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On June 19, 2014, FERC conditionally accepted the California Independent System Operator Corporation’s (“CAISO”) proposed creation of a real-time market for imbalance energy, referred to as the Energy Imbalance Market (“EIM”).  The result of a broad stakeholder process in the Western U.S., the EIM provides a venue where participants are able to buy and sell five-minute real-time energy to meet energy imbalance needs.  The EIM allows for neighboring balancing authorities to voluntarily participate on the CAISO EIM platform. 

On June 19, 2014, FERC announced a new methodology to calculate the return on equity (“ROE”) for jurisdictional electric utilities and used that methodology to tentatively set the base ROE at 10.57 percent for the New England Transmission Owners (“NETOs”) operating in the ISO New England Inc. (“ISO-NE”).  FERC’s new methodology will incorporate both short-term and long-term measures of growth projections in estimating a company’s cost of equity, thus incorporating the two-step discounted cash flow (“DCF”) methodology FERC uses in setting ROEs for natural gas and oil pipelines.

On June 19, 2014, FERC approved Reliability Standard EOP-010-1, a new reliability standard requiring certain reliability coordinators and transmission operators of the bulk-electric system to develop procedures to help mitigate the effects geomagnetic disturbances (“GMDs”) have on the bulk-electric system.  Reliability Standard EOP-010-1 was submitted by the North American Electric Reliability Corporation (“NERC”) in response to FERC’s directives in Order No. 779 (see May 20, 2013 edition of the WER), and represents the first of a two-stage process designed to address GMD events.

On June 11, 2014, FERC Commissioner Tony Clark released a statement largely agreeing with the U.S. Court of Appeals for the District of Columbia Circuit’s (“D.C. Circuit”) recent decision to vacate FERC Order No. 745, which required organized wholesale energy markets to compensate demand response resources at the market price for energy (see May 27, 2014 edition of the WER).  Commissioner Clark’s statement followed Acting Chairman Cheryl LaFleur’s announcement that FERC plans to seek an en banc review of the D.C. Circuit’s decision.  Clark had not yet joined the Commission when Order No. 745 was issued in 2011.

On June 6, 2014, the U.S. Court of Appeals for the District of Columbia Circuit (“DC Circuit”) ruled that FERC’s environmental assessment of Tennessee Gas Pipeline Company, L.L.C.’s (“Tennessee Gas”) proposed “Northeast Project” violated the National Environmental Policy Act (“NEPA”).  Specifically, the DC Circuit held that FERC (1) failed to consider Tennessee Gas’ Northeast Project in conjunction with three other connected and interdependent Tennessee Gas pipeline projects, and (2) failed to provide a meaningful analysis of the cumulative impacts of all of the Tennessee Gas projects.

On June 4, 2014, the United States Court of Appeals for the Second Circuit denied an emergency motion requesting a stay of two FERC orders associated with the New York Independent System Operator, Inc.’s (“NYISO”) creation of a new capacity market local deliverability zone in the lower Hudson Valley.  The creation of the new zone requires that a certain amount of capacity serving that area be located within the zone, which could lead to higher capacity prices in that area.  The petitioners, Central Hudson Gas & Electric and the New York Public Service Commission (“NYPSC”), argued to the court that the implementation of the new capacity zone would unnecessarily expose consumers to considerably higher prices and that pending transmission developments would eventually make the zone unnecessary.

On May 19, 2014, FERC granted the California Independent System Operator Corporation’s (“CAISO”) petition for limited waiver of certain sections of its tariff that apply a minimum performance threshold to resources providing regulation services. CAISO had requested the waiver because a significant number of resources were failing to meet the minimum threshold.  FERC approved the requested waiver, finding that the waiver was limited in scope, resulted in no undesirable consequences, and benefited customers.