On July 28, 2022, FERC issued a show cause order indicating that several regional transmission organization (“RTO”) and independent system operator (“ISO”) tariffs appear to be unjust and unreasonable because they lack certain credit risk management practices.  FERC also issued a related Notice of Proposed Rulemaking (“NOPR”) to allow all market operators to share credit-related information among themselves so that they can more accurately assess market participants’ credit risks.  Both actions aim to improve credit risk management in organized wholesale electric power markets.

On July 28, 2022, FERC proposed a new “duty of candor” rule that would broadly apply to “all entities communicating with the Commission or other specified organizations related to a matter subject to the jurisdiction of the Commission.” According to the Commission, the Notice of Proposed Rulemaking (“NOPR”) is intended to capture the types of communications that may not have been included in the Commission’s existing communication rules and policies, some of which have an existing duty of candor standard.

On July 28, 2022, FERC upheld changes to PJM Interconnection, L.L.C.’s (“PJM”) Reserve Market that it first required in a December 2021 order on voluntary remand from the U.S. Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”). FERC’s July 28 order continues to require PJM to: (1) consolidate its Tier 1 and Tier 2 Synchronized Reserve Products; (2) align reserve procurement in the day-ahead and real-time markets by establishing two 10-minute reserve requirements and one 30-minute reserve requirement in each market; (3) revert back to a stepped Operating Reserve Demand Curve (“ORDC”) and $850/MWh Reserve Penalty Factors; and (4) revert to a backward-looking Energy & Ancillary Services (“E&AS”) Offset in the Net Cost of New Entry calculation. The July 28 order also addressed challenges to the December 2021 order on the basis that the motion for voluntary remand was not filed in the D.C. Circuit pursuant to FERC’s tradition of polling the Commissioners for major litigation decisions. The order makes certain clarifications on the Chairman’s role to oversee the executive and administrative operation of FERC, including the direction of litigation. Commissioner James Danly filed a separate dissenting statement.

On July 28, 2022, FERC proposed changes to its Uniform System of Accounts (“USofA”) in response to the growth of non-hydro renewable generation such as wind, solar, and storage and to codify accounting for renewable energy credits (“RECs”). FERC’s Notice of Proposed Rulemaking (“NOPR”) follows a Notice of Inquiry issued in January 2021 seeking comment on the appropriate accounting treatment for certain renewable energy assets (see January 28, 2021 edition of the WER). Comments on the NOPR are due 45 days from its publication in the Federal Register.

On July 15, 2022, a FERC Administrative Law Judge (“Presiding Judge”) issued an initial decision in a proceeding involving the “threshold” issue of whether four solar generating facilities (collectively, “Facilities”) interconnected at the distribution level are eligible to receive reactive power compensation under Schedule 2 of the PJM Interconnection, L.L.C. (“PJM”) Open Access Transmission Tariff (“Tariff”). The Presiding Judge concluded that the Facilities are ineligible to receive reactive power rates because the facilities in question did not satisfy the so-called capability requirement, as explained further below.

On July 8, 2022, the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) issued its decision in City of Oberlin, Ohio v. FERC, a proceeding involving the issue of whether FERC properly granted NEXUS Gas Transmission, LLC (“Nexus”) a certificate of public convenience and necessity to construct and operate a natural gas pipeline that will facilitate exports into Canadian markets (“Project”).  The Court upheld the certificate.

On June 16, 2022, FERC issued two Notice of Proposed Rulemakings (“NOPRs”) aimed at improving the reliability of the bulk power system against threats of extreme weather. The NOPRs build on the June 2021 Technical Conference on Climate Change, Extreme Weather, and Electric System Reliability, which revealed an industry-wide need to assess current vulnerabilities of the transmission system to weather-related risks.

On June 30, 2022, in a 6-3 decision, with Chief Justice John G. Roberts Jr. writing for the majority, the United States Supreme Court issued a decision in West Virginia v. EPA limiting the EPA’s ability to regulate carbon emissions from existing power plants. The Court’s decision could have significant implications for other executive branch agencies attempting to issue regulations that implicate “major questions.”

On June 24th and 27th, 2022 FERC approved two stipulations and consent agreements between FERC’s Office of Enforcement (“Enforcement”) and two separate project developers. First, sPower Development Company, LLC (“sPower Devco”) agreed to a civil penalty of $24,000 after Enforcement determined that sPower Devco violated PJM Interconnection, L.L.C.’s (“PJM’s”) Tariff by submitting inaccurate information in PJM’s interconnection process. Second, Salem Harbor Power Development LP (“Harbor Power Devco”) agreed to a civil penalty of $17 million, to disgorge $26.7 million in profits, and to submit to compliance monitoring after Enforcement found that it collected capacity revenues on a project that had not yet been built nor was in commercial operation.