.S. Department of Energy (“DOE”) proposed reforms to its regulations governing the coordination of Federal authorizations for the development of interstate, onshore electric transmission facilities and to establish the Coordinated Interagency Transmission Authorizations and Permits Program (“CITAP Program”). The main goal of the CITAP Program, which will be administered by DOE’s Grid Deployment Office, is to “reduce the time required for transmission project developers to receive decisions on Federal authorizations for transmission projects.” Public comments are due by 11:59pm ET on October 2, 2023.

On July 27, 2023, the U.S. Supreme Court vacated the U.S. Court of Appeals for the Fourth Circuit’s decision to grant the Wilderness Society’s motions to stay of construction on the Mountain Valley Pipeline (“MVP”) pending that court’s review of the Forest Service’s amended Forest Management Plan. The Supreme Court’s order grants MVP’s emergency application to vacate the Fourth Circuit’s stay orders and permits MVP to resume construction on the pipeline.

On July 3, 2023, FERC affirmed its earlier determination that Bluescape Energy Partners, LLC’s (“Bluescape”) appointment of a non-independent director to Evergy Inc.’s (“Evergy”) Board of Directors overcomes the rebuttable presumption of a lack of control under FERC’s regulations that normally applies when a company owns less than 10 percent of another company’s equity (see October 27, 2022 edition of the WER).  Additionally, FERC clarified that the appointment of a non-independent director is a per se finding of control and found affiliation between Bluescape and Evergy, and therefore between Bluescape and Evergy’s public utility subsidiaries, pursuant to the definition of “affiliate” under FERC’s rules.

On July 13, 2023, FERC on rehearing set aside its prior order that had accepted Southwest Power Pool, Inc.’s (“SPP”) proposal to establish a case-by-case process to allocate, on a regional, postage-stamp basis, all of the costs of a transmission facility with a voltage level between 100 kV and 300 kV (“Byway facility”).  In setting aside its prior approval, FERC found that SPP’s Proposal granted the SPP Board too much discretion in allocating the costs of Byway facilities. Commissioners Mark Christie and James Danly each concurred with separate statements.  FERC’s rejection marked the second time SPP’s proposal failed to obtain Commission approval.