On March 25, 2020, the United States Court of Appeals for the Eighth Circuit (“Eighth Circuit”) upheld a Minnesota law granting a right of first refusal (“ROFR”) to incumbent electric transmission owners to construct, own, and maintain electric transmission lines connecting to their existing facilities. In its complaint brought before the United States District Court for the District of Minnesota (“District Court”), LSP Transmission Holdings, LLC (“LSP”) argued that Minnesota’s ROFR statute discriminates against out-of-state transmission developers and places an undue burden on interstate commerce in violation of the dormant Commerce Clause. The Eight Circuit affirmed the District Court’s dismissal of LSP’s complaint finding, de novo, that Minnesota’s ROFR provision does not violate the dormant Commerce Clause.
Continue Reading Eighth Circuit Upholds Minnesota’s Right of First Refusal Law

On March 20, 2020, FERC issued an order accepting PJM Interconnection, L.L.C.’s (“PJM”) proposal as part of its Regional Transmission Expansion Plan (“RTEP”) to allow project developers to submit binding cost commitments on a voluntary basis, and to undertake a comparative review and analysis of these commitments in selecting transmission projects. FERC accepted PJM’s proposal over the objections of certain PJM transmission owners, and concluded that the proposal would assist PJM in selecting the most efficient and cost-effective transmission solutions in its RTEP while providing greater transparency into PJM’s evaluation process.
Continue Reading FERC Accepts PJM Plan to Review and Analyze Binding Cost Commitments in its RTEP

On March 17, 2020, FERC accepted revisions to the PJM Interconnection LLC (“PJM”) Open Access Transmission Tariff (“Tariff”) to establish enhanced procedures for compliance with the North American Electric Reliability Corporation (“NERC”) reliability standard CIP-024-2.  A majority of FERC Commissioners found that the Tariff revisions, captured in a new proposed Tariff Attachment M-4, appropriately balanced transparency obligations in transmission planning with the need to maintain strict confidentiality regarding the names, locations, and vulnerabilities of CIP-014-2 facilities.  In a separate opinion, Commissioner Glick dissented, in part, arguing that the proposal inappropriately categorized Attachment M-4 projects as a subset of “Supplemental Projects” under the Tariff and PJM Operating Agreement. Commissioner Glick argued that the proposal improperly subjected such projects to non-regional cost allocation, contrary to cost-causation and other transmission planning principles expressed in Commission Order Nos. 890 and 1000.

Continue Reading FERC Accepts Separate Planning Process for CIP-014 Mitigation Projects in PJM

I. Summary of NOPR

On March 19, 2020, the Federal Energy Regulatory Commission (FERC) issued a Notice of Proposed Rulemaking (NOPR) proposing to revise its electric transmission incentive policy under Federal Power Act (FPA) Section 219[1] “to stimulate the development of transmission infrastructure needed to support the nation’s evolving generation resource mix, technological innovation and shifts in load patterns.”[2] FERC’s NOPR includes a number of changes to its transmission incentives policy and seeks comment from industry participants.

FERC’s NOPR proposes to shift the focus in granting transmission incentives from an approach based on the risks and challenges faced by a project to an approach based on economic and reliability benefits to consumers.

The NOPR intends to replace the current policy of limiting incentives to the base rate of return on equity (ROE) zone of reasonableness with a 250-basis-point cap on total ROE incentives. The NOPR proposes that transmission providers should be allowed to seek removal of the ROE zone-of-reasonableness restrictions placed on previously-granted incentives and to replace them with the hard cap.

FERC proposes to increase the ROE incentive for joining and remaining a member of a Regional Transmission Organization (RTO), an Independent System Operator (ISO) or other Commission-approved transmission organization (collectively hereinafter, “RTO”) from 50 basis points to 100 basis points, and to make the incentive available regardless of whether such participation is voluntary.

The NOPR also offers a 50-basis-point ROE incentive for transmission projects that meet a pre-construction benefit-to-cost ratio in the top 25 percent of projects examined over a sample period, and an additional 50 basis points for projects that meet a post-construction benefit-to-cost ratio in the top 10 percent of projects studied over the same sample period.

FERC further proposes a 100-basis-point ROE incentive for transmission technologies that enhance reliability, efficiency and capacity, as well as improve the operation of new or existing transmission facilities. The NOPR also proposes an incentive of up to 50 basis points for projects that demonstrate reliability benefits by providing a quantitative analysis, where possible, or a qualitative analysis.

Finally, FERC plans to retain several existing non-ROE incentives, including those related to Construction Work In Progress (CWIP), hypothetical capital structure, accelerated depreciation for rate recovery, and regulatory asset treatment, that remain vital in removing regulatory barriers and other impediments to transmission investment.

Commissioner Richard Glick dissented in part from the NOPR.

The NOPR seeks comment on these proposed reforms 90 days from the date of its publication in the Federal Register.


