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On July 1, 2016, the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) rendered an opinion affecting the return-on-equity and cost-of-service components of oil pipeline ratemaking. Specifically, the D.C. Circuit ordered FERC to either justify or amend its practice of granting income tax allowances for limited partnership pipelines, questioned FERC’s rationale in deciding what financial data should be used to calculate real rate of return on equity, and upheld FERC’s determination that a pipeline’s cost-of-service rates can already account for changes in costs associated with rate indexes. The D.C. Circuit remanded the case back to FERC on the income tax allowance and real rate of return on equity issues.

On July 7, 2016, FERC granted waiver of certain provisions of the Southwest Power Pool, Inc. (“SPP”) Open Access Transmission Tariff in order to permit SPP to implement the revenue crediting process for certain transmission upgrades. In its order, FERC noted that SPP’s implementation of the revenue crediting process had been delayed for eight years, and that “[u]pgrade sponsors who have been negatively affected by SPP’s delay will finally, through this order, get the appropriate relief.”

On July 1, 2016, the U.S. Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) denied a petition to review FERC’s determination that the “Mobile-Sierra” presumption does not preserve “right of first refusal” provisions that are otherwise required to be removed from tariffs and agreements following Order No. 1000.

On June 17, 2016, FERC declined to exercise primary jurisdiction over an interconnection dispute between Cottonwood Wind Project, LLC (“Cottonwood”) and Nebraska Public Power District (“NPPD”) because FERC determined that the controversy centered on the parties’ actions and that resolution of the case would only affect the parties to the specific agreement at issue. Specifically, FERC explained that the dispute over the interconnection agreement, which was based on FERC’s pro forma Large Generator Interconnection Agreement (“LGIA”), was a contractual dispute that failed to satisfy the factors set out in FERC’s “Arkla” test. As a result, FERC’s order dismissed the complaint brought by Cottonwood against the NPPD, which alleged that certain pre-construction authorizations were required under the parties’ LGIA. FERC’s refusal to assume jurisdiction over the dispute likely means a court will have to resolve the case.

On June 17, 2016, the Public Service Commission of the District of Columbia (“DCPSC”) denied multiple applications for reconsideration of its March 23, 2016 order approving the merger (“Merger Order”) between Pepco Holdings, Inc. (“Pepco”) and Exelon Corporation (“Exelon”) (see March 29, 2016, edition of the WER). The applications for reconsideration had been filed by several opponents of the merger. Going forward, those opponents must decide if they want to pursue a judicial appeal of the Merger Order. 

On June 21, 2016, the U.S. District Court of Wyoming (“District Court”) rejected the Bureau of Land Management’s (“BLM”) regulations for hydraulic fracturing on federal and Indian lands. In doing so, the District Court held that (1) BLM’s originating land use, management, and planning statutes did not grant BLM authority to regulate hydraulic fracturing and (2) Congress’s exclusion of non-diesel hydraulic fracturing from the Environmental Protection Agency’s (“EPA”) underground injection control (“UIC”) programs means that no federal agency can regulate hydraulic fracturing.

On June 16, 2016, FERC granted Southwest Gas Corporation’s (“Southwest Gas’s”) request for rehearing and approved Paiute Pipeline Company’s (“Paiute’s”) proposal to impose a fuel retention charge of zero, and a separate, stand-alone lost and unaccounted for (“L&U”) gas charge, for transportation service that only utilizes Paiute’s Adobe Lateral.

On June 16, 2016, FERC denied as inconsistent with section 210 of the Public Utility Regulatory Policies Act of 1978 (“PURPA”) a proposal that would require members of a generation and transmission cooperative to compensate the cooperative when the members purchase power from qualifying facilities (“QFs”) instead of from the cooperative. Specifically, Tri-State Generation and Transmission Association, Inc. (“Tri-State”) had petitioned FERC for a declaratory order finding that Tri-State’s policy of requiring compensation from Tri-State’s members when they purchase power from QFs in excess of five percent of their requirements is consistent with PURPA. FERC denied the request.

On June 16, 2016, FERC directed the Midcontinent Independent System Operator, Inc. (“MISO”) to either: (1) revise its Tariff to ensure that a generation or non-generation resource owner will no longer receive compensation for Reactive Supply and Voltage Control Service (“Reactive Service”) after it has deactivated or transferred its unit(s), and to clarify the treatment of Reactive Service revenue requirements for such unit(s); or (2) show cause why it should not be required to do so. FERC also directed MISO to post and maintain a chart listing all resource owners receiving compensation for Reactive Service, along with their current Reactive Service revenue requirements.

On June 16, 2016, FERC revised the pro forma Large Generator Interconnection Agreement (“LGIA”) and the pro forma Small Generator Interconnection Agreement (“SGIA”) to require wind generators to design their facilities to be capable of providing reactive power at their points of interconnection as a condition of interconnection. As a result, going forward all newly interconnecting non-synchronous generators, including wind generators, must be able to provide reactive power as a condition of interconnection.