The Federal Energy Regulatory Commission (FERC) issued an Order clarifying that a bankruptcy court cannot unilaterally amend or reject a wholesale power purchase agreement (PPA) or wholesale power contract that is subject to the Commission’s jurisdiction.
FERC recently issued a Notice of Proposed Rulemaking (NOPR) that would eliminate the need for electric power sellers with market-based rate authority who sell into certain independent system operator (ISO) and regional transmission organization (RTO) capacity markets to file two screens—the pivotal supplier screen and wholesale market-share screen—with FERC, which would simplify the horizontal market power analysis for sellers in those markets.
This proposed modification of the horizontal market power analysis would apply in any RTO/ISO market with RTO/ISO-administered energy, ancillary services, and capacity markets subject to FERC-approved RTO/ISO monitoring and mitigation. For RTOs and ISOs that do not have an RTO/ISO-administered capacity market, market-based rate sellers would be relieved of the requirement to submit indicative screens if their market-based rate authority is limited to sales of energy and/or ancillary services.
The NOPR, announced at FERC’s December 20, 2018 meeting, is a follow up to FERC’s Order No. 816 NOPR, and is aimed at relieving the filing burden on market-based rate sellers in RTO/ISO markets without compromising FERC’s ability to prevent the potential exercise of market power in those markets. If the NOPR were implemented, indicative screen failures in organized wholesale power markets where the grid operator does not administer a capacity market would no longer be presumed to be adequately addressed by the market monitoring and mitigation in those markets. If a screen failure were to occur, market-based sellers in those markets would be able to submit a delivered-price test or other evidence; sellers could also propose other mitigation or capacity sales. All market-based sellers would still be required to file a vertical market power analysis and an asset appendix which provides comprehensive information relevant to determining a seller’s market power. The appendix would be required to include generators owned or controlled by the seller and its affiliates, long-term firm power purchase agreements, electric transmission assets, and natural gas facilities.
The NOPR would simplify the horizontal market power analysis electric power sellers are required to complete to obtain market-based rate authority. The NOPR would apply to sellers doing business in ISO-NE, MISO, NYISO, and PJM, which all have a capacity market that includes market monitoring and mitigation. Entities in Cal-ISO and SPP would still need to file the screens, because the NOPR would not apply to them given the lack of central capacity market with monitoring and mitigation. Sellers in ERCOT would remain unaffected because the ERCOT market is not subject to FERC’s rules.
The screens this NOPR would eliminate originated in Order No. 816 NOPR, which was issued in 2009, when ISO/RTO capacity markets had just begun operating. The three pivotal supplier test and market share screen (with a 20% threshold) serve as cross checks on each other to determine whether sellers may have market power and whether they should be more closely examined. If a seller passes both screens, a rebuttable presumption the seller did not possess horizontal market power is established. If a seller fails either screen, that failure establishes a rebuttable presumption that the seller has market power; the seller then has a chance to present evidence through a delivered price test analysis or other evidence to show the seller does not have market power, despite the screen failure.
No other market-based rate regulatory reporting requirements would be affected by the proposed order.
Comments on this NOPR are due 45 days after publication in the Federal Register, and may be filed in Docket No. RM19-2-000, Refinements to Horizontal Market Power Analysis for Sellers in Certain Regional Transmission Organization and Independent System Operator Markets.
James Hoecker and Sylvia Bartell authored an article on an October 16, 2018 FERC order in the remand proceeding associated with Emera Maine v. FERC. They provide an overview of the order background, an analysis of FERC’s revised approach and wrap it up with their conclusion about the order. Read their entire article on Law360.
The Federal Energy Regulatory Commission (FERC) took swift action to respond to the recent United Airlines v. FERC decision regarding income tax allowances, as well as to implement changes stemming from the Tax Cuts and Jobs Act “to ensure that the economic benefits related to the reduction in the Federal corporate income tax rate are passed through to customers.” Specifically, FERC revised its income tax allowance policy for Master Limited Partnership (MLP) pipelines, with implications for other pass-through entities. In addition, it acted to implement federal income tax rate reductions and ordered changes affecting all FERC regulated entities.
