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On July 17, 2020, FERC issued three orders relating to the executed cost-of-service agreement (“Mystic Agreement”) among Constellation Mystic Power, LLC (“Mystic”), Exelon Generation Company, LLC (“Exelon”), and ISO New England Inc. (“ISO-NE”).  The Mystic Agreement provides for cost-of-service compensation to Mystic for the continued operation of two gas-fired generating units.  In the first two orders, FERC addressed requests for rehearing of its 2018 orders accepting the Mystic Agreement (the “July 2018 Order” and the “December 2018 Order”), including its conclusion that Mystic should recover from ratepayers 91% of the operating costs of the Everett Marine Terminal (“Everett”), a non-jurisdictional liquified natural gas import terminal.  In its third order, FERC accepted in part a Mystic compliance filing submitted in response to the December 2018 Order.  Commissioner Glick issued dissents to each of the July 17 orders.  Commissioner Glick concluded that FERC was forcing consumers to pay the full cost of service for Mystic in order to “bail out” Everett, and that each of the orders exceeded FERC’s jurisdiction under the Federal Power Act (“FPA”).
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Continue Reading Divided FERC Permits Mystic to Recover Operating Costs of Non-Jurisdictional LNG Terminal

On June 22, 2020, FERC issued a declaratory order confirming its view that it shares jurisdiction with the United States Bankruptcy Court (“Bankruptcy Court”) over transportation agreements between ETC Tiger Pipeline, LLC (“ETC Tiger”) and Chesapeake Energy Marketing L.L.C. (“Chesapeake”). As a result, aside from obtaining approval from the Bankruptcy Court to reject its contracts with ETC Tiger, Chesapeake must seek a determination from FERC as to whether a filed rate may be modified or abrogated under the Natural Gas Act (“NGA”).…
Continue Reading FERC Asserts Concurrent Jurisdiction with Bankruptcy Court over Natural Gas Transportation Service Agreements

On June 18, 2020, FERC issued an order directing New Fortress Energy LLC (“New Fortress Energy”) to show cause, within 30 days, why the liquified natural gas (“LNG”) handling facilities it constructed adjacent to the San Juan Combined Cycle Power Plant in San Juan, Puerto Rico, are not subject to FERC’s jurisdiction under section 3 of the Natural Gas Act (“NGA”).
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Continue Reading New Fortress Energy Directed to Show Cause Why Its LNG Facility is Not Subject to FERC Jurisdiction

On June 9, 2020, FERC ordered amendments to its regulations to prohibit natural gas projects authorized under Sections 3 and 7 of the Natural Gas Act (“NGA”) from commencing construction activities until after (i) the deadline for filing a request for rehearing has lapsed without a request being filed, or (ii) FERC has acted upon the merits of any timely-filed request for rehearing (“Order No. 871”). The new regulation will become effective, without any opportunity to file comments, 30 days after the Final Rule is published in the Federal Register. Because FERC’s orders on rehearing sometimes take several months, and in some cases more than a year to be issued, both liquefied natural gas (“LNG”) and natural gas pipeline projects approved by FERC could be significantly delayed from commencing construction as a result of Order No. 871.…
Continue Reading FERC to Block LNG, Pipeline Project Construction Until After Rehearing Process is Complete

On May 20, 2020, FERC issued a notice that it will convene a Commissioner-led technical conference on Wednesday and Thursday, July 8–9, 2020 from approximately 9:00 a.m. to 5:00 p.m. Eastern time each day “to consider the ongoing, serious impacts that the emergency conditions caused by COVID-19 are having on various segments of the United States’ energy industry.” The notice stated that the technical conference will explore potential long-term impacts on FERC-regulated entities to ensure the continued efficient functioning of energy markets, electric transmission, transportation of natural gas and oil, and reliable operation of energy infrastructure, while also protecting consumers.…
Continue Reading FERC to Convene Technical Conference on Impacts of COVID-19 on the Energy Industry