Continue Reading Executive Summary of FERC’s Notice of Proposed Rulemaking Regarding its Electric Transmission Incentive Policy Under Federal Power Act Section 219

On March 10, 2020, FERC accepted and suspended Midcontinent Independent System Operator, Inc.’s (“MISO”) proposal to allow for the selection of a storage facility as a transmission-only asset (“SATOA”) in the MISO Transmission Expansion Plan (“MTEP”). FERC found that MISO failed to demonstrate that the proposal was just and reasonable and not unduly discriminatory, and directed staff to convene a technical conference to explore issues including:

  1. Evaluation and selection criteria for a SATOA in the MTEP;
  2. Permitted market activities for SATOAs and potential wholesale market impacts;
  3. How MISO’s current formula rate structure accommodates cost recovery for SATOAs;
  4. A SATOA’s potential impact on MISO’s generator interconnection queue; and
  5. Operating guidelines that will apply to a SATOA.


Continue Reading FERC Orders Technical Conference on MISO’s Proposal to Include Storage in its Transmission Planning Process

On March 4, 2020, FERC denied rehearing of its prior order rejecting the New Jersey Board of Public Utilities’ (“NJBPU”) complaint alleging unjust and unreasonable cost allocations for the Bergen-Linden Corridor transmission project (“BLC Project”). FERC found that it had already fully addressed the issues raised in the original complaint and that there was no need for an evidentiary hearing to evaluate disputed facts related to the BLC Project.
Continue Reading FERC Denies Rehearing of Order Dismissing Cost Allocation Complaint for Bergen-Linden Corridor Project

On February 27, 2020, FERC accepted a compliance filing from PJM Interconnection, L.L.C. (“PJM”) that proposed identical revisions to Attachment K of the PJM Tariff and Schedule 1 of the PJM Operating Agreement, finding that the revisions met the requirements of Opinion No. 566, issued August 26, 2019. In accepting PJM’s compliance filing, FERC found that the PJM Tariff now includes greater transparency regarding the process used to evaluate requests to build network upgrades in order to obtain Incremental Auction Revenue Rights (“IARRs”).
Continue Reading FERC Accepts Revisions to PJM’s Tariff Regarding Incremental Auction Revenue Right Study Process

On January 31, 2020, FERC rejected Southwest Power Pool, Inc.’s (“SPP”) proposed Tariff revisions to eliminate SPP’s current policy of offering transmission revenue credits as reimbursement for certain transmission network upgrades, and to instead provide term- and value-limited transmission congestion rights for all such upgrades. Under SPP’s proposal, a party that funds certain network upgrades would receive incremental transmission congestion rights for a limited term of up to twenty years or until the party that sponsored the upgrade recovered their costs, with interest. FERC held that this cap on recovery would disincentivize construction of merchant transmission projects, and rejected SPP’s proposal without prejudice to SPP submitting a revised proposal that does not impose a cap on the term and value of the incremental transmission congestion rights.
Continue Reading FERC Rejects Without Prejudice SPP Proposal to Eliminate Transmission Revenue Credits and Cap Transmission Congestion Rights

On January 24, 2020, FERC issued its rehearing order on several different issues regarding the recovery of costs associated with the abandoned Potomac-Appalachian Transmission Highline Project (“PATH”). Previously, in January 2017, FERC reduced PATH’s return on equity (“ROE”) during its abandonment phase from 10.4 to 8.11 percent, and denied PATH’s recovery of expenditures related to certain public relations activities. On rehearing, FERC:

  1. Upheld its prior determination that the project’s abandonment significantly reduced its risk profile;
  2. Declined to address PATH’s arguments that FERC erred in reducing its ROE to 8.11 percent, and instead established a paper hearing addressing whether and how FERC’s proposed revised base ROE methodology should apply; and
  3. Reversed its prior denial for PATH to recover expenditures related to public information campaigns about the benefits and licensing of the project.
    Continue Reading On Rehearing, FERC Authorizes PATH Project to Recover Abandoned Plant Costs; Directs Further Briefing on ROE

On January 10, 2020, FERC issued two separate orders approving Stipulation and Consent Agreements (“Agreements”) between the Office of Enforcement (“Enforcement”) and Emera Energy Incorporated (“Emera Energy”) and Exelon Generation Company, LLC (“Exelon”), respectively. Both Agreements relate to alleged violations of ISO New England Inc.’s (“ISO-NE”) Tariff. Specifically, with respect to Emera Energy, FERC alleged that Emera Energy violated the Tariff’s requirement that evidence supporting Fuel Price Adjustment Requests (“FPA Requests”) must reflect an arm’s length transaction. With respect to Exelon, FERC alleged that Exelon misreported the type and quantity of start-up fuel used by its Mystic 7 generating unit (“Mystic 7”). In both cases, FERC found that the Agreements were in the public interest and the Enforcement investigations were resolved on fair and equitable terms.

Continue Reading FERC Issues Two Orders Approving Civil Penalties and Disgorgement of Profits for Violations of ISO New England Inc.’s Tariff