On September 22, 2022, FERC denied a complaint filed on October 14, 2020 by Cricket Valley Energy Center LLC and Empire Generating Company, LLC. Complainants alleged that the New York Independent System Operator, Inc.’s (“NYISO’s”) capacity market offer floor rules—termed buyer-side market power mitigation rules (“BSM Rules”)—were unjust and unduly discriminatory because they failed to address price suppression in NYISO’s installed capacity (“ICAP”) spot market auctions. Complainants requested that FERC require NYISO to implement a minimum offer price rule (“MOPR”) that applies to all new and existing resources that receive out-of-market subsidies, with few or no exceptions. In denying the complaint, FERC relied on a May 2022 order accepting changes to NYISO’s BSM Rules to automatically exclude wind, solar, hydroelectric, geothermal, fuel cells that do not use fossil fuel, and demand response resources from adhering to an offer floor when bidding into NYISO’s capacity market. Commissioner James Danly issued a dissenting statement and Commissioner Mark Christie issued a concurring statement.

On September 16, 2022, a panel of three judges on the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) issued a decision in United Power, Inc. v. FERC affirming FERC’s exclusive jurisdiction over exit fees charged by Tri-State Generation and Transmission Association, Inc. (“Tri-State”), a Colorado generation and transmission cooperative.

Introduction

On September 22, the Federal Energy Regulatory Commission (“FERC” or “Commission”) issued a Notice of Proposed Rulemaking to establish rules providing incentive-based rate treatment for utilities making certain voluntary cybersecurity investments (“Cybersecurity NOPR” or “NOPR”).[1] According to FERC, the Cybersecurity NOPR seeks to benefit consumers and national security by encouraging investments in advanced cybersecurity technology and participation by utilities in cybersecurity threat information sharing programs, as directed by Congress in the Infrastructure Investment and Jobs Act of 2021 (“Infrastructure and Jobs Act” or “Act”).[2] While the Cybersecurity NOPR supersedes FERC’s December 2020 cybersecurity NOPR (whose docket is being terminated), the instant Cybersecurity NOPR generally retains the incentive provisions outlined in the December 2020 NOPR. Under the Cybersecurity NOPR, FERC proposes that:

On August 30, 2022, the U.S. Court of Appeals for the Fifth Circuit issued an order in NextEra Energy Capital Holdings, Inc. v. Lake, a case raising dormant Commerce Clause challenges to a 2019 Texas law that bans new entrants from building transmission lines that are part of a multistate electricity grid.  The majority reversed the lower court’s Rule 12(b)(6) dismissal of NextEra’s petition, thereby allowing the case to proceed to trial in district court.

On August 26, 2022, Commissioner James Danly issued a statement in the FERC docket addressing PJM Interconnection, L.L.C.’s (“PJM”) replacement, focused Minimum Offer Price Rule (“Focused MOPR”). Commissioner Danly argued that the FERC Solicitor’s Office should not have filed its brief defending the Focused MOPR in the United States Court of Appeals for the Third Circuit (“Third Circuit”), and that doing so violated the Department of Energy Organization Act (“DOE Organization Act”) and the Administrative Procedure Act (“APA”). Following the statement, on September 7, 2022, certain Petitioners in the Third Circuit appeal proceedings filed a motion to strike FERC’s brief. Their motion argues that FERC’s brief should not have been filed because the Commission never voted to accept the Focused MOPR, and that filing the brief violates both the DOE Organization Act and constitutional limitations on the authority of executive officials. The Third Circuit has not yet acted on the motion.

On August 19, 2022, the U.S. Court of Appeals for the D.C. Circuit (“D.C. Circuit”) denied a Petition for Review from LS Power and two other organizations (“Petitioners”) challenging FERC’s rejection of an earlier-submitted complaint against the Midcontinent Independent System Operator, Inc.’s (“MISO”) method of allocating costs for certain transmission construction projects identified as Baseline Reliability Projects in MISO’s transmission planning process. As the D.C. Circuit determined, FERC’s rejection of the Petitioners’ complaint was not arbitrary and capricious, as the Petitioners had failed to demonstrate that MISO’s cost-allocation method was unjust and unreasonable.

On August 31, 2022, FERC issued two orders regarding two proposals to revise the Midcontinent Independent System Operator’s (“MISO”) resource adequacy requirements. In the first order, FERC accepted MISO’s proposal to move to seasonal resource adequacy requirements rather than a single requirement based on the summer peak. MISO proposed this seasonal resource adequacy construct to address significant increases in emergency events that occur year-round, driven by factors including generation retirements, reliance on intermittent resources, outages resulting from extreme weather events, and declining excess reserve margin. MISO will implement the new seasonal resource adequacy construct in the next Planning Resource Auction (“Auction”) to be held in April 2023. In the second order, FERC rejected MISO’s proposal to require a Minimum Capacity Obligation for participants in MISO’s Auction (“MCO Proposal”).

On August 30, FERC plans to hold a virtual workshop to discuss how members of the public (including customers and consumer advocates) can better participate in hydroelectric proceedings. The workshop is part of Commission’s increased focus on stakeholder engagement and environmental justice.

As we previously reported, the Infrastructure Investment and Jobs Act, also known as the Bipartisan Infrastructure Law (BIL), which President Biden signed into law on November 15, 2021, included over $900 million in waterpower incentives for new and existing hydropower, pumped storage, and marine energy. Specifically, the BIL provided additional funding for the existing incentive programs established by Sections 242 and 243 of the Energy Policy Act of 2005 (EPAct 2005) and created a new incentive program to maintain and enhance hydroelectricity through improvements to grid resiliency, dam safety, and the environment under Section 247 of EPAct 2005.

On August 5, the U.S. Court of Appeals for the Ninth Circuit overruled several orders by the Federal Energy Regulatory Commission (FERC) and held that the California State Water Resources Control Board (SWRCB) did not waive its authority to issue water quality certifications for several hydroelectric projects. Before the court in SWRCB v. FERC, No. 20-72432, were several orders on appeal from FERC where the Commission found that SWRCB had participated in a coordinated “withdrawal-and-resubmission” scheme to evade the Clean Water Act (CWA) Section 401 one-year statutory time limit on a state’s review of a certification application.