You may recall that at the beginning of this year, FERC Commissioner McNamee announced that he would not seek another term as a commissioner when his term ended on June 30, 2020. At today’s FERC Open Meeting, Commissioner McNamee announced that he will continue to serve for the foreseeable future. This is permitted by statute pursuant to which a Commissioner may stay past the end of his or her term until the appointment, confirmation, and swearing in of his or her successor, but no later than the end of the session of the Congress in which his or her term expires. As a result, Commissioner McNamee may stay until the current congressional session ends at the end of 2020 or early 2021.Read More
On June 18, 2020, the Federal Energy Regulatory Commission (“FERC”) announced that it will hold two separate technical conferences later this year. First, FERC will hold a Commissioner-led technical conference on September 30, 2020 to discuss issues related to carbon dioxide emission pricing (i.e., “carbon pricing”) as adopted by states in FERC-jurisdictional wholesale electricity markets (“Carbon Pricing in Organized Wholesale Electricity Markets”). Second, FERC staff will hold a technical conference on October 27, 2020 to discuss whether existing frameworks for transmission, interconnection, and merchant transmission facilities can incorporate the growing offshore wind generation efficiently and effectively (“Offshore Wind Integration in RTOs/ISOs”).Read More
On May 20, 2020, the Federal Energy Regulatory Commission (“FERC” or the “Commission”) announced that it will hold a technical conference to discuss the impact on the energy industry of emergency conditions arising from the COVID-19 pandemic. The conference will take place July 8-9, 2020 from 9 a.m. to 5 p.m.
Preregistration for the conference is available at: http://www.ferc.gov/whats-new/registration/07-07-20-form.asp. FERC will issue a supplemental notice that includes the conference agenda in a proceeding opened in Docket No. AD20-17-000.
The Commission plans to use the conference to assess the ongoing impacts that the COVID-19 pandemic is having on parts of the U.S. energy industry. While the Commission already enacted short-term regulatory relief actions for regulated entities, the conference will explore long-term options for safeguarding the nation’s energy markets, electric transmission system, natural gas and oil transportation, and future operation of energy infrastructure.
In addition, FERC intends for the event to serve as a public forum for the Commission and stakeholders to address the recovery of the industry from the COVID-19 pandemic. The event will afford the public an opportunity to receive high-level information about how COVID-19 may change the energy industry moving forward.
Among the topics the Commission plans to cover in panels and discussions are: (1) ongoing and future operational and planning challenges due to COVID-19; (2) operations, planning, and infrastructure development impacts anticipated due to the effect of COVID-19 on electric demand; (3) operations, planning, and infrastructure development impacts anticipated due to the effect of COVID-19 on natural gas and oil demand; and (4) anticipated issues related to access to capital, such as credit, liquidity, and return on equity.
Further information about the event will be posted on the Calendar of Events webpage for the event. K&L Gates will continue to monitor for updates from the Commission about the conference.
On April 7, 2020, the Federal Energy Regulatory Commission (“FERC”) announced that its staff will host a technical conference in July 2020 to discuss so-called “hybrid resources.” In its notice, FERC explained that it is using the term “hybrid resources” to refer to projects that are comprised of more than one resource type at the same plant location. For this summer’s technical conversation, FERC states that it will focus on scenarios where a “generation resource and an electric storage resource [are] paired together as a hybrid resource.”Read More
Join Energy Toolbase and K&L Gates for a webinar on Wednesday, June 19, 2019 at 2:00pm EDT.
Webinar topics will include:
1) Key BTM energy storage policy issues (update on the current ITC legislation for energy storage, federal tax & depreciation, utility revenue streams/aggregation, FERC 841)
2) Development issues affecting BTM energy storage projects (EPC agreements, interconnection, insurance, common development hurdles)
3) Financing & monetizing energy storage projects (capacity service agreements, operating leases, PPA’s, shared savings, project financing risks)
4) How to configure & model different storage incentives in Energy Toolbase
5) How to configure & model different storage financing transactions in Energy Toolbase
To register, please click here.
A biweekly update on blockchain technology applications, distributed energy resources, and other innovative technologies in the energy sector.
K&L Gates is pleased to announce that the Blockchain Energizer has returned from a period of rest and reflection! Recognizing the variety of important emerging technological innovations and structural changes affecting energy markets, we have decided to expand our focus beyond Blockchain to include distributed energy resources, microgrids, and other emerging energy trends — all the technological innovations driving toward a more efficient, more reliable energy system.
To reflect our broader scope, the Blockchain Energizer will be now known as The Energizer. We have expanded the team to include additional K&L Gates attorneys tracking these important developments. The Energizer will still be published about twice a month and the subscription is the same. We appreciate your support and have enjoyed hearing from the many readers who rely on the Energizer for a periodic dose of energy tech! We look forward to continuing to provide timely coverage of increasingly important developments.
To subscribe to The Energizer, please click here.
IN THIS ISSUE:
- Growing Blockchain Interest in the Oil and Gas Industry.
- California Mudslides Prompt Push for Montecito Community Microgrid Initiative.
- New Rules in EV Charging in Pennsylvania.
To view more information on these topics in Volume 40 of The Energizer, click here.
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.
There is a lot of buzz around blockchain technology and its potential to revolutionize a wide range of industries from finance and health care to real estate and supply chain management. Many institutions and companies are forming partnerships to explore how blockchain ledgers and smart contracts can be deployed to manage and share data, create transactional efficiencies, and reduce costs.
Across the energy industry, market participants have formed consortiums, and launched pilot programs testing blockchain-based use cases that could transform energy markets. State regulators, too, are engaging the industry on blockchain’s potential. Every other week, the K&L Gates’ Blockchain Energizer will highlight emerging issues or stories relating to the use of blockchain technology in the energy space. To subscribe to the Blockchain Energizer newsletter, please click here.