On January 8, 2018, the Federal Energy Regulatory Commission (FERC or the Commission) issued an Order terminating the rulemaking proceeding that it established to address DOE Secretary Rick Perry’s proposed Grid Resiliency Pricing Rule. The proposed rule directed FERC to provide special compensation to certain coal and nuclear power plants (for a full summary of the proposal, refer to Husch Blackwell’s client alert). In response, FERC found that Secretary Perry’s proposal did not meet “clear and fundamental legal requirements[.]” FERC stated that Comments from Regional Transmission Operators (RTOs) and Independent System Operators (ISOs) did not indicate that the grid is threatened by the retirement of coal and nuclear power plants.
FERC none-the-less emphasized the importance of grid reliability and resilience, and determined that it has consistently taken action to address the issue, including: (i) extensive reliability planning and standard setting through NERC, (ii) examination of fuel assurance methods during the 2014 Polar Vortex, (iii) certain capacity market reforms, and (iv) coordination of wholesale gas and electricity market scheduling. To continue its reliability work, FERC initiated a new proceeding in Docket No. AD18-7 “to specifically evaluate the resilience of the bulk power system in the regions operated by regional transmission organizations (RTO) and independent system operators (ISO).” In the new proceeding, FERC directs each RTO and ISO to submit information on certain resilience issues and concerns identified by the Commission to enable it to examine holistically the resilience of the bulk power system. FERC stated that this new proceeding will provide further information on whether further action is warranted. Continue Reading FERC Rejects DOE Proposal for Special Compensation for Coal and Nuclear Generators
FERC Holds its First Meeting in Nearly Two Years with a Full Slate of Commissioners.
At the December 21, 2017 FERC open meeting, the first with the agency’s new Chairman, Kevin McIntyre and a full slate of Commissioners, several major new orders and policy initiatives were announced that are important to the energy industry, including initiating a more RTO-specific approach to fast-start resource pricing policies, new reporting requirements for cyber security incidents and a preliminary announcement of FERC’s intent to review the current pipeline certificate procedures. Continue Reading FERC Off to a “Fast Start”
FERC recently reviewed its regulations to determine if they “potentially burden the development or use of domestically produced energy resources, with particular attention to oil, natural gas, coal, and nuclear energy resources,” as required Executive Order 13783.
In conducting this review, FERC focused on the following four jurisdictional areas:
- Hydropower Licensing
- Liquid Natural Gas (“LNG”) Facility and Natural Gas Pipeline and Storage Facility Siting
- Centralized Electric Capacity Market Policies in PJM, ISO-NE, and NYISO
- Generator Interconnection Policies
On September 29, the Department of Energy (DOE) issued a notice that may impact wholesale rates in all federally regulated wholesale markets (not including ERCOT), possibly affecting: (i) merchant plant owners, (ii) wholesale market customers, (iii) renewable and gas fired generation, (iv) coal and nuclear power plant owners, and (v) power traders. Husch Blackwell energy regulatory attorneys Linda Walsh, Chris Reeder and Sylvia Bartell issued a detailed client alert on the Notice of Proposed Rulemaking (NOPR) issued by DOE requiring regional transmission organizations (RTOs) and independent system operators (ISOs) “to ensure that certain reliability and resilience attributes of electric generation resources are fully valued.” The proposed market reform would provide Continue Reading DOE Proposes Special Compensation to Coal and Nuclear Generators
In an article by Keith Goldberg of Law360, Husch Blackwell attorney and former FERC Chairman, Jim Hoecker, discuss the role of FERC Order 1000 in regional transmission planning. He and other experts provide insight on how Order 1000 has initiated the long-term planning process but failed to spur the significant development necessary to provide regional electricity solutions.
The abrupt resignation and departure (effective February 3, 2017) of former FERC Chairman Norman Bay will leave the Commission without the minimum 3-commissioner quorum needed for the Commission to act. Regulated entities can expect a flurry of activity at the Commission this week, while Commissioner Bay is still voting. As a former FERC Chairman, I believe Acting Chairman Cheryl LaFleur, a Democrat, will do her best to conduct the agency’s business after Bay’s departure, but there are limits to what she and remaining Commissioner, Collette Honorable, can do.
The first order of business will be to Continue Reading FERC Acting Chairman LaFleur Expected to Try and Minimize FERC’s Quorum Problem