Energy & Environmental Law Adviser

U.S. Court of Appeals Affirms FERC Order No. 1000 on Regional Transmission Planning and Cost Allocation

Posted in Regulatory

On August 15, 2014, a three judge panel (Circuit Judges Rogers, Griffith and Pillard) of the United States Court of Appeals for the District of Columbia Circuit affirmed the Federal Energy Regulatory Commission’s (FERC) Order No. 1000 Final Rule and subsequent rehearing orders – Order No. 1000-A and Order No. 1000-B (together, Order No. 1000) on regional transmission planning and cost allocation, South Carolina Public Service Authority v. FERC, Case Nos. 12-1232, et al. (consolidated). 45 petitioners and 16 intervenors, including state regulatory agencies, electric transmission providers, regional transmission organizations, and electric industry trade associations, had petitioned for review of Order No. 1000.  The Court’s 97-page opinion is attached.  In brief, the Court held as follows: Continue Reading

FERC Approves $12 Million Settlement for Reliability Standards Violations of Imperial Irrigation District

Posted in Compliance, Regulatory

On August 7, 2014, FERC issued an order approving a Stipulation and Consent Agreement between FERC’s enforcement staff, NERC, and Imperial Irrigation District (IID).  See Imperial Irrigation District, 148 FERC ¶ 61,108 (2014). As indicated in FERC’s press release about the order, this Stipulation and Consent Agreement is the second settlement to stem from the September 8, 2011 Southwest Blackout, which left more than 5 million people in Southern California, Arizona, and Baja California, Mexico without power for up to 12 hours.  As we previously reported, FERC approved the first settlement on July 7, 2014, which provided for a $3.25 million civil penalty against Arizona Public Service Company (APS). Continue Reading

FERC Staff Issues Notice of Alleged Violations in Powhatan Case

Posted in Regulatory

On August 5, 2014, FERC’s Office of Enforcement (OE) issued a Notice of Alleged Violations (NAV) asserting that Powhatan Energy Fund, LLC, HEEP Fund, Inc., CU Fund Inc., and Houlian (Alan) Chen (jointly Powhatan) engaged in improper and manipulative Up to Congestion (UTC) trading in PJM markets.   The NAV alleges that, between June 1, 2010 and August 3, 2010, Powhatan engaged in UTC transactions “designed to falsely appear to be spread trades, as a vehicle for collecting certain payments (called Marginal Loss Surplus Allocation or MLSA) from PJM.”  In addition, the NAV claims that Powhatan’s strategy involved the use of wash trades – or offsetting – for the same number of MWh at the same trading points in order to cancel out the financial effects of these trades while continuing to capture MLSA payments.  FERC has long prohibited wash trades. Continue Reading

FERC Concludes It Lacks Jurisdiction Over LNG Facility in Marcellus Region

Posted in Natural Gas, Regulatory

FERC recently issued an order disclaiming jurisdiction over an LNG facility to be constructed and operated by Gulf Oil Limited Partnership (Gulf Oil) in the Marcellus Shale region.  Gulf Oil sought a declaratory order asking FERC to disclaim any jurisdiction it might have under Section 7 of the Natural Gas Act.  Gulf Oil asserted that the LNG facility will be used to convert natural gas produced in the Marcellus region into LNG for use as a vehicular fuel or for transportation by truck to LDCs for peak shaving purposes.  Gulf Oil stated that, to the best of its knowledge, neither the natural gas transported to the LNG facility nor the subsequently produced LNG would be transported over a pipeline in interstate commerce.  Gulf Oil noted that, after the LNG has been delivered by truck to LDCs, the LDCs could possibly re-gasify the LNG and transport it over interstate pipelines. Continue Reading

FERC Issues Notices of Proposed Rulemaking on Physical Security and Protection System Maintenance and a Final Order on Generator and Transmission Relay Loadability

Posted in Regulatory

At its meeting on July 17, 2014, FERC took three significant actions.

Physical Security NOPR

First, and most significantly, FERC issued a notice of proposed rulemaking (NOPR) proposing to approve NERC’s proposed Reliability Standard CIP-014-1, which addresses physical security of certain transmission substations that are the most critical to the operation of the Bulk-Power System.  In a blog article we posted last March, we reported that FERC had directed NERC to promulgate new standards related to physical security within 90 days after significant attention to the issue was raised in the press and in Congress earlier in the year.  Reliability Standard CIP-014-1 tracks the directives FERC had set forth in March to establish standards that provided for the identification of the substations most critical to Bulk-Power System reliability, development of risk assessments and security plans for such critical substations, and verification of those assessments and plans. Continue Reading

Seventh Circuit Remands FERC for the Second Time on Cost Allocation for High-Voltage Transmission Lines in PJM

