On July 27, 2016, the Federal Energy Regulatory Commission (“FERC” or the “Commission”) accepted a compliance filing from ISO New England (“ISO-NE”) that establishes a ten-percent materiality threshold before ISO-NE will mitigate a retirement bid in its annual Forward Capacity Auction (“FCA”). In an April 2016 order, FERC previously accepted a set of proposed revisions to ISO-NE’s Transmission, Markets, and Services Tariff (“Tariff”) regarding capacity market power and FCA prices on the condition that the ISO include a price mitigation threshold for retirement bids (see April 18, 2016, edition of the WER).

On July 21, 2016, FERC issued a final rule (“Order No. 828”) modifying the pro forma Small Generator Interconnection Agreement (“SGIA”) to require newly interconnecting small generators to “ride-through” voltage and frequency variations rather than having those generators disconnect from the larger transmission system. With this final rule, FERC obligates new small generators—those less than 20 MW—to have comparable ride-through capabilities as those currently imposed on their large-scale counterparts through the pro forma Large Generator Interconnection Agreement (“LGIA”). 

On July 21, 2016, the U.S. District Court for the District of Massachusetts (“District Court”) determined that review of a FERC-issued penalty for alleged market manipulation must be treated as an “ordinary civil action” requiring de novo review and finding against FERC’s arguments to the contrary. The District Court further ordered in its decision, FERC v. Maxim Power Corp., et al., that in the corresponding civil action—to determine whether to affirm FERC’s prior penalty assessment against the owners and operators of a power plant in Pittsfield, Massachusetts (“Maxim”) and one of their employees (together, “Respondents”)—the Respondents will be entitled to the full discovery of an ordinary civil case, and the proceeding can be decided by a jury, if necessary. 

On July 21, 2016, FERC issued a declaratory order related to a qualifying facility’s (“QF”) right to sell its capacity and energy pursuant to a legally enforceable obligation under the Public Utilities Regulatory Policies Act of 1978 (“PURPA”). Specifically, FERC held that: (1) regardless of whether a QF has previously sold its renewable energy credits (“RECs”) under a separate contract, a QF has the right to sell its output pursuant to a legally enforceable obligation (“LEO”), and (2) regardless of whether a QF has participated in a request for proposal, a QF has the right to obtain a LEO.

On July 21, 2016, FERC proposed new data collection and reporting requirements for market-based rate (“MBR”) sellers and entities trading virtual products or holding financial transmission rights in organized wholesale markets (“Virtual/FTR Participants”). Specifically, in an effort to streamline and reduce the burden of proposed information collection, FERC proposed in the Notice of Proposed Rulemaking (the “Data Collection NOPR”) to (1) revise the information to be submitted on ownership, employee, debt, and contractual connections (“Connected Entity Information”) from a prior proposed rule (the “Connected Entity NOPR”); (2) better align the information to be provided on “affiliates” in connection with Connected Entity Information submissions with the information MBR sellers must provide on “affiliate owners” under FERC’s MBR regulations; and (3) remove the existing requirement that MBR sellers submit corporate organization charts adopted in Order No. 816.

On July 21, 2016, in Order No. 829, FERC directed the North American Electric Reliability Corporation (“NERC”) to develop a new or modified Critical Infrastructure Protection (“CIP”) Reliability Standard that addresses supply chain risk management for industrial control system hardware, software, and computing and networking services associated with Bulk Electric System operations. FERC directed NERC to submit the new or modified Reliability Standard within one year of the effective date of the order, which is 60 days after the order’s publication in the Federal Register.

On July 11, 2016, FERC imposed fines on BP America Inc., BP Corporation North America Inc., BP America Production Company, and BP Energy Company (collectively, “BP”) of over $20 million in civil monetary penalties, and disgorgement of over $200,000 in profits, for manipulating natural gas prices by, FERC found, uneconomically trading physical natural gas at the Houston Ship Channel to benefit BP’s financial spread positions based on the price differential between the Houston Ship Channel and the Henry Hub.

On July 13, 2016, FERC issued an order partially lifting a long-standing pricing limitation for energy exports from the Midcontinent Independent System Operator, Inc. (“MISO”) to the PJM Interconnection, L.L.C. (“PJM”) in relation to Multi-Value Projects (“MVPs”). The order—released in response to a remand from the U.S. Court of Appeals for the Seventh Circuit (“Seventh Circuit Court of Appeals”)—resolves a multi-year-long process and debate over how to allocate costs to PJM for MISO’s MVP transmission projects that benefit customers inside of the PJM region. The central issue decided by FERC was, in light of current system, market, and technological conditions impacting these two Regional Transmission Organizations (“RTOs”), whether it was still necessary to maintain a restriction on export charges for MVP-enabled energy deliveries that originate in MISO and sink in PJM.

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.”