Archive: December 2016

1
Treasury Guidance Clarifies and (Again) Expands Field of Renewable Energy Projects That May Qualify for the PTC or ITC
2
FERC Issues Notice of Inquiry on Income Tax Allowance Policy Statement and ROE Methodology
3
FERC Proposes Reforms to Large Generator Interconnection Procedures and Agreements

Treasury Guidance Clarifies and (Again) Expands Field of Renewable Energy Projects That May Qualify for the PTC or ITC

By Elizabeth C. Crouse, Charles H. Purcell, Won-Han Cheng, and Alex Weber

Notice 2017-04, issued on December 15, 2016, clarifies and expands the beginning of construction and continuity safe harbors applicable to certain alternative energy projects, including wind installations. Like Notice 2016-31, released on May 5, 2016, Notice 2017-04 concerns only projects that qualify for the Production Tax Credit (“PTC”) under Code Section 45 and, by extension, many projects that qualify for the Investment Tax Credit (“ITC”) through Code Section 48(a)(5). You may read more about the provisions and consequences of Notice 2016-31 in our previous e-alert.

To read the full alert, click here.

 

FERC Issues Notice of Inquiry on Income Tax Allowance Policy Statement and ROE Methodology

By William M. Keyser, Sandra E. Safro, Michael L. O’Neill, and Benjamin L. Tejblum

On December 15, 2016, the Federal Energy Regulatory Commission (FERC) issued a Notice of Inquiry (NOI) seeking comment on how to address any double recovery resulting from income tax allowance policy set forth in its Income Tax Allowance Policy Statement and current policies regarding the derivation of return on equity (ROE).  FERC’s existing Income Tax Allowance Policy Statement has been in place since 2005 and permits an income tax allowance for partnerships, or similar pass-through entities, to the extent that partners or members have actual or potential income tax obligations on the partnership entity’s income.

The NOI stems from the July 1, 2016 decision of the U.S. Court of Appeals for the District of Columbia Circuit (DC Circuit) in United Airlines Inc. v. Federal Energy Regulatory Commission, 827 F.3d 122 (D.C. Cir. 2016) (UAL v. FERC).  In that decision, the DC Circuit held that FERC had not adequately demonstrated that the application of its Income Tax Allowance Policy Statement in combination with its use of a discounted cash flow (DCF) methodology to determine ROE does not result in double recovery of taxes for a pipeline organized as a partnership.  The DC Circuit remanded the issue to FERC to develop a mechanism “for which the Commission can demonstrate that there is no double recovery” of partnership income tax costs.  Among the potential options that the DC Circuit outlined was eliminating all income tax allowances and setting rates based on pre-tax returns.  The NOI explicitly notes “the potentially significant and widespread effect of [the decision in UAL v. FERC] upon the oil pipelines, natural gas pipelines, and electric utilities subject to the Commission’s regulation.”  NOI at P 2.

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FERC Proposes Reforms to Large Generator Interconnection Procedures and Agreements

By William M. Keyser and Elizabeth P. Trinkle

On December 15, 2016, the Federal Energy Regulatory Commission (“FERC”) issued a Notice of Proposed Rulemaking (“NOPR”) to revise Parts 35 and 37 of its regulations, as well as the pro forma Large Generator Interconnection Procedures (“LGIP”) and pro forma Large Generator Interconnection Agreement (“LGIA”).  The proposed reforms are designed to improve certainty, promote more informed interconnection, and enhance interconnection processes.

The pro forma LGIP and LGIA establish the terms and conditions by which public utilities subject to the Federal Power Act must provide interconnection service to Large Generating Facilities.  FERC defines “Large Generating Facilities” as facilities with generating capacity greater than 20 MW.  While FERC has previously undertaken steps to reduce undue discrimination in the generator interconnection process, interconnection customers have continued to express concerns regarding inefficiencies and discriminatory practices.  Moreover, FERC proposes that recent changes to the resource mix, the emergence of new technologies, changes to state and federal policies, and challenges with the interconnection study process warrant reforms.  Based, in part, on input received from stakeholders following a 2015 technical conference on these issues, the NOPR identifies reforms to benefit both interconnection customers through timely and cost-effective interconnection and transmission providers by mitigating the potential for re-studies associated with late-stage interconnection request withdrawals.

Specifically, FERC proposes reforms that focus on improving aspects of the pro forma LGIP and LGIA, the pro forma Open Access Transmission Tariff, and the Commission’s regulations.  These reforms fall into three broad categories:  (1) reforms intended to improve certainty in the interconnection process; (2) reforms intended to improve transparency by providing more information to interconnection customers; and (3) reforms intended to enhance interconnection processes.  FERC requests comment from interested stakeholders on specific issues related to development and implementation of each of the proposals within these three broad areas of reform.  An overview of FERC’s proposals and request for comment on each area of reform are summarized below.

Comments on the NOPR will be due 60 days from publication in the Federal Register.  A copy of the NOPR is available here.

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