Category: Regulation and Legislation

1
CFTC Proposes Amendments to Swap Data Reporting Requirements
2
OZ Flash: Newly Issued Proposed Regulations and the President’s Remarks are a Boon to the OZ Incentive
3
Screen Grabs: FERC’s NOPR Removes Screens in Organized Markets Where Market Mitigation Rules
4
2018 Election Guide: A Guide to Changes in Congress – Available Now
5
FERC Rule Seeks to Expand Energy Storage Participation in Wholesale Electricity Markets
6
President Trump Imposes Tariffs on Imported Solar Modules and Cells
7
New York Signals Continued Support for Energy Storage as Governor Signs Procurement Target Legislation
8
DOE Directs FERC to Issue Grid Resiliency Rules Providing Cost Recovery for Traditional Baseload Generation
9
Halftime in California — Which Climate and Environmental Bills Are on the Board?
10
Energy Department Seeks Input on Regulatory Reform

CFTC Proposes Amendments to Swap Data Reporting Requirements

By: Lawrence B. Patent

Sellers under virtual power purchase agreements often agree to assume the duty to report the swap transactions contemplated by those agreements. Parties acting as reporting parties for Dodd-Frank purposes will be interested in the Roadmap to Achieve High Quality Swap Data (“Roadmap”) rulemakings currently under way at the Commodity Futures Trading Commission (“CFTC”).

As part of the Roadmap proceedings, the CFTC recently published proposed amendments to its regulations governing swap data reporting requirements and swap data repositories (“SDR”). 84 Fed. Reg. 21044 (May 13, 2019). Among other changes, the proposals would require an SDR to distribute to each reporting counterparty on a regular basis an “open swaps report” detailing the swap data maintained by the SDR for all open swaps, organized by the unique identifier created for each swap. SDRs would be required to distribute the open swaps reports to non-swap dealer (“non-SD”) reporting counterparties, which would encompass most energy firms acting as a reporting counterparty, on a monthly basis, no later than the end of the day Eastern Time on the day of the month that the SDR chooses to regularly distribute the reports. The reporting counterparty would then be required to compare its books and records against the report to determine if the swap data that the SDR maintains is complete and accurate. A non-SD reporting counterparty would be required to submit either a verification of data accuracy or a notice of discrepancy within 96 hours of the SDR providing the open swaps report. This would be a change from the current regulatory framework that is based on the concept of negative affirmation, whereby reported swap data is presumed accurate and confirmed if a counterparty does not inform the SDR of errors or omissions or otherwise make modifications to a trade record within a specified time period under SDR rules.

If a notice of discrepancy were filed, the error or omission must be corrected within three business days of that notice filing. The current regulations require that an error or omission be corrected “as soon as technologically practicable” following discovery, but the proposals would reinforce that requirement with the three-business-day time frame. If that three-business-day time frame cannot be met, the reporting party would be required immediately to inform the Director of the CFTC’s Division of Market Oversight, or the Director’s designee, in writing, of such errors or omissions and provide an initial assessment of the scope of the errors or omissions and an initial remediation plan for their correction.

The requirements for correcting errors or omissions would apply to both swap data required by Part 45 of the CFTC’s regulations (creation and continuation data) and to swap transaction and pricing data required by Part 43 of the CFTC’s regulations. However, the open swaps report provision would only apply to the former, although the preamble of the notice announcing the proposed amendments specifically requests comment on whether that report should also cover swap transaction and pricing data.

The CFTC also states in the preamble that it expects that a reporting counterparty that repeatedly discovers errors or omissions, especially if they follow a pattern, would evaluate its reporting systems to discover and correct any issues. This would include working with the relevant SDR to address any reporting issues. The CFTC further notes that it may consider a reporting counterparty that fails to perform such an evaluation and improvement in light of repeated errors not to be in compliance with the regulations.

The proposed amendments, which are available here, are part of the CFTC’s Roadmap, and constitute the first of three anticipated Roadmap rulemakings. The comment period on these proposed amendments closes July 29, 2019. When the CFTC proposes the next two rulemakings, it anticipates re-opening the comment period for this first proposal to provide market participants with an opportunity to comment collectively on the three rulemakings together. The CFTC also anticipates that key provisions of each rulemaking would have the same compliance date, regardless of when each rulemaking is adopted in final form. The CFTC intends to provide a sufficient implementation period for these various rulemakings to give SDRs and market participants enough time to implement and test the changes that would be required.

OZ Flash: Newly Issued Proposed Regulations and the President’s Remarks are a Boon to the OZ Incentive

By Mary Burke Baker, Adam J. Tejeda, Olivia S. Byrne, Elizabeth C. Crouse, Edward Dartley, and Cary J. Meer

Yesterday, the Treasury Department rolled out proposed Opportunity Zone (“OZ”) regulations (the “Proposed Regulations”) and President Trump noted the progress made by his Opportunity and Revitalization Council to eliminate barriers to OZ investments. The administration is clearly all in on maximizing the number of businesses and projects that will qualify for OZ benefits.

