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On October 28, 2016, FERC issued an order that both partially accepted compliance filings and also denied rehearing requests from PJM Interconnection, LLC (“PJM”), Midcontinent Independent System Operator, Inc. (“MISO”) and MISO Transmission Owners regarding Order No. 1000 interregional compliance filings. Of particular concern for the Commission was the parties’ MISO-PJM Joint Operating Agreement (“MISO-PJM JOA”), and whether it failed to satisfy certain required Interregional Cost Allocation Principles. This is the third such order to address the parties’ compliance with the interregional transmission coordination and cost allocation requirements of Order No. 1000.
Continue Reading FERC Denies Rehearing of PJM and MISO Order No. 1000 Interregional Compliance Filings

On October 25, 2016, FERC held that a pipeline providing interstate service pursuant to Natural Gas Policy Act (“NGPA”) Section 311 may not give preferential curtailment priority to preexisting, intrastate customers unless their intrastate transportation service agreements expressly provide for a higher curtailment priority above the pipeline’s other firm services. In doing so, FERC clarified that it is not enough that a preexisting intrastate service agreement has “different” curtailment provisions than the pipeline’s Statement of Operating Conditions (“SOC”) used to provide interstate service pursuant to NGPA Section 311.
Continue Reading FERC Clarifies Precedent on Curtailment Priority Between Firm Section 311 Service and Preexisting Intrastate Service

On October 25, 2016, the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) ruled that two Notices issued by the FERC Secretary as the result of a deadlock between the then-four sitting FERC Commissioners over whether to approve or set for hearing the rates established by ISO-New England, Inc.’s (“ISO-NE”) eighth Forward-Capacity Auction (“FCA 8”) were unreviewable. Specifically, the court concluded that: (i) the Notices did not constitute reviewable “agency action” as contemplated by the Federal Power Act (“FPA”), because, according to the court, the FPA requires a “majority” vote of the Commissioners in order for FERC to act institutionally; and (ii) the Notices were not reviewable under the Administrative Procedure Act (“APA”) by virtue of an unlawful “failure to act,” because the FPA does not mandatorily obligate FERC to either set disputed rates for hearing, or to affirmatively prevent any unjust and unreasonable rates from going into effect.
Continue Reading D.C. Circuit Holds That FERC Deadlock is Unreviewable Under FPA, APA

On October 26, 2016, FERC denied a rehearing request from San Diego Gas & Electric Company (“SDG&E”), Pacific Gas and Electric Company, and Southern California Edison Company following a March 2, 2016 order wherein FERC allowed only a 50 percent cost recovery in the event that SDG&E’s South Orange County Reliability Enhancement (“SOCRE”) transmission project is abandoned or canceled. As the Commission reiterated, utilities are generally allowed 100 percent cost recovery for abandoned or canceled projects only after a project is found eligible for “Abandonment Incentives,” whereas only 50 percent cost recovery is typically allowed for costs incurred before such determination. Thus, because SDG&E was not granted the Abandonment Incentive until FERC issued its March 2 order, FERC denied SDG&E’s request for an Abandonment Incentive for 100 percent of the prudently incurred costs prior to March 2, 2016. In reaching this conclusion, the Commission noted, “it would be reasonable to infer” that utilities are required to request eligibility for Abandonment Incentives before incurring significant expenditures on a transmission project.
Continue Reading FERC Upholds Denial of Full Retroactive Abandonment Costs for SDG&E

On October 18, 2016, FERC accepted proposed changes to ISO New England Inc’s (“ISO-NE”) Transmission, Markets and Services Tariff (“Tariff”) intended to enhance liquidity in ISO-NE’s Forward Capacity Market (“FCM”). According to ISO-NE’s proposal, the changes – proposed jointly by ISO-NE and the New England Power Pool Participants Committee – will give qualified resources additional opportunities to provide capacity to the New England region.
Continue Reading FERC Accepts ISO-NE Tariff Changes Intended to Enhance Liquidity in Forward Capacity Market

On October 20, 2016, FERC issued an order that, among other things, rejected a refund report filed by the California Independent System Operator Corporation (“CAISO”). In so doing, FERC reiterated its discretionary authority to order refunds as well as its general policy to not exercise this discretion in situations involving cost allocation and rate design.
Continue Reading FERC Rejects CAISO’s “Amendment 60” Report for Retroactive Refunds Explaining Cost Allocation Errors Should Be Corrected Only Prospectively

On October 21, 2016, FERC terminated the West-wide must-offer requirement imposed on public and non-public utility sellers in the Western Electricity Coordinating Council (“WECC”) during the California Energy Crisis of 2001. FERC also terminated the associated requirement that all sellers in WECC must post daily the amount of capacity that they have for sale. In terminating the requirements, FERC found that “[i]n light of the passage of time and significant improvements to California’s wholesale electricity markets over that time,” the requirements produce “little or no benefits today.” The termination of the requirements is effective February 24, 2016.
Continue Reading FERC Terminates West-Wide Must-Offer Requirement in WECC

On October 11, 2016, FERC issued an order on the refund liability of Midwest Generation, LLC (“Midwest”) for violating FERC-approved settlement agreement terms regarding reactive supply and voltage control service. Of note, although FERC approved Midwest’s total refund obligation calculation of over $3.6 million, it declined to exercise its primary jurisdiction over whether Midwest should be responsible to pay the portion of this obligation that accrued before the utility’s debts were discharged in an April 2014 bankruptcy proceeding. Instead, FERC directed Midwest to pay the refund amounts that accrued following the bankruptcy proceeding, which totaled around $1.7 million.
Continue Reading FERC Declines to Exercise Primary Jurisdiction Over Midwest Generation’s Pre-Bankruptcy Refund Liability

On October 7, 2016, FERC rejected Midcontinent Independent System Operator, Inc.’s (“MISO”) submitted revisions (“Compliance Revisions”) to Schedule 2 for Reactive Supply and Voltage Control from Generation or Other Sources Service of its Open Access Transmission, Energy and Operating Reserve Markets Tariff (“Tariff”) to comply with FERC’s June 16, 2016 order to show cause (“Show Cause Order”). Going forward, MISO must amend its Compliance Revisions and resubmit within sixty days.
Continue Reading FERC Rejects Revisions to MISO’s Reactive Service Tariff Provisions

On October 13, 2016, FERC found that the M2 Milestone Payment in the Midcontinent Independent System Operator, Inc. (“MISO”) interconnection process should apply to all interconnection customers, including generators external to MISO that want to participate in MISO’s capacity and energy markets through network resource interconnection service—External Network Resource Interconnection Service (“E-NRIS”) and Network Resource Interconnection Service-only (“NRIS-only”) customers. The M2 Milestone Payment is a payment that interconnection customers entering the final phase of MISO’s interconnection process are required to make to MISO, and is used to help alleviate the costs of necessary network upgrades and restudies that are shifted to other interconnection customers in the event that an interconnection customer withdraws from the interconnection queue.
Continue Reading FERC Requires MISO to Apply Its M2 Milestone Payment to All Interconnection Customers, Including External Generators