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On June 7, 2013, the United States Court of Appeals for the Seventh Circuit (“Seventh Circuit”) upheld the majority of a FERC order that approved the Midcontinent Independent System Operator, Inc.’s (“MISO”) cost allocation methodology for multi-value projects (“MVPs”) (see October 24, 2011 edition of the WER).  The Seventh Circuit affirmed the majority of FERC’s approval of MISO’s MVP cost allocation, dismissed one issue, and remanded another back to FERC for further analysis.

On June 7, 2013, President Obama issued a memorandum titled “Transforming our Nation’s Electric Grid Through Improved Siting, Permitting and Review.”  The memo directs the Secretaries of Agriculture, Commerce, Defense, Energy, and the Interior (collectively the “Secretaries”) to engage in certain actions aimed at establishing energy right-of-way corridors on Federal lands (“energy corridors”) and improved transmission siting, permitting, and review processes.  The memo focuses on expanding energy corridors outside those designated by the Secretaries of the Interior and Agriculture in 2009 in 11 contiguous Western States (as defined in section 368 of the Energy Policy Act of 2005).

On June 5, 2013, FERC issued an order conditionally granting the California Independent System Operator Corporation’s (“CAISO”) petition for declaratory order, allowing CAISO to force certain power sellers, including JP Morgan Ventures Energy Corp. (“JP Morgan”), to reimburse CAISO electricity distributers for overpayments caused by a flaw in CAISO’s bid cost recovery calculation.  In the order, FERC approved CAISO’s resettlements spanning from the date that CAISO had first implemented its flawed bid cost recovery mechanism, April 1, 2009, until the effective date of the tariff revision which addressed the calculation’s defect, March 25, 2011.  The resettlement amount for the entire period is expected to total $52 million in reimbursement costs.

On May 31, 2013, FERC approved a settlement (“Settlement Agreement”) between its Office of Enforcement (“Enforcement”) and Washington 10 Gas Storage Corporation (“Washington 10”) and DTE Gas Company (“DTE Gas”) (both subsidiaries of DTE Energy (“DTE”)).  Specifically, Enforcement concluded that Washington 10 violated FERC regulations by: (1) misclassifying certain firm transportation storage contracts; (2) misclassifying Park and Loan (“PAL”) contracts, and therefore contracting for an unauthorized service; (3) filing inaccurate semi-annual reports; and (4) failing to file annual reports on hub activities.  Additionally, Enforcement concluded that DTE Gas engaged in “flipping” by repeatedly releasing discounted rate capacity to affiliated replacement shippers on an alternating monthly basis to avoid competitive bidding requirements.

On June 6, 2013, the Edison Electric Institute (“EEI”) released a white paper recommending that FERC adjust its methodology for calculating utilities’ return on equity (“ROE”) for transmission investments.  The white paper, “Transmission Investment: Adequate Returns and Regulatory Certainty Are Key,” highlighted that FERC’s discounted cash flow (“DCF”) model – a model used to estimate a utility’s cost of equity for setting regulated returns – is outdated and can result in substantially lower returns on equity, and therefore, recommended changes to the methodology. 

On Wednesday, June 5, 2013, the Department of Interior’s Bureau of Ocean Energy Management (“BOEM”) issued the Final Sale Notice for the sale of commercial wind energy leases on the Outer Continental Shelf.  The auction is scheduled to take place on July 31, 2013 and will offer 164,750 acres for commercial wind energy leasing off the coast of Rhode Island and Massachusetts.  BOEM will simultaneously auction the area as two separate leases.

On May 28, 2013, various news outlets reported that FERC Chairman Jon Wellinghoff had tendered his resignation to President Barrack Obama.  Although nothing official has been released by FERC, these same news outlets also reported that Chairman Wellinghoff intends to remain at FERC until his replacement is confirmed by the United States Senate.  If no replacement is confirmed by June 30, 2013, the end of Chairman Wellinghoff’s term, he may hold-over until the end of the Congressional term or until a replacement is confirmed.

On May 23, 2013, FERC approved revisions to the Midcontinent (previously Midwest) Independent System Operator, Inc.’s (“MISO”) Agreement of Transmission Facilities Owners to Organize the Midwest Independent Transmission System Operator, Inc. (“Transmission Owners Agreement”) that grant increased authority to state regulators.  The revisions allow for the Organization of MISO States (“OMS”) – a regional state committee comprised of state, city, and local regulatory officials within MISO’s footprint – to have enhanced authority in determining transmission cost allocation methodologies, by requesting that MISO make a filing pursuant to Section 205 of the Federal Power Act (“FPA”).

On May 28, 2013, FERC announced that it will hold a technical conference on the California Independent System Operator Corporation’s (“CAISO”) proposal to provide financial assistance to resources that are either at risk for retirement or are uneconomic, but are still needed for flexible capacity and local reliability (the “FLRR Mechanism”).

On May 20, 2013, the U.S. Supreme Court ruled that a “windfall tax” imposed on a subsidiary of PPL Corporation (“PPL”) by the United Kingdom (“U.K.”) is creditable for U.S. tax purposes.  The Supreme Court held that the predominant character of the tax was tantamount to an excessive profit tax, and therefore, is classified as an income tax and creditable for U.S. purposes.  The Supreme Court’s ruling overturned the U.S. Court of Appeals for the Third Circuit’s (“Third Circuit”) prior decision on the matter.