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Screen Grabs: FERC’s NOPR Removes Screens in Organized Markets Where Market Mitigation Rules

By William Keyser, Benjamin Tejblum, and Abraham F. Johns

On December 20, 2018, the Federal Energy Regulatory Commission (FERC) announced a Notice of Proposed Rule Making (NOPR) designed to simplify the horizontal market power analysis necessary for electric power sellers to secure market-based rate authority in some wholesale power markets.  Specifically, the NOPR eliminates the need to perform two indicative screens (the pivotal supplier screen and the wholesale market share screen) in capacity markets and wholesale power markets already subject to Commission-approved monitoring and mitigation rules.  Notably, the Southwest Power Pool and California Independent System Operator wholesale markets are not subject to these monitoring and mitigation rules, so parties seeking market-based rate authority to sell capacity in those markets must still perform the two indicative screens.  This simplification will relieve the added procedural burden of administering the indicative screens for parties seeking market-based rate authority in the other FERC-regulated markets. 

The NOPR also proposes to remove the presumption that market monitoring or mitigation measures will adequately address indicative screen failures in organized wholesale power markets where the grid operator does not administer a capacity market. Rather, the NOPR proposes that in the event of an indicative screen failure in those markets, applicants submit a delivered-price test or other evidence demonstrating a lack of horizontal market power or that the applicant propose other mitigation for capacity sales in those markets. 

K&L Gates attorneys will continue to monitor these developments and assist our clients navigating compliance with FERC rules and regulations.

2018 Election Guide: A Guide to Changes in Congress – Available Now

The tumultuous 2018 midterm election, characterized by many as the most consequential in a generation, ended as predicted: the Democrats took control of the House while the Republicans increased their hold in the Senate.

Indeed, it was a tale of two Houses. As of 10:00 a.m. ET on November 7, the Democrats have picked up 28 seats in the House of Representatives, with the prospects of gaining about seven more as the remaining close races are decided, mostly in the west. In the Senate, Democratic Senators in Missouri, Indiana, and North Dakota were defeated while a Republican lost in Nevada, resulting in a net gain of two Senate seats thus far for Republicans with three races too close to call.

To help you assess yesterday’s election, K&L Gates has prepared a comprehensive guide that summarizes the results and their impact on the 116th Congress, which will convene in January. The Election Guide lists all new members elected to Congress, updates the congressional delegations for each state, and provides a starting point for analyzing the coming changes to the House and Senate committees.

Please click here to download the most up-to-date version of the 148-page Election Guide, which will be updated on an ongoing basis as more of the close races are called and committees are finalized.

For additional information regarding the effects of the recent elections, please contact Tim Peckinpaugh or any member of the Public Policy and Law practice.

To view the complete guide online, click here.

FERC Rule Seeks to Expand Energy Storage Participation in Wholesale Electricity Markets

By William Keyser, Buck Endemann, Mike O’Neill and Jim Wrathall

On February 15, 2018 the Federal Energy Regulatory Commission (“FERC”) issued a Final Rule addressing participation of energy storage resources in electricity markets operated by Regional Transmission Organizations (“RTOs”) and Independent System Operators (“ISOs”).  Largely adopting the proposal issued in November 2016, the Final Rule seeks to remove barriers for energy storage participation in wholesale capacity, energy, and ancillary services markets.  The ultimate impact of FERC’s directive will be determined over the next few years as RTOs and ISOs implement the standards through their respective stakeholder processes, compliance filings, and (potentially) litigation.    FERC deferred ruling on a companion proposal addressing participation of distributed energy resources (“DERs”) in wholesale markets.  In the coming months, stakeholders should carefully consider these measures as there will continue to be opportunities to shape the final outcomes. Read More

President Trump Imposes Tariffs on Imported Solar Modules and Cells

By Stacy Ettinger and James Wrathall

President Trump announced the imposition of tariffs on imported crystalline silicon photovoltaic (“CSPV”) modules and cells, as previously recommended by the U.S. International Trade Commission.  The tariffs will be effective February 7, 2018.

Importers will be required to pay a tariff in the amount of 30 percent of the entered value in the first year, declining by 5 percent a year in each of the second, third, and fourth years.  With respect to CSPV solar cells, the first 2.5 gigawatts imported in each year will be exempted from the tariff.  These tariffs are in addition to the antidumping and countervailing duties relief previously imposed by the U.S. Department of Commerce on Chinese solar imports.

For U.S. solar developers and installers, the initial 30 percent tariff is expected to add 10 to 15 cents per watt to the final installed price.  Green Tech Media Research (“GTM”) has predicted this will cause a reduction of approximately 10 percent in U.S. installed solar capacity.  The tariffs do not apply to technologies other than CSPV, specifically thin film modules.  Therefore manufacturers of thin film products such as Solar Frontier and First Solar may see increased relative market share.

The biggest impacts on projects are expected in the utility-scale solar sector, which is largely dependent on being competitive with other generation sources.  Residential solar is viewed as more resilient and less sensitive to price changes.

