On June 5, 2013, FERC issued an order conditionally granting the California Independent System Operator Corporation’s (“CAISO”) petition for declaratory order, allowing CAISO to force certain power sellers, including JP Morgan Ventures Energy Corp. (“JP Morgan”), to reimburse CAISO electricity distributers for overpayments caused by a flaw in CAISO’s bid cost recovery calculation.  In the order, FERC approved CAISO’s resettlements spanning from the date that CAISO had first implemented its flawed bid cost recovery mechanism, April 1, 2009, until the effective date of the tariff revision which addressed the calculation’s defect, March 25, 2011.  The resettlement amount for the entire period is expected to total $52 million in reimbursement costs.

On May 31, 2013, FERC approved a settlement (“Settlement Agreement”) between its Office of Enforcement (“Enforcement”) and Washington 10 Gas Storage Corporation (“Washington 10”) and DTE Gas Company (“DTE Gas”) (both subsidiaries of DTE Energy (“DTE”)).  Specifically, Enforcement concluded that Washington 10 violated FERC regulations by: (1) misclassifying certain firm transportation storage contracts; (2) misclassifying Park and Loan (“PAL”) contracts, and therefore contracting for an unauthorized service; (3) filing inaccurate semi-annual reports; and (4) failing to file annual reports on hub activities.  Additionally, Enforcement concluded that DTE Gas engaged in “flipping” by repeatedly releasing discounted rate capacity to affiliated replacement shippers on an alternating monthly basis to avoid competitive bidding requirements.

On June 6, 2013, the Edison Electric Institute (“EEI”) released a white paper recommending that FERC adjust its methodology for calculating utilities’ return on equity (“ROE”) for transmission investments.  The white paper, “Transmission Investment: Adequate Returns and Regulatory Certainty Are Key,” highlighted that FERC’s discounted cash flow (“DCF”) model – a model used to estimate a utility’s cost of equity for setting regulated returns – is outdated and can result in substantially lower returns on equity, and therefore, recommended changes to the methodology. 

On May 28, 2013, various news outlets reported that FERC Chairman Jon Wellinghoff had tendered his resignation to President Barrack Obama.  Although nothing official has been released by FERC, these same news outlets also reported that Chairman Wellinghoff intends to remain at FERC until his replacement is confirmed by the United States Senate.  If no replacement is confirmed by June 30, 2013, the end of Chairman Wellinghoff’s term, he may hold-over until the end of the Congressional term or until a replacement is confirmed.

On May 23, 2013, FERC approved revisions to the Midcontinent (previously Midwest) Independent System Operator, Inc.’s (“MISO”) Agreement of Transmission Facilities Owners to Organize the Midwest Independent Transmission System Operator, Inc. (“Transmission Owners Agreement”) that grant increased authority to state regulators.  The revisions allow for the Organization of MISO States (“OMS”) – a regional state committee comprised of state, city, and local regulatory officials within MISO’s footprint – to have enhanced authority in determining transmission cost allocation methodologies, by requesting that MISO make a filing pursuant to Section 205 of the Federal Power Act (“FPA”).

On May 28, 2013, FERC announced that it will hold a technical conference on the California Independent System Operator Corporation’s (“CAISO”) proposal to provide financial assistance to resources that are either at risk for retirement or are uneconomic, but are still needed for flexible capacity and local reliability (the “FLRR Mechanism”).

On May 16, 2013, FERC’s Office of Enforcement and Office of Electric Reliability jointly presented their annual assessment of the condition and reliability of the energy market to FERC.  The presentation, titled Summer 2013 Energy Market and Reliability Assessment, predicted an increase in natural gas prices due to higher-than-normal summer temperatures, as well as an increase in coal usage due to the increased natural gas prices.

On May 16, 2013, FERC issued an order on an investigation (“Investigation Order”) that will require revisions to the formula rate protocols of the Midcontinent (previously Midwest) Independent System Operator, Inc. (“MISO”) and its Transmission Owners (“TOs”).  The formula rate protocols are used by the TOs when calculating annual charges pursuant to their formula transmission rates.  As a result of FERC’s Investigation Order, MISO and the TOs must revise their formula rate protocols to: (1) allow for increased participation in the annual update of the TOs formula rates; (2) provide interested parties with additional and more specific information regarding the annual update process; and (3) allow interested the opportunity to challenge those updates.