FERC, CFTC, and State Energy Law Developments

FERC recently issued a pair of orders approving the electric storage market participation proposals of PJM Interconnection, Inc. (PJM) and Southwest Power Pool, Inc. (SPP). PJM and SPP submitted those proposals to comply with the directives of Order No. 841, FERC’s final rule addressing the participation of electric storage resources in the capacity, energy, and ancillary service markets operated by independent system operators and regional transmission organizations. The October 17 orders represent the agency’s first two approvals of Order No. 841 compliance filings, which have been under review since late last year.

Morgan Lewis energy partner Ken Kulak takes a look at the role of regulation in defining the future of energy storage in Energy Policy Now, a podcast produced by the University of Pennsylvania Kleinman Center for Energy Policy. Ken also previews an upcoming FERC meeting during which the agency will consider plans submitted by regional transmission organizations to facilitate the participation of battery storage.

Listen to the podcast episode >

President Donald Trump signed a pair of executive orders on October 9 that may limit the impact of an agency’s use of informal guidance documents. The executive orders express concern that agency guidance, which includes policy statements, memoranda, and letters, has become a backdoor for regulators to change the laws and expand their scope and reach.

FERC Staff issued an October 4 report on Commission-led critical infrastructure protection (CIP) reliability audits completed during fiscal year 2019. The report provides lessons learned and identifies voluntary practices that FERC Staff observed during those audits that could improve the protection of electric infrastructure from cyberattacks.

In October 2018, Pennsylvania Governor Tom Wolf signed into law Act 120 of 2018 (Act 120), which grants the Pennsylvania Public Utility Commission (PaPUC) additional authority to support investor-owned water utilities’ efforts to protect Pennsylvania residents from lead entering their drinking water from customer-owned lead service lines. On October 3, the PaPUC, in its first exercise of this authority, approved Pennsylvania-American Water Company’s (PAWC’s) comprehensive plan for replacing customer-owned lead service lines in its service territory and established a working group to develop recommendations for the uniform implementation of Act 120 by all water companies in the commonwealth.

President Donald Trump announced on Monday his intention to nominate FERC General Counsel James Danly to fill the remaining Republican position at FERC. That position has been vacant since the untimely passing of former Chairman Kevin McIntyre.

Under FERC’s governing statute, no more than three of the five commission seats can be held by the members of a single party and FERC currently has two Republican commissioners. If Mr. Danly is confirmed as a Commissioner, FERC would have three Republican Commissioners and one Democratic Commissioner. As a result, a successful confirmation will ensure that even if a single Commissioner is recused from a proceeding or resigns as a Commissioner, FERC will continue to have a quorum and a Republican voting majority.

The nomination has not yet been submitted to the Senate and no hearings have been scheduled at this time. As a result, the timing of any potential confirmation remains unclear, as does the potential replacement of Mr. Danly as general counsel to FERC.

Interest in microgrids is on the rise in the United States as over half of states explore ways to modernize the grid and promote distributed energy resources (DER), including innovative renewable energy, storage, and demand response technologies. However, microgrids are not defined by law or regulation in most states and are more complex than other types of DER because they involve both the generation and distribution of energy. This raises several policy questions, including who should pay for microgrid development and use and whether microgrid operators that technically distribute energy to retail customers should be classified as public utilities and subject to regulations ordinarily imposed on such entities. California is currently exploring the potential benefits of microgrids and the role of state regulation.

FERC issued a notice of proposed rulemaking (NOPR) on September 19 announcing its intent to revise key rules governing the status and rights of Qualifying Facilities (QFs). These revisions include proposed changes to the rules for measuring QF size that could make it more difficult for certain projects to maintain QF status. The NOPR also proposes to provide greater flexibility to states in regulating the rates that QFs can receive from their interconnected utilities, as well as a number of other fundamental changes in the regulation of QFs.

A proposed rule by the US Environmental Protection Agency (EPA) could reduce costs for oil and gas producers and processors by eliminating certain air emission requirements. The EPA issued a proposed rule on August 29 to roll back new source performance standards (NSPS) established in 2012 and 2016 by removing sources in the transmission and storage segment from the source category; rescind the NSPS applicable to those sources, including methane and volatile organic compounds requirements; and rescind the methane-specific requirements of the NSPS applicable to sources in the production and processing segments. The proposed rule also includes an alternate proposal to rescind the methane-specific requirements of the NSPS applicable to all oil and natural gas sources, without removing any sources from the source category.

Facing what it deems an “unprecedented number of FOIA requests” for nonpublic information related to utility violations of the North American Electric Reliability Corporation (NERC) critical infrastructure protection (CIP) requirements governing cybersecurity compliance for critical electric infrastructure, FERC Staff has issued a white paper proposing to make publicly available additional information regarding those violations, including the names of the utilities involved. If adopted, this proposal could increase the risk of a serious and successful attack on the nation’s electric infrastructure with no benefit other than a “name and shame” approach to CIP enforcement.