Some CSPV manufacturing might shift to free trade agreement countries not included in the injury finding.  In particular, manufacturers based in Singapore or Canada may benefit, if the President’s proclamation reflects the approach taken by a majority of the ITC Commissioners to exclude these countries from the tariff program.

China, South Korea, and other countries with exports subject to the tariffs will likely file complaints before the World Trade Organization (“WTO”).  It is unclear what position the current Administration would take in response to an adverse WTO decision, if any. In any case, the WTO dispute settlement process itself could take anywhere from two to four years to complete.

Companies should consider steps to mitigate impacts of these tariffs.  Reportedly over two gigawatts of modules have already been procured for 2018 projects in the United States.  Accessing stockpiles of solar equipment may aid in reducing economic impacts.

The formal proclamation signed today by President Trump provides for exclusion of particular products from the safeguard measure. Procedures for requests for exclusion will be published in the Federal Register within 30 days.  Companies may want to review the product exclusion process and consider whether an exclusion request is warranted.

 

New York Signals Continued Support for Energy Storage as Governor Signs Procurement Target Legislation

By Buck Endemann, Bill Holmes, and Mike O’Neill

On November 29, 2017, New York Gov. Andrew Cuomo (D) signed Assembly Bill A6571.  Passed by the New York legislature in June 2017, this legislation directs the New York Public Service Commission (PSC) to undertake two efforts: (1) institute a proceeding to establish the Energy Storage Deployment Program within 90 days; and (2) set a target by January 1, 2018, for the installation of qualified energy storage systems across the state by 2030.

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DOE Directs FERC to Issue Grid Resiliency Rules Providing Cost Recovery for Traditional Baseload Generation

By Molly Suda, William M. Keyser, Donald A. Kaplan and Elizabeth P. Trinkle

UPDATE 10/5/17: On October 4, 2017, pursuant to authority delegated to the Director of the Office of Energy Policy and Innovation, FERC Staff issued a request that comments filed regarding DOE’s proposed rulemaking address specific questions “in order to assist Staff in understanding the implications of the proposed rule.” The request includes several categories of questions regarding the proposed rule, including the need for reform; eligibility (including with respect to the 90-day fuel supply requirement); implementation concerns; and impact on wholesale market rates. The request also asks commenters to address the timeline for compliance with a final rule; the impact of the proposed rule on consumers; and any alternative approaches that could be taken to accomplish the goals of the proposed rule.

UPDATE 10/3/17: On October 2, 2017, FERC issued a Notice Inviting Comments on DOE’s proposed rulemaking. Initial comments are due on October 23, 2017. Reply comments are due on November 7, 2017. FERC has docketed the proceeding at RM18-1-000.

On September 28, 2017, using the Secretary of Energy’s authority under Section 403 of the Department of Energy Organization Act, the Department of Energy (“DOE”) proposed a rule for final action by the Federal Energy Regulatory Commission (“FERC”). The rule would allow certain traditional baseload generators, such as coal and nuclear plants, to “fully recover costs” to maintain the reliability and resiliency of the electric grid. DOE is requiring FERC to consider and take final action on the proposed rule within 60 days after publication in the Federal Register. In the alternative, Secretary of Energy Rick Perry urges FERC to issue the proposed rule as an interim final rule, effective immediately. The proposed rule has the potential to significantly impact the wholesale electricity markets, implicate a host of issues related to pricing, and draw strong objections from the oil and gas industry.

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Halftime in California — Which Climate and Environmental Bills Are on the Board?

By Buck B. Endemann and Molly Suda

The California legislature conducts its business in two-year sessions starting on the first Monday in December following an election. Last Friday, September 15, 2017, marked the last day for the California legislature to pass bills before a long interim recess lasting until January 3, 2018. Over the past nine months, the first half of the 2017–2018 legislative session saw a flurry of bills fueled by climate goals and the speculation of eroding federal support for environmental regulation.

Below is a summary of the primary successful and not-so-successful climate and environmental bills that were debated right down to the halftime whistle. On the whole, California made incremental progress in funding clean transportation efforts and incentivizing the deployment of energy storage systems, distributed energy resources, and energy efficiency strategies. While some of California’s grander schemes like the 100% Renewable Portfolio Standard (RPS) and California Independent System Operator (CAISO) regionalization fell short, Senate President Pro Tem Kevin de León has vowed to carry those efforts into the second half of the 2017–2018 session. K&L Gates’ energy and environmental attorneys will continue to monitor California’s progress toward its bold climate and environmental goals.

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Energy Department Seeks Input on Regulatory Reform

By Tim L. Peckinpaugh, David L. Wochner, David L. Benson and Kathleen L. Nicholas

On May 30, the Department of Energy (“DOE”) published a request for information (“RFI”) soliciting guidance on potential regulations that should be modified or repealed to reduce burdens and costs. This is part of a government-wide initiative to overhaul the federal government’s regulatory regime, set in motion with an executive order signed by President Trump just after his inauguration. This RFI also comes after President Trump signed an executive order, “Promoting Energy Independence and Economic Growth,” which seeks to review all regulatory actions that hamper the domestic production of fossil fuels and nuclear energy.

To read the full alert on K&L Gates HUB, click here.

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