At a time of significant industry transformation driven by technological change and spurred on by environmental policy concerns, the Federal Energy Regulatory Commission (“FERC” or “Commission”) has now added a significant layer to the stack of policy debates – the future of transmission investment.  Many states have seized the initiative in terms of establishing preferable resource mixes for in-state customers, and are spearheading significant pushes for greater renewable and storage resource deployment.  FERC has now joined the fray by opening up the policy debate anew regarding how to spur (or whether to spur) additional transmission sector investment.  The FERC order described below focuses on regulatory and market rules impacting transmission investment (Docket No. PL19-3-000).  The agency also opened a companion docket requesting comments on the details of its policies regarding establishment of a public utility transmission owner’s stated return on equity (“ROE”) (Docket No. PL19-4-000).  The Washington Energy Report will provide detailed summaries of these orders via our blog.  FERC’s mention here of “an increased emphasis on the reliability of transmission infrastructure” (emphasis added) could signal an attempt to re-focus the U.S. Department of Energy’s resiliency concerns to an arena that gives FERC home-field advantage.  Lest the states forget, FERC controls the price of admission for a ticket to the interstate transmission network, and this open-ended fact-finding effort bears a high likelihood of impacting the price of such tickets (for a large portion of the continental United States).

On March 11, 2019, a U.S. district court judge in California denied FERC’s motion to withdraw the reference of Pacific Gas and Electric’s (“PG&E”) adversary proceeding from the U.S. Bankruptcy Court in the ongoing jurisdictional dispute between FERC and the bankruptcy court.  In his ruling, Judge Haywood Gilliam Jr. of the U.S. District Court for the Northern District of California held that removal of the case from the bankruptcy courts was neither required nor permitted because the plain language of the Bankruptcy Code is sufficient to address the questions raised in the proceeding.

On March 11, 2019, PJM Interconnection, L.L.C. (“PJM”) made a filing informing FERC that it has begun advising Capacity Market Sellers to use both its existing capacity market rules, as well as its proposed Capacity Reform rules while it awaits a final order from FERC on the proposed reforms.  PJM stated that this approach ensures that all Capacity Market Sellers will have satisfied both the existing and PJM’s proposed pre-auction requirements prior to the conduct of the August 2019 Base Residual Auction (for the 2022/2023 Delivery Year) in anticipation of a Commission order.  The Capacity Reform rules include revised Minimum Offer Price (“MOPR”) rules and the “Resource Carve-Out” alternative.

On March 6, 2019, the New Hampshire Public Utilities Commission (“PUC”) declined to reconsider an earlier order refusing to enforce a newly-enacted mandatory biomass power purchase obligation, and associated subsidy scheme. Although the New Hampshire PUC ruled narrowly in both decisions, the law subsidizing state biomass generators at above-market rates is the latest in a series of recent state actions pushing the jurisdictional line between FERC and state authority (see, e.g., April 27, 2016 edition of the WER; September 25, 2018 edition of the WER; October 3, 2018 edition of the WER).  As of this writing, challenges to the law remain pending at FERC.

On March 6, 2019, FERC denied GridLiance GP, LLC’s (“GridLiance”) proposal (“Proposed Transaction”) to acquire from People’s Electric Cooperative certain transmission lines and related facilities (“Assets”).  In its order, FERC concluded that GridLiance failed to demonstrate that the benefits of its ownership of the facilities would offset the rate increases that GridLiance acknowledged would result from the Proposed Transaction.  However, because FERC denied the proposal without prejudice, GridLiance can make a new filing that, according to FERC “proposes adequate ratepayer protection and demonstrates specific additional benefits to offset a rate increase.”

On February 28, 2019, FERC denied the Coalition of Midwest Power Producers, Inc.’s (“Power Producers”) complaint alleging that Midcontinent Independent System Operator, Inc. (“MISO”) violated its tariff (“OATT”) by not requiring all capacity resources to be deliverable up to their installed capacity levels (“Complaint”).  FERC concluded that MISO reasonably implemented its OATT provisions regarding capacity resources.

On February 28, 2019, following a July 2018 voluntary remand order from the U.S. Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”), FERC reversed tariff waivers it previously granted to the Southwest Power Pool, Inc. (“SPP”) regarding customer crediting payments for certain network upgrades.  FERC had granted a waiver of the one-year time bar for billing adjustments in SPP’s tariff so that SPP could retroactively reimburse transmission customers for qualifying network upgrade payments.  In its order on voluntary remand (“Remand Order”) however, FERC concluded that granting such a waiver would violate the filed rate doctrine.  As such, FERC directed the SPP to provide refunds and interest to affected transmission customers.

On February 25, 2019, FERC issued an order accepting proposed revisions to the ISO New England Inc. (“ISO-NE”) Transmission, Markets and Services Tariff (“Tariff”) that would enable electric storage resources (“ESRs”) to more fully participate in ISO-NE’s markets (“Storage Revisions”).  FERC found that the Storage Revisions reduce barriers to entry for ESRs by enabling them to provide services they are capable of providing, which would enhance competition, thus helping to ensure just and reasonable rates in the ISO-NE markets.  ISO-NE submitted these changes as essentially an interim step on its road to becoming fully compliant with Order No. 841’s generic requirements regarding Regional Transmission Operators (“RTOs”) and Independent Service Operators (“ISOs”) enabling storage participation in competitive markets.

On February 21, 2019, FERC issued an order accepting tariff revisions proposed by the California Independent System Operator Corporation (“CAISO”) regarding manual load forecast adjustments (also known as “load conformance”) in the CAISO and the western Energy Imbalance Market (“EIM”).  CAISO’s December 12, 2018 filing proposed tariff additions to describe: (1) load-conforming practice used in the real-time market; (2) a similar load-conforming practice used in the residual unit commitment (“RUC”) process of the day-ahead market; and (3) a “load conformance limiter” tool to automatically limit system operator-initiated load conformance in the real-time market to ensure that adjustments to load do not exceed actual market ramping capability, thereby triggering shortage pricing when extra supply is not actually needed.  FERC approved CAISO’s tariff revisions, effective February 27, 2019, over objections from parties that the load conformance limiter mechanism suppresses market prices and prevents shortage pricing.