Since the issuance of Order No. 697-A, FERC has required market based rate sellers to include a comprehensive description of all upstream owners. In its latest notice of proposed rulemaking, FERC recognizes that the level of upstream ownership related detail currently required is not essential to a determination of the seller’s market power. FERC also points out the difficulty that many sellers face in accurately capturing and describing all upstream owners given the often numerous and types of ownership interests (e.g., full versus partial, passive versus controlling, direct versus indirect, etc.).
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Late last month, FERC issued its Order on Rehearing[1] affirming a 2012 order conditionally approving MISO’s proposal to improve the deliverability of capacity resources.  Among other things, FERC upheld its earlier rejection of portions of MISO’s initial proposal to make its Planning Resource Auction mandatory and subject to a minimum offer price rule (MOPR). FERC’s continued rejection of the mandatory proposal relied heavily on the specific characteristics of the MISO region and the differences between the MISO region and other regions in the country. Commissioner LaFleur commented on these regional distinctions when voting on the rehearing order. As MISO continues to consider modifications to its resource adequacy mechanism, FERC Staff planned to attend a recent meeting of the Illinois Commerce Commission on resource adequacy in MISO Zone 4.
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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.
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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.
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Agreement with Arizona Public Service Company Suggests More to Come

Background

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. 
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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.
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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.
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Over the objections of leading environmental groups and others, FERC recently approved a second application to export LNG.  Specifically, FERC granted Cameron LNG, LLC’s (a Sempra Energy affiliate) request pursuant to Section 3 of the Natural Gas Act to modify its LNG terminal in Cameron Parish, Louisiana to permit LNG exports up to approximately 14.95 million metric tons per annum (or the equivalent of 2.33 Bcf per day). [https://www.ferc.gov/whats-new/comm-meet/2014/061914/C-1.pdf (Order).]  In its Order, FERC also approved Cameron Interstate Pipeline, LLC’s (Cameron Interstate) application to construct and operate pipeline and compression facilities to transport domestically-produced natural gas to the Cameron LNG terminal for processing, liquefaction, and export.  The facilities must be placed in service within 5 years.
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FERC took the unprecedented step of delaying the filing of comments in its March 20 NOPR, proposing changes to the gas pipeline nomination and scheduling timetable (Docket No. RM14-2; http://www.ferc.gov/whats-new/comm-meet/2014/032014/M-1.pdf) to provide the North American Energy Standards Board (NAESB) the opportunity to develop a counterproposal broadly supported by the industry.  The NOPR requires NAESB to submit any counterproposal developed by the industry by September 16, 2014.  NAESB filed a status report with FERC on June 18, 2014.  This post is the second in a series addressing various issues related to gas-electric coordination.
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