On April 10, 2020, FERC consolidated two separate dockets resulting from PJM Interconnection, L.L.C.’s (“PJM”) Order No. 841 compliance proceeding, and established paper hearing procedures to examine PJM’s methodology for calculating capacity values—not just for Electric Storage Resources (“ESRs”) participating in its capacity markets, but for all resource types, including run-of-river hydroelectric resources with and without reservoir storage capability. However, FERC held the proceedings in abeyance through October 30, 2020 to permit PJM and its stakeholders time to consider replacing the current capacity value calculation methodology with a new, Effective Load Carrying Capability (“ELCC”) approach. FERC concluded that the October 30 deadline would provide sufficient time to consider the new approach, while also allowing for new rules to become effective in advance of PJM’s next capacity auction. Commissioner Richard Glick issued partial dissent, explaining that he would have held the proceedings in abeyance until January 29, 2021.

On April 7, 2020, FERC issued a Notice announcing that it will host a technical conference this summer to discuss technical and market issues raised by so-called “hybrid resources.” As FERC described, hybrid resources are projects comprising more than one type of resource at the same plant location. The Notice…

On April 10, 2020, the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) granted Gulf South Pipeline Company, LP’s (“Gulf South”) petition for review in part, finding that FERC’s rejection of Gulf South’s proposed “incremental plus rates” for the Westlake Expansion Project, an expansion within the Lake Charles Zone, was arbitrary and capricious. In doing so, the D.C. Circuit found that FERC could easily distinguish between which customers are using the new facilities and which customers were using the gas pipeline’s existing facilities. The D.C. Circuit denied Gulf South’s petition for review on issues related to FERC’s denial of Gulf South’s proposed initial rate of return and depreciation rate for the Project, upholding FERC’s use of Gulf South’s last approved rate of return and depreciation rate.

On April 7, 2020, FERC and the National Association of Regulatory Utility Commissioners (“NARUC”), the national organization representing state public service commissions, sent a letter to the Federal Reserve supporting a request from the Edison Electric Institute (“EEI”), the American Gas Association and the National Association of Water Companies (together, the “Trade Groups”) to expand access to short-term debt available to the utility industry during the COVID-19 pandemic, as utilities are facing decreasing load and increasing bill nonpayment.

On March 27, 2020, FERC denied NorthWestern Corporation’s (“NorthWestern” or the Company) petition for a declaratory order regarding Qualifying Facility (“QF”) avoided cost pricing during times of excess generation. In its petition, NorthWestern asked the Commission to determine that (1) when excess generation occurs, QF pricing should be set to zero, and (2) nothing in the Public Utilities Regulatory Policies Act (“PURPA”), including the rule against non-discrimination in avoided cost pricing, permits establishing a rate in excess of the utility’s avoided cost. In exercising its discretion to deny the petition, FERC did not reject NorthWestern’s request on the merits, but rather, stated that whether avoided energy costs can be zero depends on the facts of the case, and that NorthWestern had failed to provide sufficient information to support its request.

On March 27, 2020, the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) denied a petition for review filed by Baltimore Gas and Electric Company (“BG&E) arguing, among other things, that FERC’s application of its long-standing tax normalization policy to BG&E was arbitrary and capricious. The D.C. Circuit ultimately held that FERC reasonably explained its decision; however, the majority opinion also concluded that FERC cannot avoid its obligation to provide a reasoned explanation of contrary treatment of “similarly situated” parties merely because (i) prior orders were issued pursuant to delegated authority, or (ii) the prior orders were unopposed.   

On March 30, 2020, FERC issued an order establishing a paper hearing to evaluate Energy Harbor LLC’s (formerly known as FirstEnergy Solutions Corp.) proposed rejection in bankruptcy of a variety of FERC-jurisdictional contracts (“Jurisdictional Contracts”). FERC’s order follows a recent decision of the United States Court of Appeals for the Sixth Circuit ordering the bankruptcy court to take public interest factors into account when reviewing the proposed rejection of the Jurisdictional Contracts, and to invite FERC to provide its opinion on the issue (see December 19, 2019 edition of the WER).  FERC initiated the paper hearing to consider these public interest factors.

On April 2, 2020, FERC issued several orders aimed at helping regulated entities manage compliance deadlines and related issues in the wake of COVID-19 response.  Chairman Neil Chatterjee also issued a press release confirming the pandemic qualifies as an emergency under the Commission’s rules and detailing additional steps in FERC’s plan to help regulated entities manage potential enforcement and compliance-related burdens during the pandemic, including two new task forces to expedite standards of conduct waiver requests and no-action letters.

On March 25, 2020, the United States Court of Appeals for the Eighth Circuit (“Eighth Circuit”) upheld a Minnesota law granting a right of first refusal (“ROFR”) to incumbent electric transmission owners to construct, own, and maintain electric transmission lines connecting to their existing facilities. In its complaint brought before the United States District Court for the District of Minnesota (“District Court”), LSP Transmission Holdings, LLC (“LSP”) argued that Minnesota’s ROFR statute discriminates against out-of-state transmission developers and places an undue burden on interstate commerce in violation of the dormant Commerce Clause. The Eight Circuit affirmed the District Court’s dismissal of LSP’s complaint finding, de novo, that Minnesota’s ROFR provision does not violate the dormant Commerce Clause.

On March 27, 2020, FERC Chairman Neil Chatterjee and senior FERC staff members began periodic meetings with the National Association of Regulatory Utility Commissioners (“NARUC”), the National Association of State Energy Officials, and the National Governors Association to coordinate efforts to help ensure the reliability of the nation’s energy transmission and distribution systems during the coronavirus pandemic. FERC and NARUC are currently urging all state authorities to designate utility workers as essential to the nation’s critical infrastructure.