IN THIS ISSUE
- KEPCO Plans to Develop an “Open Energy Community” via a Blockchain-based “Future Micro Grid.”
- Shell and Other Oil Companies Test Blockchain-based Crude Oil Trading on Vakt.
- Energy Web Foundation Collaborates With Wirepas and Siemens.
To view more information on theses topics in Volume 39 of the Blockchain Energizer, click here.
On November 15, 2018, the Federal Energy Regulatory Commission (“FERC”) announced two major policy developments on the treatment of Accumulated Deferred Income Taxes (“ADIT”) in light of the recent reduction of the federal income tax rate in the Tax Cuts and Jobs Act of 2017. The proposed developments are intended to benefit utility customers by providing for a fair return of the tax savings created by the new law. First, FERC issued a Policy Statement that outlines FERC’s policy on the treatment of ADIT for both accounting and ratemaking purposes for public utilities, natural gas pipelines and oil pipelines in light of the recent reduction in income taxes. Second, in a notice of proposed rulemaking (“NOPR”), FERC proposes to require all public utility transmission providers to revise their transmission rates to account for the reduction in income taxes caused by the Tax Cuts and Jobs Act of 2017.
Policy Statement: Treatment of ADIT in Light of the Tax Rate Reduction
The Policy Statement, titled “Accounting and Ratemaking Treatment of Accumulated Deferred Income Taxes and Treatment Following the Sale or Retirement of Assets,” provides guidance on two questions FERC posed in its March 15, 2018, Notice of Inquiry (“NOI”).
First, FERC provides details on the specific accounts that public utilities and natural gas pipelines should use to record amortization of excess and deficient ADIT. FERC also explains how oil pipelines should treat deferred tax balances and provides that, for ratemaking purposes, FERC will continue the practice of amortization and removal of excess or deficient ADIT by reducing the returned allowed prior to grossing up for income taxes.
Second, FERC provides guidance on how public utilities, natural gas pipelines and oil pipelines should address excess and/or deficient ADIT that is recorded on their books after December 31, 2017, as a result of the sale or retirement of assets. The Policy Statement explains that in the case of a public utility or natural gas pipeline that continues to have an income tax allowance, any excess or deficient ADIT associated with an asset must continue to be amortized in rates even after the sale or retirement of that asset. If the rate treatment of the excess or deficient ADIT is disallowed, then the amounts should be written off in the year of the disallowance. In line with the existing Uniform System of Accounting for oil pipelines, FERC notes that for accounting purposes an oil pipeline’s ADIT balance will be reduced immediately by the full amount of the excess or deficient tax reserve. For ratemaking purposes, an oil pipeline would maintain the excess or deficient ADIT in the ADIT account and would continue to amortize those amounts when determining its income tax allowance as part of the ratemaking process after the assets are sold or retired.
The Policy Statement also states that, to provide greater transparency, public utilities, natural gas pipelines and oil pipelines should provide additional information regarding ADIT in their annual financial filings.
NOPR: Closing the Gap in Transmission Formula Rates of Public Utilities
The proposed reforms are intended to ensure ratepayers receive the benefits of the Tax Cuts and Jobs Act of 2017 and that transmission rates are just and reasonable following the enactment of the Tax Cuts and Jobs Act. As explained in the NOPR, the proposed changes fall into three categories and apply differently to transmission formula rates and stated rates. First, the NOPR proposes to require public utilities with formula rates to include a mechanism in their formula rate to deduct excess ADIT from or add deficient ADIT to their rate bases. Second, the NOPR proposes to require public utilities with transmission formula rates to include a mechanism in the formula rate that decreases or increases their income tax allowances by any amortized excess or deficient ADIT. The NOPR proposes to require that public utility transmission providers with stated rates to determine the excess or deficient ADIT caused by the Tax Cuts and Jobs Act based on the ADIT amounts approved in their last rate case and return or recover this amount from ratepayers. Finally, the NOPR proposes to require all public utility transmission providers with transmission formula rates to include a new permanent worksheet into their transmission formula rate that will track information annually related to excess or deficient ADIT.
In his remarks at FERC’s monthly meeting, Chairman Chatterjee emphasized that the NOPR does not prescribe a one-size-fits-all approach to make the required adjustments. Rather, the NOPR recognizes that multiple approaches to modify rate base may be just and reasonable.
All three Commissioners strongly supported the NOPR. Commissioner LaFleur stated, “My goal is to get tax savings back into the hands of the customers as quickly as possible. That’s not yet done, but this is an important first step.”
Comments are due within 30 days of publication of the NOPR in the Federal Register. We will continue to monitor the developments of this proceeding.
In a closely watched battle between FirstEnergy Solutions (“FirstEnergy”) and the Ohio Valley Energy Corporation (“OVEC”) that could have significant implications for the U.S. power sector, the U.S. Bankruptcy Court for the Northern District of Ohio asserted its primacy over the Federal Energy Regulatory Commission (“FERC”) in deciding whether to allow FirstEnergy to repudiate certain FERC-regulated power purchase agreements (“PPAs”). In a decision with significant implications for all participants in rapidly evolving wholesale power markets, the bankruptcy court applied the highly deferential business judgment standard instead of the more stringent standard applied by FERC when evaluating proposed changes to PPAs featuring mutually agreed-upon filed rates. The court’s decision is now the subject of a direct appeal to the U.S. Court of Appeals for the Sixth Circuit, and the outcome may inspire additional action by Congress and the president.
To read the full alert, click here.