FERC, CFTC, and State Energy Law Developments

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.

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.

The Pennsylvania (PA) Supreme Court issued its unanimous decision on August 20 in PPL Electric Utilities Corp. v. City of Lancaster, invalidating a municipality’s efforts to impose annual fees on utilities to occupy public rights-of-way and adopt inspection, supervision, and enforcement measures underpinning those fees. The PA Supreme Court affirmed that the Public Utility Code (Code) and the authority of the Pennsylvania Public Utility Commission (PUC) to apply and enforce the Code preempt the field on all matters that relate to the regulation of public utilities in the commonwealth. In doing so, the court upheld the longstanding principle that public utilities should be regulated by one statewide agency, namely the PUC.

The litigation culminating in the PA Supreme Court’s decision arose from the 2013 enactment of a local ordinance that implemented a comprehensive program for management of municipal rights-of-way. The key provision of the ordinance at issue authorized the City of Lancaster (City) to impose perpetual, annual occupancy fees on utilities for their presence in municipal rights-of-way. The ordinance also included provisions purporting to grant the City authority to inspect public utility facilities located in the right-of-way, order the relocation of such facilities, and enforce the Code and the ordinance itself.

The US Environmental Protection Agency (EPA) issued three rules on June 19 that may give utilities new reasons to consider investing in certain plant modifications and reassessing the projected lifespans of their facilities. The rules also affect each state’s resource planning process and may contribute to changes in a state’s projected energy resource mixes. In response to the rules, utilities should be prepared for possible changes to state policies defining what constitutes “clean” energy and supporting reliability. The rules are intended to go into effect 30 days from their issuance. However, the implementation timeline for the rules is not certain because several states and organizations have stated they intend to challenge the rules in the federal courts.

Consolidated Edison Company of New York, Inc. (Con Edison) and Orange and Rockland Utilities, Inc. (O&R) issued a draft joint Request for Proposals (RFP) on May 31 to competitively procure scheduling and dispatch rights from new energy storage projects. Through this initial solicitation, Con Edison and O&R are targeting at least 300 megawatts (MW) and 10 MW, respectively, of new energy storage facilities to meet the in-service deadline of December 31, 2022, set by the New York Public Service Commission (NYPSC) in its December 2018 Order (Storage Order) establishing New York’s three gigawatt (GW) energy storage deployment goal.

Both utilities will accept bids only for new storage projects sized over five MW and connected to the transmission or distribution system that can directly participate in New York Independent System Operator (NYISO) markets and provide distribution benefits, if applicable. These front-of-meter systems must be able to discharge for at least four hours 100 to 350 times per year, have at least 85% roundtrip efficiency, and maintain 98% availability for dispatch each contract year.

As we reported in December 2018, to jumpstart the energy storage market as envisioned by Governor Andrew M. Cuomo, the New York Public Service Commission (NYPSC) issued an order establishing an aggressive 3 GW energy storage goal by 2030, with an interim target of 1.5 GW by 2025, and directing investor-owned electric utilities (IOUs) to engage in competitive procurements for energy storage. The IOUs will issue draft requests for proposals (RFPs) this summer following a stakeholder process that kicks off on March 29.

In response to state legislation enacted last year, the New Jersey Board of Public Utilities (BPU) is seeking comments concerning the state of and prognosis for energy storage development within the State of New Jersey. New Jersey enacted the Clean Energy Act on May 23, 2018. Among other things, the act requires the BPU, in consultation with the regional grid operator, PJM Interconnection, LLC, and other stakeholders, to conduct an energy storage analysis and submit a written report on energy storage to the governor and legislature by May 23, 2019.