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On November 22, 2019, FERC issued three separate orders accepting, subject to further compliance, California Independent System Operator Corporation’s (“CAISO”), the Midcontinent Independent System Operator, Inc.’s (“MISO”), and ISO New England, Inc.’s (“ISO-NE”) proposals to comply with FERC Order Nos. 841 and 841-A—addressing energy storage resources’ (“ESR”) participation in Regional Transmission Organization/Independent System Operator (“RTO/ISO”)-operated markets (see February 20, 2018 edition of the WER; April 10, 2019 edition of the WER; and May 22, 2019 edition of the WER for more background and context on Order No. 841). The November 22 orders, which follow FERC’s previous acceptance of PJM Interconnection, L.L.C.’s and Southwest Power Pool, Inc.’s storage participation proposals (see October 24, 2019 edition of the WER), found that the RTOs/ISOs generally complied with the requirements of Order No. 841. FERC ordered certain modifications to each RTO’s/ISO’s proposals, addressing metering and accounting practices, ESR bidding parameters, minimum size requirements, and transmission service charges, in addition to other issues. Commissioner McNamee issued separate opinions concurring with all three orders.

On November 21, 2019, FERC announced that public utilities with transmission formula rates must revise those rates to account for changes in accumulated deferred income taxes (“ADIT”) resulting from the Tax Cuts and Jobs Act of 2017 (“TCJA”). Utilities with transmission formula rates under an Open Access Transmission Tariff, a transmission owner tariff, or a rate schedule must:

  • include a mechanism to deduct any excess ADIT from, or add any deficient ADIT to, their rate base in order to ensure rate base neutrality (the “Rate Base Adjustment Mechanism”);
  • return to, or recover from, customers any excess or deficient ADIT through an adjustment to the formula rate’s income tax allowance (“Income Tax Allowance Adjustment Mechanism”); and
  • incorporate a new permanent worksheet into the formula rate to annually track ADIT amounts.

FERC declined to adopt any compliance requirements for transmission stated rates, finding that the utility’s next rate case would be the most appropriate place to address excess or deficient ADIT resulting from the TCJA. Compliance filings are due the later of: (1) 30 days from the effective date of the final rule; or (2) the utility’s next informational filing following the final rule. 

On September 19, 2019, one Independent and four Democratic Senators wrote a letter to FERC which expressed concerns over recent actions taken by FERC and which directed a series of questions to FERC regarding the “apparent erosion” of FERC’s role in preventing fraud and manipulation in U.S. energy and financial markets (see October 3, 2019 edition of the WER). The concerns expressed by the senators related to (i) the decline in the number of civil penalty actions initiated by FERC; (ii) the closing of FERC’s Division of Energy Market Oversight (“DEMO”), and (iii) FERC’s ending its policy on issuing Notices of Alleged Violations (“NAVs”) regarding investigations.

On November 5 and 6, 2019, FERC staff held a two-day workshop at its headquarters in Washington, DC on technologies that increase the capacity, efficiency, or reliability of transmission facilities.  Panelists and FERC staff discussed technologies that are currently used in transmission planning and operations, challenges associated with the deployment of grid-enhancing technologies, and regulatory actions that might promote increased adoption of these technologies going forward. A formal notice requesting written comments will soon be issued. 

On October 30, 2019, the House Committee on Energy & Commerce held a hearing in furtherance of its development of comprehensive climate legislation focused on reaching a 100 percent clean energy economy by 2050.  John Bear, the Chief Executive Officer of the Midcontinent Independent System Operator, Inc. (“MISO”) testified at the hearing while Southwest Power Pool, Inc. (“SPP”) and PJM Interconnection, L.L.C. (“PJM”) provided input in response to an earlier request from the Committee. The three Regional Transmission Organizations (“RTOs”) generally reported increases in both renewable and distributed generation in their regions over the past several years, highlighting the operational and reliability challenges that can come along with the growing prevalence of both. The RTOs also recognized the widely divergent state decarbonization policies and the associated impacts to the regional wholesale markets.

On October 17, 2019, FERC directed PJM Interconnection, L.L.C. (“PJM”) and other interested parties to provide information with respect to how uplift costs—i.e., the costs associated with make-whole payments provided by Regional Transmission Organizations (“RTOs”) and Independent System Operators (“ISOs”) to market participants whose commitment and dispatch resulted in a shortfall between the generator’s offer and the revenue earned through market-clearing prices—should be allocated to virtual transactions in PJM, and in particular to Up-to-Congestion (“UTC”) transactions. FERC’s order seeks to update the record in an ongoing Federal Power Act Section 206 investigation into PJM’s UTC and uplift practices that FERC initiated in 2014.

On October 17, 2019, FERC denied Public Citizen, Inc.’s (“Public Citizen”) complaint alleging that PJM Interconnection, L.L.C. (“PJM”) recovered improper campaign contributions and lobbying expenses through its filed rate and failed to disclose its spending on political activity. In doing so, FERC concluded that PJM could recover the expenses in question through its rates because they represent an educational, outreach, or informational function essential to PJM’s core operations and because PJM determined that such expenditures are in the collective best interest of PJM’s stakeholders.

On October 17, 2019, FERC issued two separate orders accepting in part PJM Interconnection L.L.C.’s (“PJM”), and Southwest Power Pool, Inc.’s (“SPP”) proposals to comply with FERC’s orders addressing energy storage resources’ (“ESR”) participation in Regional Transmission Organization (“RTO”)-operated markets, subject to further compliance (see February 20, 2018 edition of the WER; April 10, 2019 edition of the WER; and May 22, 2019 edition of the WER for more background and context on Order No. 841). SPP’s and PJM’s ESR participation proposals are the first to be accepted by FERC, which found that the RTOs generally complied with Order No. 841 by enabling ESRs to provide all services they are technically capable of providing, to be compensated for those services in the same manner as other resources, and by recognizing ESRs’ unique physical and operational characteristics. However, FERC initiated further proceedings to require both RTOs to include the minimum run-time requirements applicable to ESRs and other generation resources in their Tariffs, and initiated an investigation into whether PJM’s application of minimum run-time requirements to ESRs participating in its capacity markets is just and reasonable. FERC also directed SPP and PJM to take further action, requiring both RTOs to submit compliance filings within 60 days that, as one example, address the basic metering and accounting practices applicable to ESRs. Commissioner McNamee issued separate opinions concurring with both orders.

On October 17, 2019, FERC denied rehearing of its order denying a complaint filed by CXA La Paloma, LLC (“La Paloma”), which argued that the California Independent System Operator Corporation’s (“CAISO”) resource adequacy regime had become unjust and unreasonable. Stakeholders asserted, among other things, that FERC ignored certain evidence suggesting inadequate capacity prices would lead to near-term reliability problems; FERC disagreed, restating the evidence and arguments initially presented in the complaint, and explaining that based on the evidence presented it did not find CAISO’s resource adequacy regime unjust and unreasonable. In its order denying rehearing, FERC weighed in (again) on low capacity prices and reliability concerns in California, as well as the scope of its section 206 authority.     

On October 8, 2019, FERC accepted ISO New England Inc.’s (“ISO-NE”) public and private versions of a filing containing the de-list bids (“De-List Bids”) and substation auction test prices (“Test Prices”) for the fourteenth Forward Capacity Auction (“FCA 14”), to be held in February 2020 and to become effective August 27, 2019. In the process, FERC also granted ISO-NE’s requested waiver of FERC’s regulations requiring parties requesting privileged treatment of their filings to provide a copy of such non-public documents to intervenors who execute a protective agreement.