On December 1, 2023, the United States Court of Appeals for the Third Circuit (“Third Circuit”) upheld PJM Interconnection, L.L.C.’s (“PJM”) latest minimum offer price rule (the “Focused MOPR”), denying challenges to both the substance of the rule and FERC’s “constructive” approval of the rule, which went into effect after the Commissioners deadlocked two-to-two and failed to issue a timely order accepting or denying the Focused MOPR. The Third Circuit held that a court’s review of FERC’s “action,” whether actual or constructive, proceeds under the same deferential standards in the Federal Power Act (“FPA”) and the Administrative Procedure Act (“APA”), and encompasses the Commissioners’ mandatory statements setting forth their reasoning for approving or denying the filing. On the merits, the Third Circuit held that FERC’s acceptance of PJM’s Focused MOPR policy was not arbitrary and capricious, pointing to arguments laid out in then-Chairman Glick’s and Commissioner Clements’ Joint Statement supporting the Focused MOPR.

On November 27, 2023, Troutman Pepper’s award-winning Energy Group published a white paper titled, Unlocking U.S. Transmission Upgrades – Are We On the Cusp of Real Progress?  The white paper offers perspectives from a range of transmission experts and examines the latest regulatory and legal changes that could lead to much-needed upgrades to the U.S. transmission grid.  Specifically, the report discusses why transmission grid upgrades are needed, identifies four main obstacles to upgrading the transmission system, provides solutions and benefits to overcoming these obstacles, and concludes with reasons for optimism for the future of the U.S. transmission system.

On November 17, 2023, the U.S. Court of Appeals of the District of Columbia Circuit (“D.C. Circuit”) denied petitions challenging FERC’s approval of recent changes to the PJM Interconnection, L.L.C.’s (“PJM”) Open Access Transmission Tariff. The changes permit Transmission Owners in PJM to plan for “asset management projects” and certain End of Life (“EOL”) projects without satisfying PJM regional planning criteria. The D.C. Circuit also dismissed certain petitions for lack of standing.

On November 30, 2023, the Commission denied the Minnesota Municipal Power Agency’s (“MMPA”) complaint alleging that Northern Natural Gas Company (“Northern”) violated the Natural Gas Act (“NGA”) by refusing to execute an interconnection agreement for MMPA’s planned renewable natural gas (“RNG”) facility in Elk River, Minnesota (“Elk River Project”).  The Commission denied MMPA’s complaint without prejudice because the complaint was unripe since Northern has yet to act on MMPA’s interconnection request.

The IRS and the Treasury Department issued proposed regulations under Section 48 on November 22, 2023 (Proposed Regulations), providing further guidance in determining whether property is energy property and eligible for the Section 48 credit (ITC). As part of this further guidance, the Proposed Regulations introduce a new framework for the definition of energy property, provide welcome clarification regarding the eligibility of energy property for multiple credits, and provide guidance on the Section 48(a)(10)(C) recapture rules applicable to failures to satisfy the prevailing wage and apprenticeship requirements (PWA requirements). Taxpayers must be aware of these energy property requirements and additional ITC eligibility guidance to ensure future eligibility for the ITC. The Proposed Regulations would amend Treasury Regulation Section 1.48-9, withdraw and replace Proposed Treasury Regulation 1.48-13 as it was proposed in REG-100908-23 (PWA Proposed Regulations), and introduce Proposed Regulation Section 1.48-14. The Proposed Regulations follow the passage of the Inflation Reduction Act of 2022 (IRA) and the publication of Notice 2022-49, 2022-43 I.R.B. 321, which requested comments on issues arising under Section 48.

Bridging the Gap Between Planning and Permitting

In recent decades, the U.S. has not been able to construct the volume of high-voltage backbone transmission facilities needed to support the country’s move to a ‘greener’ power system. The inability to build sufficient transmission infrastructure thwarts customer demands for a greener power mix.

In this report, we offer perspectives from a range of transmission experts about where the major roadblocks exist, and the latest regulatory and legal changes that promise to bring greater unity between the divergent federal planning and state siting and permitting processes. These changes provide hope that the U.S. can bridge the gaps that have delayed much-needed upgrades to the transmission system.

On November 16, 2023, FERC granted Virginia Electric and Power Company d/b/a Dominion Energy Virginia’s (“Dominion”) petition requesting the Commission declare that Dominion’s planned liquefied natural gas (“LNG”) production, storage, and regasification facility (“Back-up Fuel Project” or “Project”) in Greensville County, Virginia would be exempt from the Commission’s jurisdiction under section 7 of the Natural Gas Act (“NGA”). In so doing, FERC determined the Project satisfied the “Hinshaw Exemption” under NGA section 1(c).

On November 16, 2023, the U.S. Department of Energy (“DOE”) issued a Notice of Proposed Rulemaking (“NOPR”) to update its National Environmental Policy Act (“NEPA”) implementing regulations to add a categorical exclusion for specific energy storage systems and revising categorical exclusions for upgrading and rebuilding transmission lines and solar photovoltaic (“PV”) systems. Comments on the NOPR are due January 2, 2024.

On November 16, 2023, FERC staff issued the 2023-2024 Winter Energy Market and Electric Reliability Assessment report, projecting trends and identifying considerations for energy markets and electric reliability for the upcoming winter (December through February). The report focuses on weather outlook, the state of the natural gas and electricity markets, and initiatives implemented in the wake of Winter Storm Elliott.

On September 29, 2023, FERC accepted part of Arizona Public Service Company’s (“APS”) proposed interconnection queue reforms to transition from a first come, first served cluster study process to a first ready, first served cluster study process. Generally, FERC accepted APS’s proposals that would prevent speculative projects from moving through the queue, while rejecting proposals that were not consistent with or superior to the pro forma Large Generator Interconnection Procedures (“LGIP”). APS’s interconnection queue reform proposal was submitted before FERC issued Order No. 2023; the approved reforms do not constitute APS’s Order No. 2023 compliance filing and are based on FERC’s currently effective pro forma LGIP.