On June 7, 2019, Judge Dennis Montali of the U.S. Bankruptcy Court of the Northern District of California San Francisco Division found that FERC’s finding that it had concurrent jurisdiction with the U.S. bankruptcy court over wholesale power agreements was “unenforceable in bankruptcy court and of no force on the parties before it.” Judge Montali further noted that if necessary, the U.S. bankruptcy court will “enjoin FERC from perpetuating its attempt to exercise power it wholly lacks.” At issue, on review by the bankruptcy court, was whether, pursuant to 28 U.S.C. 2201, the bankruptcy court has exclusive jurisdiction over Pacific Gas & Electric Company’s and Pacific Gas & Electric Corporation’s (collectively “Debtors”) right to reject a power purchase agreement (“PPA”) under Section 365 of the Bankruptcy Code, and whether FERC has concurrent jurisdiction to grant or deny PG&E’s rejection of any PPAs.

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On April 1, 2019, FERC issued deficiency letters to the six FERC-jurisdictional ISOs and RTOs, asking for additional information about how they intend to comply with the directives of FERC Order No. 841.  The specific ISOs and RTOs are: ISO New England Inc. (“ISO-NE”); Midcontinent Independent System Operator, Inc. (“MISO”); California Independent System Operator Corporation (“CAISO”); New York Independent System Operator, Inc. (“NYISO”); PJM Interconnection, L.L.C. (“PJM”); and Southwest Power Pool, Inc. (“SPP”).  Each grid operator has thirty days to respond to the deficiency letters.
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On March 21, 2019, the same day FERC issued an inquiry into Return on Equity (“ROE”) policies (see here), FERC also published another Notice of Inquiry (“NOI”) seeking comments on the scope and implementation of its electric transmission incentives policy and regulations.  The NOI covers a broad range of topics from using incentives to encourage new technology integration to unlocking location constrained resources and addressing resiliency concerns.  Initial comments are due 90 days after the NOI is published in the Federal Register, with reply comments due 30 days thereafter.

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On March 21, 2019, FERC issued a Notice of Inquiry (“NOI”) seeking information regarding whether and how to revise its policy for determining the rate of return on equity (“ROE”) used in setting rates charged by jurisdictional public utilities.  The NOI also seeks comment on whether any changes to the Commission’s ROE policies for public utilities should be applied to interstate natural gas and oil pipelines.  Specifically, the NOI requests information in eight areas:  (1) the role of FERC’s base ROE in investment decision-making and what objectives should guide the Commission’s approach; (2) whether uniform application of FERC’s base ROE policy across the electric, interstate natural gas pipeline and oil pipeline industries is appropriate and advisable; (3) performance of the discounted cash flow (“DCF”) model; (4) proxy groups; (5) the choice of financial model(s) used; (6) the mismatch between market-based ROE determinations and book-value rate base; (7) how FERC determines whether an existing ROE is unjust and unreasonable under the first prong of Federal Power Act section 206; and (8) model mechanics and implementation.
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At a time of significant industry transformation driven by technological change and spurred on by environmental policy concerns, the Federal Energy Regulatory Commission (“FERC” or “Commission”) has now added a significant layer to the stack of policy debates – the future of transmission investment.  Many states have seized the initiative in terms of establishing preferable resource mixes for in-state customers, and are spearheading significant pushes for greater renewable and storage resource deployment.  FERC has now joined the fray by opening up the policy debate anew regarding how to spur (or whether to spur) additional transmission sector investment.  The FERC order described below focuses on regulatory and market rules impacting transmission investment (Docket No. PL19-3-000).  The agency also opened a companion docket requesting comments on the details of its policies regarding establishment of a public utility transmission owner’s stated return on equity (“ROE”) (Docket No. PL19-4-000).  The Washington Energy Report will provide detailed summaries of these orders via our blog.  FERC’s mention here of “an increased emphasis on the reliability of transmission infrastructure” (emphasis added) could signal an attempt to re-focus the U.S. Department of Energy’s resiliency concerns to an arena that gives FERC home-field advantage.  Lest the states forget, FERC controls the price of admission for a ticket to the interstate transmission network, and this open-ended fact-finding effort bears a high likelihood of impacting the price of such tickets (for a large portion of the continental United States).
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On February 21, 2019, FERC issued a final rule (“Order No. 855”) amending Part 33 of its regulations to establish that FERC authorization for mergers or consolidations of a public utility’s jurisdictional facilities is only required when such transactions exceed a $10 million threshold.  Order No. 855 also establishes that public utilities are not required to secure FERC authorization for mergers and acquisitions that are valued between $1 million and $10 million – instead they are only required to submit a notification filing.  Order No. 855 will become effective 30 days after publication in the Federal Register.
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On February 21, 2019, FERC issued an order (“Order No. 845-A”) granting in part and denying in part various requests for rehearing and clarification of its determinations in Order No. 845.  In Order No. 845, FERC revised its interconnection rules for large generators, i.e., generators with capacities greater than 20 MW.  Although the requests for rehearing asked FERC to reconsider all but one of the Order No. 845 reforms, Order No. 845-A effectively leaves the major reforms intact, and focuses in large part on explaining FERC’s intentions as to how the new rules should work.  Compliance filings in response to both Order Nos. 845 and 845-A are due May 22, 2019.
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On February 11, 2019, a group of seventeen Democrat United States Senators and Senator Bernie Sanders wrote a letter (the “2019 Letter”) to FERC Chairman Neil Chatterjee urging FERC to adopt a rule requiring Regional Transmission Organizations (“RTOs”) and Independent System Operators (“ISOs”) to open their markets to participation of aggregated distributed energy resources (“DERs”).
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On January 7, 2019, FERC Commissioner Bernard McNamee signaled in a letter to members of the United States Senate (“January 7 Letter”) that he would not recuse himself from FERC’s pending grid resiliency proceeding in Docket No. AD18-7 unless the FERC proceeding began to “closely resemble” a Notice of Proposed Rulemaking (“NOPR”) issued in September 2018 by the Department of Energy (“DOE”).  Commissioner McNamee helped draft the DOE NOPR, which also addressed grid resiliency issues and was rejected by FERC in Docket No. RM18-1 in January 2018 (see January 17, 2018 edition of the WER), when he was an attorney at the DOE.  The January 7 Letter responded to a December 12, 2018 request from a group of Senators, led by Catherine Cortez Masto (D-NV), that Commissioner McNamee provide an update on the guidance he received from FERC ethics officials regarding his recusal from specific proceedings.  According to that guidance, notwithstanding the similarities between Docket No. AD18-7 and the now-terminated Docket No. RM18-1 on the DOE NOPR, previous statements by Commissioner McNamee did not meet the legal standard for recusal, although the guidance urged “continued oversight to ensure that Docket No. AD18-7 does not develop in such a way as to replicate or closely resemble Docket No. RM18-1.”
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