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.

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.