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On July 17, 2014, FERC issued a notice of proposed rulemaking (“NOPR”) proposing to approve the North American Electric Reliability Corporation (“NERC”) Reliability Standard CIP-014-1.  The goal of the Reliability Standard is to enhance physical security measures for the most critical Bulk-Power System facilities and thereby lessen the overall vulnerability of the Bulk-Power System facilities against physical attacks.  FERC also proposed to direct NERC to develop two modifications to the standard.

On July 8, 2014, the U.S. Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) issued an order denying petitions for review of FERC’s January 19, 2012 order requiring certain market mitigation measures in ISO New England Inc.’s (“ISO-NE”) Forward Capacity Market (“FCM”).  The D.C. Circuit instead deferred to FERC’s reasoning, holding that FERC based its buyer-side and supplier-side mitigation measures on substantial evidence and undertook its balancing responsibilities with appropriate consideration.  Notably, the D.C. Circuit upheld FERC’s prior decision that the FCM must have an offer-floor mechanism to keep “out of market” capacity from bidding as a price-taker and depressing market-clearing prices.

On July 7, 2014, FERC petitioned the U.S. Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) for an en banc rehearing of the D.C. Circuit’s opinion that vacated FERC’s Order No. 745, which required organized wholesale energy markets to compensate demand response resources at the market price for energy (see June 13, 2014 edition of the WER).

On July 7, 2014, FERC approved a Stipulation and Consent Agreement between its Office of Enforcement (“Enforcement”), the North American Electric Reliability Corporation (“NERC”), and Arizona Public Service Company (“APS”) relating to the September 2011 Southwest power outage that affected approximately 2.7 million customers in Southern California, Arizona and Northern Baja Mexico. 

On June 23, 2014, the U.S. Supreme Court reversed the Environmental Protection Agency’s (“EPA”) “Tailoring Rule,” but affirmed EPA’s authority to regulate greenhouse gas (“GHG”) emissions under the Clean Air Act (“CAA”) Prevention of Significant Deterioration (“PSD”) permit program.  Writing for a five-member majority, Justice Antonin Scalia notably ruled that EPA could not “tailor” the PSD statutory permitting thresholds to exclude small GHG emitters from PSD program requirements.

On June 19, 2014, FERC conditionally accepted the California Independent System Operator Corporation’s (“CAISO”) proposed creation of a real-time market for imbalance energy, referred to as the Energy Imbalance Market (“EIM”).  The result of a broad stakeholder process in the Western U.S., the EIM provides a venue where participants are able to buy and sell five-minute real-time energy to meet energy imbalance needs.  The EIM allows for neighboring balancing authorities to voluntarily participate on the CAISO EIM platform. 

On June 19, 2014, FERC announced a new methodology to calculate the return on equity (“ROE”) for jurisdictional electric utilities and used that methodology to tentatively set the base ROE at 10.57 percent for the New England Transmission Owners (“NETOs”) operating in the ISO New England Inc. (“ISO-NE”).  FERC’s new methodology will incorporate both short-term and long-term measures of growth projections in estimating a company’s cost of equity, thus incorporating the two-step discounted cash flow (“DCF”) methodology FERC uses in setting ROEs for natural gas and oil pipelines.