On April 27, 2020, the Department of Energy’s (DOE) Water Power Technologies Office (WPTO) released a Request for Information (RFI) to gather information and feedback from hydropower industry stakeholders on its Hydropower Program Research and Development (R&D) Strategy and Hydro and Water Innovation for a Resilient Electricity System (HydroWIRES) Research Roadmap.

On May 21, 2020, FERC issued the latest in a series of orders finding that a state—California, in this case—waived its authority to issue water quality certification pursuant to section 401 of the Clean Water Act (CWA) for the Yuba County Water Agency’s (YCWA) Yuba River Development Project, a FERC-licensed hydroelectric project in northern California.

On May 26, 2020, FERC staff issued an order determining that additional information provided by the South Carolina Public Service Authority (Santee Cooper) was sufficient for FERC to determine that certain investments made over the term of the existing license for the Santee Cooper Project (FERC No. 199) satisfied the criteria under section 36(b) of the Federal Power Act (FPA), and should be considered when the Commission establishes the length of the next license term for the Project.

On May 27, 2020, the IRS issued Notice 2020-41, which provides much-anticipated relief for delays caused by the COVID-19 pandemic with respect to the “beginning of construction” requirements for renewable energy projects eligible for the production tax credit (“PTC”) or investment tax credit (“ITC”).

Notice 2020-41 modifies the guidance…

On May 21, 2020, FERC issued a proposed policy statement setting forth a revised approach to addressing requests for waiver, including: waiver of rates; non-rate terms and conditions; market rules; and procedural deadlines that are set forth in tariffs, rate schedules, service agreements, and contracts on file with FERC (“Proposed Policy Statement”). FERC specifically proposes to:

  1. discontinue granting retroactive waivers of tariff provisions, with a few specified exceptions; and
  2. grant requests for “remedial relief” only when applicants demonstrate that (a) such a request does not violate the filed rate doctrine or rule against retroactive ratemaking, or (b) the requested relief is within FERC’s remedial authority under section 309 of the Federal Power Act (“FPA”) or section 16 of the Natural Gas Act (“NGA”).

On May 21, 2020, FERC found PJM Interconnection, L.L.C.’s (“PJM”) existing reserve market design to be unjust and unreasonable and established a replacement market design that includes, among other elements, a downward-sloping Operating Reserve Demand Curve (“ORCD”) and a $2,000/MWh price ceiling. In addition, FERC found that the changes to PJM’s reserve market would render PJM’s existing methodology for calculating its energy and ancillary services offset (“E&AS Offset”) unjust and unreasonable, and directed PJM to implement a forward-looking E&AS Offset on compliance. In a separate dissenting statement, Commissioner Richard Glick stated that PJM’s proposal would result in over procurement of reserves and impose billions of dollars of additional costs on consumers. Pointing to FERC’s recent orders accepting PJM’s Variable Resource Requirement Curve (see April 23, 2020 edition of the WER) and Minimum Offer Price Rule (see April 22, 2020 edition of the WER), Commissioner Glick characterized the May 21 order as the latest installment in a series of decisions prioritizing high prices over efficient markets.

On May 21, 2020, FERC issued Opinion No. 569-A, which revised the Commission’s methodology for determining whether an established rate of return on equity (“ROE”) is just and reasonable under section 206 of the Federal Power Act (“FPA”). Among other things, Opinion No. 569-A accepts the use of a third financial model for establishing just and reasonable ROE for Transmission Owners (“TOs”)—the “Risk Premium Model” (which was rejected in an earlier opinion)—in addition to the previously accepted two-step discount cash flow (“DCF”) model and capital asset pricing model (“CAPM”). Commissioner Richard Glick dissented in part, arguing that FERC was “once again changing course and revamping [its] ROE methodology” to the detriment of regulatory certainty among TOs and investors. In a related action, FERC contemporaneously issued a Policy Statement clarifying that the newly revised ROE methodology in Opinion No. 569-A applies to natural gas and oil pipelines, with certain exceptions.

On May 1, 2020, the U.S. Department of Energy (“DOE”) issued a Notice of Proposed Rulemaking (“NOPR”) to update its National Environmental Policy Act (“NEPA”) implementing regulations concerning applications to import to, or export from, liquid natural gas (“LNG”) terminals. In particular, DOE has previously determined that the transportation of natural gas by marine vessels normally does not pose the potential for significant environmental impacts, and accordingly, exports of LNG should be considered a “categorical exclusion” from NEPA review.  Comments are due June 1, 2020. 

On May 12, 2020, FERC clarified that the offer floor price calculation for Special Case Resources (“SCRs”)—demand response resources participating in the New York Independent System Operator, Inc.’s (“NYISO”) Installed Capacity market (“ICAP”)—must include any payment or other benefit provided by state-sponsored programs. FERC’s order follows a February 2020 order directing NYISO to apply its buyer-side mitigation (“BSM”) rules to all new SCRs, and finding that the offer floor calculation for SCRs should include only the incremental costs of providing wholesale-level capacity services rather than payments from retail-level demand response programs designed to address distribution-level reliability needs. Commissioner Richard Glick issued a separate statement concurring with FERC’s clarification as to the SCR offer floor price calculation, but added that NYISO’s BSM regime will impose arbitrarily high offer floors on SCRs that are not exercising market power.

Due to the unprecedented and rapidly changing landscape caused by the COVID-19 pandemic, FERC has provided multiple resources and notices over the last two weeks. Three of those relevant releases include an Epidemic/Pandemic Response Plan Resource, a policy statement providing guidance to oil pipelines impacted by the pandemic, and a notice that FERC is temporarily delaying the processing of all hardcopy submissions.