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.

On March 20, 2020, FERC issued an order accepting PJM Interconnection, L.L.C.’s (“PJM”) proposal as part of its Regional Transmission Expansion Plan (“RTEP”) to allow project developers to submit binding cost commitments on a voluntary basis, and to undertake a comparative review and analysis of these commitments in selecting transmission projects. FERC accepted PJM’s proposal over the objections of certain PJM transmission owners, and concluded that the proposal would assist PJM in selecting the most efficient and cost-effective transmission solutions in its RTEP while providing greater transparency into PJM’s evaluation process.

On March 20, 2020, FERC denied rehearing of a February 2018 order accepting the Midcontinent Independent System Operator, Inc.’s (“MISO”) resource adequacy Tariff provisions (see March 5, 2018 edition of the WER). FERC noted that many of the arguments raised on rehearing sought to impose on MISO the rules and requirements used in the centralized capacity markets in the eastern Regional Transmission Organizations/Independent System Operators (“RTOs/ISOs”). FERC rejected those arguments, concluding that unlike the centralized capacity constructs used in the eastern RTOs/ISOs, MISO’s capacity auction is not, and never has been, the primary mechanism for Load-Serving Entities (“LSEs”) to procure capacity.

On March 19, 2020, FERC authorized Jordan Cove Energy Project L.P.’s (“Jordan Cove”) Natural Gas Act (“NGA”) section 3 proposal to site, construct, and operate a liquefied natural gas (“LNG”) export terminal in Coos County, Oregon (“Terminal”) and Pacific Connector Gas Pipeline, LP’s (“Pacific Connector”) application under section 7(c) of the NGA and Parts 157 and 284 of FERC’s regulations that would allow it to construct and operate an interstate natural gas pipeline system connected to the Terminal (“Pacific Connector Pipeline”). The decision prompted a dissent from Commissioner Richard Glick, who argued that the majority’s decision did not adequately consider the impacts that the Terminal and Pacific Connector Pipeline will have on climate change and other environmental concerns.

On March 17, 2020, FERC accepted revisions to the PJM Interconnection LLC (“PJM”) Open Access Transmission Tariff (“Tariff”) to establish enhanced procedures for compliance with the North American Electric Reliability Corporation (“NERC”) reliability standard CIP-024-2.  A majority of FERC Commissioners found that the Tariff revisions, captured in a new proposed Tariff Attachment M-4, appropriately balanced transparency obligations in transmission planning with the need to maintain strict confidentiality regarding the names, locations, and vulnerabilities of CIP-014-2 facilities.  In a separate opinion, Commissioner Glick dissented, in part, arguing that the proposal inappropriately categorized Attachment M-4 projects as a subset of “Supplemental Projects” under the Tariff and PJM Operating Agreement. Commissioner Glick argued that the proposal improperly subjected such projects to non-regional cost allocation, contrary to cost-causation and other transmission planning principles expressed in Commission Order Nos. 890 and 1000.