On April 17, 2020, FERC denied Potomac Economics, Ltd.’s (“Potomac Economics”) complaint against PJM Interconnection, L.L.C. (”PJM”), which alleged that PJM’s rule requiring external generation resources to obtain a pseudo-tie in order to participate in PJM’s capacity market was unjust and unreasonable (“Complaint”). FERC found that Potomac Economics failed to show that PJM’s pseudo-tie requirement had caused market inefficiencies or harmed reliability and that any arguments regarding potential future harms to the New York System Operator, Inc. (“NYISO”) by the pseudo-tie requirement were speculative. FERC also denied PJM’s motion to dismiss the Complaint, finding that market monitors may file complaints under Federal Power Act (“FPA”) section 206, provided that such market monitors satisfy the requirements of FERC’s relevant regulations.

On April 22, 2020, FERC accepted tariff revisions from Southwest Power Pool, Inc. (“SPP”) to comply with a October 17, 2019 order accepting in part SPP’s Order No. 841 compliance proposal (the “October Order”). FERC also directed SPP to submit a further compliance filing to specifically exempt run-of-the-river hydroelectric, wind, and solar resources from the continuous minimum run-time requirement under SPP’s Resource Adequacy tariff provisions and Planning Criteria.

On April 23, 2020 the Federal Communications Commission (“FCC”) issued a Report and Order adopting rules to make 1,200 megahertz of spectrum in the 6 GHz band—a band of airwaves used for communications in the operation of electric, oil, natural gas, and water companies—also available for unlicensed use by Wi-Fi and Bluetooth-connected consumer products. The FCC stated that expanding unlicensed broadband operations would provide opportunity for innovation and improve broadband speed and connectivity. The FCC also adopted an Automated Frequency Coordination (“AFC”) system to prevent unlicensed use from interfering with incumbent users including utilities. The Report and Order follows a December 2019 letter from FERC Chairman Neil Chatterjee and Commissioners Richard Glick and Bernard McNamee to FCC Chairman Ajit Pai, urging the FCC to consider additional testing of the AFC system to guarantee that unlicensed devices do not interfere with incumbent users.

On April 21, 2020, the National Rural Electric Cooperative Association (“NRECA”), an organization that represents the interests of over 900 electric cooperatives nationally, issued a fact sheet projecting that COVID-19’s economic impact on electric cooperatives will total an estimated $10 billion through 2022. This fact sheet follows an April 6, 2020 letter from the CEO of NRECA to congressional leaders requesting legislative remedies to help address the challenges currently facing electric cooperatives as a result of COVID-19. Among other things, NRECA explains that, absent federal assistance in the form of federal funding and repricing of the United States Department of Agriculture (“USDA”) Rural Utilities Services (“RUS”) debt, co-ops may face severe financial distress due to prohibitions against utility disconnections, increasing electric bill nonpayment, and loss of load.

On April 17, 2020, FERC granted the North American Electric Reliability Corporation’s (“NERC”) request to defer implementing several Commission-approved Reliability Standards that have effective dates or phased-in implementation dates in the second half of 2020. NERC argued the deferred implementation would not hamper grid reliability but would instead allow NERC-registered entities additional flexibility to continue prioritizing worker safety and reliability during the COVID-19 pandemic.

On April 16, 2020, FERC addressed the American Public Power Association (“APPA”) and Exelon Corporation and its public utility subsidiaries (collectively, “Exelon Companies”) requests for rehearing and clarification of Order No. 864.  Specifically, FERC:

  • granted in part APPA’s request, clarifying that public utilities with stated transmission rates are required to use some ratemaking method to appropriately account for excess or deficient accumulated deferred income taxes (“ADIT”) resulting from the Tax Cuts and Jobs Act (“TCJA”), which will be subject to review in the utility’s next rate case;
  • confirmed that, consistent with prior precedent, any excess or deficient ADIT will not result in a windfall to either shareholders or ratepayers of public utilities with stated transmission rates; and
  • denied Exelon Companies’ request for rehearing, reaffirming Order No. 864’s requirement that public utilities with transmission formula rates return to customers the full amount of excess ADIT resulting from TCJA.

On April 16, 2020, FERC denied rehearing of an April 2019 order approving changes to PJM Interconnection, L.L.C.’s (“PJM”) Variable Resource Requirement (“VRR”) demand curve in connection with PJM’s 2019 Base Residual Auction for the 2022/2023 Delivery Year (see April 24, 2019 edition of the WER for more background on the April 2019 order and the PJM’s VRR curve). Among other issues, FERC’s April 2020 order on rehearing rejected arguments that PJM erred in designating a combustion turbine (“CT”) power plant with a new H-class turbine configuration as the Reference Resource—a theoretical new generator that PJM uses as a benchmark to determine the cost of entering the market. In a lengthy dissent, Commissioner Richard Glick argued FERC’s decision is unsupported by substantial evidence and inconsistent with FERC precedent. According to Commissioner Glick, FERC’s approval of a CT Reference Resource and resulting Net Cost of New Entry (“CONE”) estimate will lead to host of issues, including distorting PJM’s entire capacity market design and harming consumers by increasing rates.

On April 16, 2020, FERC issued two orders in the proceedings related to PJM Interconnection, L.L.C.’s (“PJM”) Minimum Offer Price Rule (“MOPR”). First, FERC denied requests for rehearing and granted limited clarification with respect to its June 29, 2018 order (“Paper Hearing Order”) where it (i) found PJM’s then-existing tariff to be unjust and unreasonable because it failed to address the suppressive effect of resources receiving out-of-market payments on the capacity market, and (ii) implemented a paper hearing to establish a revised MOPR to apply to both new and existing resources receiving out-of-market payments, regardless of resource type (see July 11, 2018 edition of the WER). Second, FERC largely affirmed its December 19, 2019 order arising out of the paper hearing, in which it directed PJM to apply the MOPR to all state-subsidized capacity resources (“Replacement Rate Order”) (see December 20, 2019 edition of the WER).

On April 13, 2020, numerous industry groups and business associations (“Industry Stakeholders”) submitted a joint request asking FERC to organize a technical conference or workshop to discuss potential issues with the implementation of state, regional, and national carbon pricing in regions with organized wholesale electric energy markets. The Industry Stakeholders proposed that the workshop examine both the mechanics needed to account for the implementation of carbon pricing as well as the mechanics that are already in place. Industry Stakeholders stated that such a conference could open a dialogue among stakeholders and interested parties regarding the opportunities and potential difficulties presented by carbon pricing.

On Thursday, April 16, 2020, FERC issued two orders concerning section 401 of the Clean Water Act (“CWA”) and state agencies’ waiver of their right to issue certifications for FERC-licensed hydroelectric projects.  In an order responding to a request from the Nevada Irrigation District (“NID”), the Commission determined that the California State Water Resources Control Board (“California Board” or “Board”) waived its authority to issue water quality certification under section 401.  In a second order, FERC denied requests for rehearing and a stay of a September 20, 2019 order issuing an original license to McMahan Hydroelectric, LLC (“McMahan”) for the Bynum Project in North Carolina and holding that the North Carolina Department of Environmental Quality (“North Carolina DEQ”) waived its authority to issue water quality certification under section 401.