On December 2, 2019, FERC staff (“Staff”) issued its annual report (“Report”) on demand response and advanced metering, a high-level review of demand response potential in the retail and wholesale markets. In the Report, Staff highlights that: (i) advanced meters account for more than half of all meters in operation in the United States, (ii) multiple states have received approval for, or proposed, advanced meter deployment programs, (iii) many state regulators appear to support advanced meter investments, and (iv) from 2017 to 2018, there was an almost 8% increase in the overall demand response participation in wholesale markets.
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On December 3, 2019, FERC denied a challenge filed by Southern Maryland Electric Cooperative, Inc. (“SMECO”) challenging Potomac Electric Power Company’s (“Pepco”) balance of prepaid pension assets (“Prepaid Pension Assets”) included in Pepco’s annual transmission rate update. FERC found that SMECO did not raise any serious doubt about the prudence of the Prepaid Pension Assets and that Pepco’s inclusion of a portion of the Prepaid Pension Assets amount in its rate base was reasonable.
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On November 21, 2019, FERC issued Opinion No. 569, adopting a revised methodology to determine whether an established rate of return on equity (“ROE”) is just and reasonable under Section 206 of the Federal Power Act. Additionally, FERC applied this new methodology to two complaint proceedings involving the base ROEs of Midcontinent Independent System Operator, Inc. (“MISO”) transmission owners (“TOs”). FERC found first that the MISO TOs’ ROE of 12.38 percent in the first complaint (“First Complaint”) was unjust and unreasonable, and ordered refunds based on this finding. FERC then found that the MISO TOs’ ROE of 9.88 percent in the second complaint (“Second Complaint”) fell within the range of presumptively just and reasonable ROEs, and subsequently dismissed the complaint. Commissioner Glick dissented in part, stating that refunds should have been ordered with regard to the Second Complaint.
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On September 19, 2019, one Independent and four Democratic Senators wrote a letter to FERC which expressed concerns over recent actions taken by FERC and which directed a series of questions to FERC regarding the “apparent erosion” of FERC’s role in preventing fraud and manipulation in U.S. energy and financial markets (see October 3, 2019 edition of the WER). The concerns expressed by the senators related to (i) the decline in the number of civil penalty actions initiated by FERC; (ii) the closing of FERC’s Division of Energy Market Oversight (“DEMO”), and (iii) FERC’s ending its policy on issuing Notices of Alleged Violations (“NAVs”) regarding investigations.
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On October 24, 2019, FERC denied Harbor Cogeneration Company, LLC’s (“Harbor”) complaint alleging that Southern California Edison Company (“SoCal Edison”) misclassified certain interconnection facilities contrary to FERC’s Order No. 2003 and violated SoCal Edison’s Transmission Owner Tariff (“TO Tariff”) in directly assigning the facility costs to Harbor without FERC “approval.” FERC denied the complaint and rejected Harbor’s request for refunds, reasoning that the charges constituted valid filed rates notwithstanding that FERC did not use the word “approve” in its delegated letter orders, and that, therefore, the charges were lawfully imposed regardless of any alleged conflicts with FERC interconnection pricing policies.
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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 17, 2019, FERC issued an order establishing an investigation under Federal Power Act Section 206 into whether ISO New England Inc. (“ISO-NE”), PJM Interconnection, L.L.C. (“PJM”), and Southwest Power Pool, Inc. (“SPP”) (collectively, “Responding RTOs”) may be inconsistently or more expansively implementing Order No. 1000’s immediate need reliability project exemption, which allows Responding RTOs to establish immediate need reliability projects exempt from Order No. 1000’s regional transmission planning competition requirements. In the order, FERC established proceedings related to its concern, and directed the Responding RTOs to provide responses to certain questions regarding the implementation of the exemption.
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On October 8, 2019, FERC accepted ISO New England Inc.’s (“ISO-NE”) public and private versions of a filing containing the de-list bids (“De-List Bids”) and substation auction test prices (“Test Prices”) for the fourteenth Forward Capacity Auction (“FCA 14”), to be held in February 2020 and to become effective August 27, 2019. In the process, FERC also granted ISO-NE’s requested waiver of FERC’s regulations requiring parties requesting privileged treatment of their filings to provide a copy of such non-public documents to intervenors who execute a protective agreement.
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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, FERC granted a petition for declaratory order by the New England Ratepayers Association (“New England Ratepayers”), which asked FERC to find that a New Hampshire statute, Senate Bill 365 (“SB 365”), mandating a purchase price for wholesale sales of certain biomass and waste generators in the state, is preempted by the Federal Power Act (“FPA”) and violates section 210 of the Public Utility Regulatory Policies Act of 1978 (“PURPA”).
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