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Bracewell & Giuliani
Category: Air Quality/Climate Change, Courts, Crude and Products, DOE, Electric, Enforcement, Environmental, Litigation, Midstream, National Energy Law, Natural Gas/LNG, Offshore, Power, Regional Energy Law, Renewable Energy/Cleantech, Shale Development, Transmission, Upstream Energy
David Perlman and Jessica Miller
This week the Federal Energy Regulatory Commission (FERC) put to rest any doubt that transmission rights pursuant to a pre-Order No. 888 transmission service agreement are subject to the FERC’s open access regime when the agreement is modified or becomes obsolete. In the same order, FERC found that a so-called “resale tariff” is only permissible where a jurisdictional transmission provider seeks to resell transmission rights on a non-jurisdictional transmission provider’s facilities—where the resale could not be facilitated under a FERC-approved Open Access Transmission Tariff (OATT).
FERC’s February 27, 2014 order rejected a December 30, 2013 filing by SoCal Edison Company (SCE). SCE’s filing attempted to modify transmission rights it has held since 1966 under a transmission services agreement with Arizona Public Service Company (APS). The 1966 agreement arose in connection with SCE and APS’s joint ownership interests in two generating units at Four Corners in New Mexico. Pursuant to the agreement, APS constructed and operated a 500 kV transmission line from Four Corners to the Arizona-Nevada border, and SCE paid APS cost-based transmission service charges for rights to all of that line’s transmission capacity, for purposes of transmitting SCE’s portion of the units’ output to California. In 2013, SCE transferred to APS its ownership interests in the Four Corners units, so SCE no longer needed the transmission capacity it had held for more than four decades for purposes of transmitting its Four Corners capacity. (more…)
Robert E. Pease, David Perlman and Jennifer Lias
After an investigation of actions in the western electricity markets by Barclays Bank PLC (“Barclays”), Daniel Brin, Scott Connelly, Karen Levine, and Ryan Smith (collectively, the “Traders” and together with Barclays, “Defendants”), the Federal Energy Regulatory Commission (“FERC”) issued an order finding the Defendants in violation of FERC’s anti-manipulation regulations and assessing Barclays a $435 million civil penalty, assessing each Trader an individual civil penalty, and requiring disgorgement of $34.9 million plus interest in unjust profits.[i] In accordance with the Defendants’ election of a trial de novo in federal district court, on October 9, 2013 FERC filed a petition in the United States District Court for the Eastern District of California requesting an order affirming its assessment of penalties.
In response to FERC’s petition, on December 16, 2013, the Defendants filed a motion to dismiss the complaint.[ii] The Defendants moved to dismiss the complaint, as a matter of law, on the grounds that venue is not proper and that FERC has failed to state a claim upon which relief can be granted. (more…)
Electricity Consumers Seek to Lower Returns for MISO Transmission Owners and also Challenge Capital Structure and Incentive AddersThursday, November 14, 2013 5:50 pm by Kaleb Lockwood
Adding to a recent spate of complaints filed at FERC seeking to reduce the return on equity (“ROE”) of various transmission owners, on November 12, 2013, several groups composed of large industrial and commercial electricity consumers together filed a complaint against Midcontinent Independent System Operator (“MISO”) transmission owners asking for a reduction in the MISO transmission owners’ ROE. With one exception, all MISO transmission owners currently have a base ROE of 12.38%. The complaint seeks to lower the transmission owners’ base ROE over 300 basis points below the current base ROE, to 9.15%.
The law is well settled that in regulated industries, ROEs must be set at levels sufficient to attract capital investment. Transmission owners have responded to the recent complaints seeking ROE reductions by expressing concerns that lower ROEs will result in lower levels of investment in transmission, contrary to FERC’s policy initiatives intended to encourage and sustain transmission investment. (more…)
On July 18, 2013, the Federal Energy Regulatory Commission (“Commission”) issued a Notice of Proposed Rulemaking (“NOPR”) proposing to revise its regulations to permit expressly interstate natural gas pipelines and public utilities that own, operate, or control transmission facilities (i.e., transmission operators) to share non-public, operational information for the purpose of promoting reliable service or operational planning. The Commission issued the NOPR in response to statements by natural gas pipelines and transmission operators at recent conferences concerning electric-gas coordination that they are reluctant to share non-public operational information with each other due to a concern that such sharing may be viewed as a violation of Commission laws and regulations, including the prohibitions against undue discrimination and preference contained in the Federal Power Act (“FPA”) and Natural Gas Act (“NGA”).
Noting that the protections against undue discrimination and preference do not prohibit differences in treatment when the difference is justified, the Commission clarified that the sharing of non-public, operational information between transmission operators and natural gas pipelines for the purpose of promoting reliable service or operational planning is reasonable and does not violate the FPA or NGA. In addition, responding to concerns that the Standards of Conduct (“SOC”) contained in Part 358 of the Commission’s regulations could prevent the effective participation of such entities in regional reliability or system planning exercises, the Commission clarified that the SOC do not limit communications between pipelines and transmission operators that are not affiliated with each other; the Commission emphasized, however, that communicating non-public transmission information during private exercises involving only the transmission provider and its marketing function employees is prohibited by the SOC, as it would give marketing function employees preferential access to non-public transmission information. (more…)
Practical Effect of FERC Decision: Non-Jurisdictionals May Opt Out of Regional Transmission Planning ProcessesMonday, July 1, 2013 11:21 am by Kaleb Lockwood
In a recent order on the ColumbiaGrid Order No. 1000 compliance filing, FERC dug in on its position that Order No. 1000 requires that cost allocation for transmission projects selected in the regional transmission planning process must be binding. FERC rejected the filing parties’ proposed non-binding cost allocation provisions, stating that non-binding cost allocation is inconsistent with Order No. 1000’s goals of minimizing free ridership and increasing the likelihood that planned transmission facilities move forward to construction.
FERC’s decision to require binding cost allocation could pose particular challenges to the transmission planning process in the ColumbiaGrid region, which is located in the Pacific Northwest. That region includes an unusually large number of transmission owners not subject to FERC’s jurisdiction or the requirements of Order No. 1000. About 75% of the transmission in the region is owned by the Bonneville Power Administration (“BPA”). BPA’s transmission is not generally subject to FERC’s jurisdiction. Without the participation of non-jurisdictional entities in the Order No. 1000 regional transmission planning process, FERC’s Order No. 1000 policy goals could be at risk. (more…)