On May 21, 2020, FERC issued a proposed policy statement setting forth a revised approach to addressing requests for waiver, including: waiver of rates; non-rate terms and conditions; market rules; and procedural deadlines that are set forth in tariffs, rate schedules, service agreements, and contracts on file with FERC (“Proposed Policy Statement”). FERC specifically proposes to:

  1. discontinue granting retroactive waivers of tariff provisions, with a few specified exceptions; and
  2. grant requests for “remedial relief” only when applicants demonstrate that (a) such a request does not violate the filed rate doctrine or rule against retroactive ratemaking, or (b) the requested relief is within FERC’s remedial authority under section 309 of the Federal Power Act (“FPA”) or section 16 of the Natural Gas Act (“NGA”).

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Continue Reading FERC Proposes and Seeks Comment on Changes to its Policies on Retroactive Waivers

On May 21, 2020, FERC issued Opinion No. 569-A, which revised the Commission’s methodology for determining whether an established rate of return on equity (“ROE”) is just and reasonable under section 206 of the Federal Power Act (“FPA”). Among other things, Opinion No. 569-A accepts the use of a third financial model for establishing just and reasonable ROE for Transmission Owners (“TOs”)—the “Risk Premium Model” (which was rejected in an earlier opinion)—in addition to the previously accepted two-step discount cash flow (“DCF”) model and capital asset pricing model (“CAPM”). Commissioner Richard Glick dissented in part, arguing that FERC was “once again changing course and revamping [its] ROE methodology” to the detriment of regulatory certainty among TOs and investors. In a related action, FERC contemporaneously issued a Policy Statement clarifying that the newly revised ROE methodology in Opinion No. 569-A applies to natural gas and oil pipelines, with certain exceptions.…
Continue Reading FERC Revises Public Utility ROE Methodology; Sets Policy for Natural Gas, Oil Pipelines

On May 1, 2020, the U.S. Department of Energy (“DOE”) issued a Notice of Proposed Rulemaking (“NOPR”) to update its National Environmental Policy Act (“NEPA”) implementing regulations concerning applications to import to, or export from, liquid natural gas (“LNG”) terminals. In particular, DOE has previously determined that the transportation of natural gas by marine vessels normally does not pose the potential for significant environmental impacts, and accordingly, exports of LNG should be considered a “categorical exclusion” from NEPA review.  Comments are due June 1, 2020.  …
Continue Reading DOE Proposes to Limit NEPA Review for LNG Export Applications

On April 30, 2020, FERC granted Tennessee Gas Pipeline Company, L.L.C.’s (“Tennessee Gas”) petition for declaratory order that requested authorization to charge market-based rates for its proposed firm flexible storage (“FS Flex”) service. In reaching its decision, FERC reviewed whether Tennessee Gas held significant market power in the relevant product and geographic markets where the FS Flex service was to be offered, with the geographic market including east Texas, Louisiana, Mississippi, and Alabama (“Gulf Coast Production Area”). FERC found that Tennessee Gas’s small market share and market concentration in the relevant markets adequately demonstrated that Tennessee Gas lacked market power and that there were no other factors indicating that Tennessee Gas would be able to exercise market power when providing the FS Flex service.…
Continue Reading FERC Grants Tennessee Gas Market-Based Rate Authority for Proposed FS Flex Service

On April 10, 2020, the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) granted Gulf South Pipeline Company, LP’s (“Gulf South”) petition for review in part, finding that FERC’s rejection of Gulf South’s proposed “incremental plus rates” for the Westlake Expansion Project, an expansion within the Lake Charles Zone, was arbitrary and capricious. In doing so, the D.C. Circuit found that FERC could easily distinguish between which customers are using the new facilities and which customers were using the gas pipeline’s existing facilities. The D.C. Circuit denied Gulf South’s petition for review on issues related to FERC’s denial of Gulf South’s proposed initial rate of return and depreciation rate for the Project, upholding FERC’s use of Gulf South’s last approved rate of return and depreciation rate.…
Continue Reading D.C. Circuit Reverses FERC’s Rejection of “Incremental Plus” Rates for Gas Pipeline Expansion Project