On June 29, 2021, the Supreme Court of the United States ruled that a certificate of public convenience and necessity issued by FERC under section 7 of the Natural Gas Act (“NGA”) authorizes a private company to exercise eminent domain to condemn state-owned property. In particular, the opinion holds that states cannot claim sovereign immunity from condemnation lawsuits filed by certificated pipelines against the state in order to take public land to construct, own, and operate an interstate gas pipeline project. Continue Reading Supreme Court Rules that PennEast, Gas Pipelines May Condemn State-Owned Land
On June 23, 2021, FERC accepted in part and rejected in part the New York Independent System Operator’s (“NYISO”) February 2021 proposal to revise its process for procuring operating reserves throughout the New York Control Area (“NYCA”). FERC accepted NYISO’s proposed revisions to its Operating Reserves Demand Curve (“ORDC”), including revisions to certain shortage pricing values, subject to a compliance filing providing at least two weeks’ notice of the actual effective date of the revisions. NYISO subsequently submitted that compliance filing on June 29, 2021 noting an effective date of July 13, 2021. The June 23 order also rejected NYISO’s proposal to establish a process for procuring reserves in excess of quantities required by minimum reliability standards, without prejudice to NYISO submitting a more specific proposal in the future. Continue Reading FERC Accepts NYISO Operating Reserve Pricing Proposal, Rejects Proposal for Procuring Supplemental Reserves
On June 17, 2021, FERC set aside its previous decision in Order No. 2222-A that allowed state regulatory authorities to prohibit demand response resources from participating in distributed energy resource (“DER”) aggregations in wholesale energy markets when the DER aggregation contains only demand response resources. As a result, upon the effective date of Order No. 2222-B, state regulatory authorities will be able to prohibit demand response resources from participating in all wholesale DER aggregations. However, FERC also stated that it will further consider the issue in the Notice of Inquiry (“NOI”) proceeding established in Order No. 2222-A to consider whether to revise its regulations to remove the demand response opt-out established in Order Nos. 719 and 719-A. FERC also extended the comment period in the NOI proceeding to ensure an adequate opportunity for interested parties to comment on these issues. Finally, Order No. 2222-B clarified the appropriate restrictions to avoid double counting of services and the compensation of demand response resources that participate in DER aggregations. Commissioners Neil Chatterjee and James Danly wrote separate concurring opinions; Commissioner Mark Christie concurred in part and dissented in part. Continue Reading FERC Issues Order No. 2222-B, Setting Demand Response Opt-Out for Further Consideration
On June 17, 2021, FERC issued an order providing guidance on the means by which sellers in the Western Electricity Coordinating Council (“WECC”) market can demonstrate that sales made above the $1,000/MWh soft price cap were just and reasonable. This guidance has been provided for sellers with pending justification filings, which have been granted 30 days to amend or supplement their filings accordingly, as well as any sellers making prospective justification filings. Continue Reading FERC Provides Guidance on Justification Filings for Sales Above the WECC Soft Price Cap
On June 17, 2021, FERC took two actions to encourage transmission development across the U.S. Specifically, FERC issued an order establishing a joint state-federal task force to evaluate transmission development issues, and also issued a policy statement clarifying that states and public utilities remain free to coordinate and collaborate on transmission projects. As Chairman Glick stated in the Commission meeting announcing the order and policy statement, these actions are intended to enable FERC to be “fully engaged with [its] state partners,” ahead of “several transmission initiatives” that may be issued from the Commission in the coming months. Continue Reading FERC Establishes Joint Federal-State Task Force with NARUC and Issues Policy Statement to Spur Transmission Development
On February 11, 2021, the Federal Energy Regulatory Commission (FERC) announced plans to create a senior position at the Commission to coordinate incorporation of environmental justice (EJ) concerns into the Commission’s decision-making process. FERC Chairman Richard Glick indicated that the newly created office would be a cross-cutting position and that its eventual occupant would be charged with working with experts across all FERC program offices to ensure that EJ and equity matters are integrated into Commission decisions. On May 20, Chairman Glick announced the appointment of Montina Cole to serve as Senior Counsel for Environmental Justice and Equity. The FERC press release describes Cole as a “seasoned executive and attorney” with an active consulting and legal practice, “where she works at the intersection of climate policy, racial equity and resilience.” Continue Reading FERC Fills Newly Created EJ Position
In an order dated May 20, 2021, the Federal Energy Regulatory Commission (FERC, or the Commission) terminated the hydropower licenses for three projects located on the Tittabawasee River in Michigan—the Secord (P-10809), Smallwood (P-10810) and Sanford (P-2785) dams. The termination by implied surrender follows a May 2020 breach at the Sanford dam and the breach and failure of the upstream Edenville dam, which was also operated by the same licensee before the Commission revoked the Edenville license in 2018 due to the licensee’s repeated noncompliance with FERC dam safety orders. The resultant floods caused significant damage in the communities surrounding the dams and have been estimated by the State of Michigan to have caused economic harm exceeding $190 million.
