On October 25, 2019, FERC found that Vitol, Inc. (“Vitol”) and one of its traders, Federico Corteggiano, violated the Federal Power Act (“FPA”) and FERC’s rules prohibiting energy market manipulation by importing power at a loss from October 28 through November 1, 2013, at the border of the California Independent System Operator Corporation’s (“CAISO”) wholesale electric market in order to relieve transmission congestion and to benefit Vitol’s congestion revenue rights (“CRRs”) sourced at that location. The order follows an investigation into Vitol’s and Corteggiano’s trading practices that was initiated in 2014 by FERC’s Office of Enforcement. In July 2019, following the completion of Enforcement Staff’s investigation, FERC issued an order directing Vitol and Corteggiano to show cause why they should not be assessed Enforcement Staff’s recommended civil penalties of $6 million and $800,000 respectively, and directing Vitol to show cause why it should not disgorge $1,227,143 in unjust profits. FERC’s October 25 order affirmed Enforcement Staff’s conclusion that Vitol and Corteggiano engaged in market manipulation, and ordered Vitol to disgorge $1,227,143 in unjust profits. However, FERC significantly reduced Vitol’s civil penalty to $1.5 million and increased Corteggiano’s civil penalty to $1 million after concluding that Corteggiano was primarily responsible for the manipulative conduct.
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On October 17, 2019, FERC denied Public Citizen, Inc.’s (“Public Citizen”) complaint alleging that PJM Interconnection, L.L.C. (“PJM”) recovered improper campaign contributions and lobbying expenses through its filed rate and failed to disclose its spending on political activity. In doing so, FERC concluded that PJM could recover the expenses in question through its rates because they represent an educational, outreach, or informational function essential to PJM’s core operations and because PJM determined that such expenditures are in the collective best interest of PJM’s stakeholders.
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On October 4, 2019, FERC rejected without prejudice a stated rate tariff and Open Access Transmission Tariff (“OATT”), among other filings, by Tri-State Generation and Transmission Association, Inc. (“Tri-State”) and its subsidiary Thermal Cogen Partnership, L.P. (“Thermal Cogen”). Tri-State, an electric cooperative previously exempt from FERC’s jurisdiction, submitted the filings in an attempt to submit to FERC regulation after Tri-State admitted Mieco, Inc., a jurisdictional public utility, to its Board of Directors. FERC concluded that Tri-State’s stated rate tariff and OATT filings were patently deficient because they failed to provide the supporting data required for FERC to assess whether the proposed rates were just and reasonable, and for potentially interested parties to determine how the rates might affect them.
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On September 30, 2019, President Donald Trump announced his intent to nominate James P. Danly for Commissioner of FERC. If confirmed by the Senate, Mr. Danly would fill the seat vacated by the passing of former Chairman Kevin McIntyre for a term to expire on June 30, 2023, resulting in three Republican Commissioners and one Democratic Commissioner.
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On September 19, 2019, one Independent and four Democratic U.S. Senators wrote a letter to FERC asking for an explanation of three actions the Senators believed showed an “apparent erosion” of the “vital role” FERC plays in preventing fraud and manipulation in U.S. energy markets and financial markets: (1) the decline in FERC-initiated civil penalty actions and the abrupt termination of non-public investigations without explanation; (2) the elimination of the Division of Energy Market Oversight (“DEMO”); and (3) the rescission of its policy on issuing Notices of Alleged Violations (“NAVs”) for investigations. Those Senators were Maria Cantwell (D-WA), Dianne Feinstein (D-CA), Ron Wyden (D-OR), Edward Markey (D-MA), and Angus King (I-ME).

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On September 19, 2019, FERC proposed substantial revisions to its Public Utility Regulatory Policies Act of 1978 (“PURPA”) regulations.  If adopted, the package of reforms proposed in the Notice of Proposed Rulemaking (“NOPR”) would: (1) allow states more flexibility to incorporate competitive forces when setting avoided cost rates for Qualifying Facilities (“QFs”), (2) modify the “one-mile rule,” (3) reduce the size threshold for the rebuttable presumption about QFs’ ability to access markets, (4) provide clarity on establishing a legally enforceable obligation (“LEO”), and (5) establish a simplified process to challenge a project’s QF status.  FERC requested comments on a number of proposals, which are due 60 days from publication of the NOPR in the Federal Register.
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Summary of NOPR

On September 19, 2019, the Federal Energy Regulatory Commission (FERC) issued a Notice of Proposed Rulemaking (NOPR) proposing to revise its regulations implementing Sections 201 and 210 of the Public Utility Regulatory Policies Act of 1978 (PURPA) in light of changes in the energy industry since 1978.[1]
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On September 10, 2019, the United States Court of Appeals for the Third Circuit (“Third Circuit”) vacated a federal district court order permitting PennEast Pipeline Company (“PennEast”) to exercise eminent domain power under the Natural Gas Act (“NGA”) over property interests owned by the State of New Jersey.  The Third Circuit found that while the NGA delegates the federal government’s eminent domain authority to private gas companies, it does not delegate the federal government’s separate and distinct exemption from state sovereign immunity under the Eleventh Amendment.  After acknowledging concerns that its decision would disrupt the interstate gas pipeline industry, the Third Circuit suggested that in the case of state-owned property, a “work-around” might be for a federal official to file the necessary condemnation actions, and then to transfer the property to the natural gas company.
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On September 6, 2019, the U.S. Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) dismissed the City of Oberlin, Ohio’s and the Coalition to Reroute Nexus’s (collectively, “Petitioners”) request to vacate FERC’s authorization for Nexus Gas Transmission, LLC (“Nexus”) to: (1) construct and operate an interstate natural gas pipeline through parts of Ohio and Michigan; and (2) use eminent domain to acquire any necessary rights of way to complete the project (see December 18, 2018 edition of the WER).  The D.C. Circuit agreed with Petitioners, however, that the Commission failed to adequately substantiate its finding that it lawfully credited Nexus’s precedent agreements—under which shippers agree to enter into service agreements once the pipeline is built—with foreign shippers serving foreign customers as evidence of market demand for the interstate pipeline.  As a result, the D.C. Circuit remanded this issue to the Commission, without vacatur, for further explanation of the decision.

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On August 28, 2019, FERC found on voluntary remand from the United States Court of Appeals for the D.C. Circuit (“D.C. Circuit”) that the New York State Department of Environmental Conservation (“New York DEC”) waived its authority under section 401 of the Clean Water Act (“CWA”) to either issue or deny Constitution Pipeline Company, LLC (“Constitution”) a water quality certificate for a proposed 125-mile pipeline project from that would stretch from Pennsylvania to New York (“Project”).  Based on the D.C. Circuit’s decision in Hoopa Valley Tribe v. FERC (“Hoopa Valley”) (see April 24, 2019 edition of the WER), FERC concluded that Constitution’s agreement with the New York DEC to withdraw and resubmit CWA section 401 certification applications did not restart the one-year statutory deadline for the New York DEC to act on Constitution’s application.
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