Posted in Electric, Regulatory

In a split decision issued on June 25, 2014, the U.S. Court of Appeals for the Seventh Circuit remanded a Federal Energy Regulatory Commission (“FERC”) order allocating costs for certain new high-voltage network transmission lines within PJM Interconnection, L.L.C. (“PJM”).  In 2009, the Court previously remanded a FERC order in the same case in Illinois Commerce Commission v. FERC, 576 F.3d 470 (7th Cir. 2009).  In its June 25 decision, the Court held that FERC failed to comply with the Court’s 2009 decision remanding the case to it and must try again. Continue Reading

FERC Approves First Settlement Stemming from the September 2011 Southwest Blackout Inquiry

Posted in Electric, Regulatory

Agreement with Arizona Public Service Company Suggests More to Come


On July 7, 2014, the Federal Energy Regulatory Commission (FERC) issued the first, but likely not the last, Enforcement Order addressing the events of the September 8, 2011 Southwest Regional Blackout.  As described by the Commission in its new release, “[t]he agreement marks the first settlement stemming from the FERC-[North American Electric Reliability Corporation (NERC)] joint investigation into the outage, which left more than 5 million people in Southern California, Arizona and Baja California, Mexico without power for up to 12 hours.”  The Order approves a Stipulation and Consent Agreement between FERC Enforcement, NERC, and Arizona Public Service Company (APS) and assesses a $3.25 million civil penalty, $1.25 million of which is in the form of an offset for the cost of remediation and mitigation under the Agreement.   See Arizona Public Service Company, 148 FERC ¶ 61,009 (2014) (Order). In describing the events in the Southwest on September 8, 2011, the Commission identifies a series of cascading failures that lead to outages that began with a three-phase fault which led to the loss of APS’ Hassayampa-N.Gila 500kV transmission line (H-NG).  The H-NG line is part of the Southwest Power Link (SWPL), which is a major transmission corridor transporting power east-west from generators in Arizona, through the Imperial Irrigation District (IID), into Southern California.  The failure of the H-NG line rendered the SWPL ineffective and resulted in the re-distribution of power throughout the Pacific Southwest and Southern California. Ultimately, approximately 2.7 million customers were without power, some for multiple hours extending into the next day.  Continue Reading

Despite Customer Opposition, FERC Accepts CAISO’s Proposed Entergy Imbalance Market for the Western Interconnection and PacifiCorp’s Proposal To Be the EIM’s First Participant

Posted in Electric, Regulatory

On June 18, 2014, FERC issued an order conditionally accepting California Independent System Operator Corporation’s (CAISO) proposal to implement an Energy Imbalance Market (EIM).  The EIM tariff would allow neighboring balancing authorities to participate in CAISO’s real-time market to buy and sell five-minute real-time energy to meet energy imbalance needs.  Participation in the EIM is voluntary, and there is no exit fee for leaving the EIM.  Unlike other regional transmission organizations that administer similar real time markets, CAISO will not assume operational control over the transmission facilities in the balancing authorities participating in the EIM, except to the extent a transmission owner may have separately placed them under CAISO’s control.  In a related order, FERC conditionally accepted in part revisions to PacifiCorp’s open-access transmission tariff to reflect the utility’s participation in the EIM as its first participant. CAISO and PacifiCorp conducted a study projecting annual consumer benefits of up to $129 million from economic efficiencies, improved renewable integration and increased reliability. Continue Reading

Return on Equity: After Several Years of Uncertainty, FERC Takes Action

Posted in Electric, Regulatory

On June 19, 2014, at its Open Meeting, the Federal Energy Regulatory Commission (FERC or Commission) adopted a new methodology for determining the rate of return on equity (ROE) for FERC-jurisdictional electric utilities, and applied this new methodology in a pending complaint case involving the New England transmission owners. The Commission also set for hearing and settlement judge procedures in five complaints involving challenges to electric utility ROEs that have been pending for several years, expressing hope that the New England decision would provide guidance. Finally, the Commission acted on a partial remand from the United States Court of Appeals for the D.C. Circuit (D.C. Circuit) of the Southern California Edison Company’s (SoCal Edison) base ROE case. Continue Reading

Supreme Court Limits USEPA’s Greenhouse Gas Regulations, Refuses to “Wave Goodbye” to Separation of Power Principles

Posted in Air

In a major reversal for the United States Environmental Protection Agency (USEPA), the Supreme Court on June 23, 2014, limited USEPA’s authority to regulate greenhouse gases (GHGs), holding that USEPA did not have the authority to change a statutory applicability term of the Clean Air Act (Act).  Utility Air Regulatory Group v. Environmental Protection Agency, et al. (UARG), No. 12-1146, slip op. (June 23, 2014).  “Were we to recognize the authority claimed by EPA in the Tailoring Rule, we would deal a severe blow to the Constitution’s separation of powers.”  Id. at 23.  As a result, the Court concluded that USEPA cannot require a Title V or Prevention of Significant Deterioration (PSD) permit solely on the basis of a source’s GHG emissions. Continue Reading