In the year that has passed since the dam breaches, the licensee failed to adequately respond or comply with numerous FERC orders to address the damage from the failures, declared bankruptcy on July 31, 2020, lost the projects through condemnation by Midland and Gladwin Counties in December 2020, and was assessed an unprecedented civil penalty of $15 million by the Commission in April 2021. The dams are now owned and operated by the Four Lakes Task Force, as agent to the counties, and are no longer operated for hydropower generation. The Task Force has consulted with both FERC and the Michigan Department of the Environment, Great Lakes, and Energy (EGLE) to begin restoring the reservoirs to a safe condition.
In its May 20, 2021 order, FERC explained that termination of a hydropower license by implied surrender is required under both Section 6 of the Federal Power Act and the license itself in cases where a licensee, by either action or inaction, has clearly indicated its intent to abandon a project and has not filed a surrender application with the Commission. FERC found implied surrender was appropriate in this case because the licensee is bankrupt and no longer has ownership of the properties, the new owner has already begun rehabilitation work at the dams, and Michigan EGLE, the agency responsible for dam safety in Michigan, supports the termination of the license.
FERC used the order terminating the license to express its “great disfavor” for the licensee’s” “deliberate abandonment of these projects following extensive harm…caused to the public.” FERC also made clear that it was willing to terminate the license by implied surrender only due to the unique situation presented, in which a local entity had already acquired the projects and was implementing plans to correct the licensee’s deficiencies and had no intent to generate hydropower, and where the state regulator had expressed support for the action.
FERC indicated that it was terminating the licenses by implied surrender “with some reluctance” and cautioned licensees that there was “no guarantee” that it would choose a similar resolution in future cases. FERC also took the opportunity, as it did in its April 2021 order assessing the $15 million civil penalty, to remind the public of its January 2021 Notice of Inquiry seeking public comment on the future imposition of financial assurance requirements on hydropower licensee, noting that the “financial viability of hydropower licensees, which can have significant impacts on the public and the environment, is a matter of great concern to us.”
On May 20, 2021, FERC issued a Show Cause Order directing GreenHat Energy, LLC (“GreenHat”) and its owners to show why they did not violate the Federal Power Act, FERC’s regulations, the PJM Interconnection, L.L.C. (“PJM”) Tariff, and the PJM Operating Agreement by manipulating PJM’s Financial Transmission Rights (“FTR”) market, generating $13 million in unjust profits and imposing $179 million in losses on PJM members. FERC also directed GreenHat and its owners to file an answer with FERC within 30 days showing why they should not be required to disgorge $13 million in unjust profits, plus interest, and to pay civil penalties totaling $229 million. FERC’s order is accompanied by a report from FERC’s Office of Enforcement (“OE Report”). Commissioner James Danly issued a separate concurring statement. Continue Reading FERC Issues Show Cause Order Directing GreenHat Energy to Respond to Market Manipulation Claims
On May 20, 2021, FERC issued two orders in which it authorized two pipeline companies to construct and abandon certain pipeline facilities, subject to conditions. In an exciting and sometimes tense Commission open-meeting, the Commission ultimately approved Northern Natural Gas Company’s (“Northern”) application to construct and operate certain pipeline compression and auxiliary facilities and abandon short segments of existing pipeline (“2021 Expansion Project”) in Minnesota.
On May 19, 2021, FERC issued an order dismissing requests for rehearing of an order directing briefing (“Briefing Order”) about the operation of Algonquin Gas Transmission, LLC’s Atlantic Bridge project after finding that requesting parties were not “aggrieved” under court precedent interpreting Section 19(a) of the Natural Gas Act (“NGA”). Commissioner James Danly wrote separately in dissent explaining his view that FERC’s request for briefing means that the determinations made in the Atlantic Bridge certificate order are no longer settled and that the certificate order is in fact no longer final. Continue Reading FERC Maintains Order Directing Briefing Long After Authorizing Gas Facilities to Begin Operations, Prompting Dissent from Commissioner Danly