Tag: FERC

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FirstEnergy: Bankruptcy Court Asserts Primacy Over FERC; Approves Rejection of Power Purchase Agreements
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Balancing the Interconnect: FERC Reforms Large Generator Interconnection Process in a Manner That Could Benefit Energy Storage
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K&L Gates Energy Storage Handbook Volume 2 is Now Available!
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FERC Rule Seeks to Expand Energy Storage Participation in Wholesale Electricity Markets
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FERC Rejects DOE’s Grid Reliability and Resilience NOPR
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FERC FINDS CERTAIN PASSIVE INVESTMENTS DO NOT REQUIRE PRIOR APPROVAL FOR TRANSFER
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DOE Directs FERC to Issue Grid Resiliency Rules Providing Cost Recovery for Traditional Baseload Generation
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FERC Seeks Additional Comments on Proposed Primary Frequency Response Requirements for Electric Storage and Small Generating Facilities
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FERC Welcomes New Commissioners, Quorum Restored
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Trade Group Complains that PJM’s Frequency Regulation System Unduly Discriminates Against Energy Storage Resources

FirstEnergy: Bankruptcy Court Asserts Primacy Over FERC; Approves Rejection of Power Purchase Agreements

By Charles A. Dale III, William M. Keyser, David A. Mawhinney, and Michael L. O’Neill                      

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.

 

Balancing the Interconnect: FERC Reforms Large Generator Interconnection Process in a Manner That Could Benefit Energy Storage

By William M. Keyser, Buck B. Endemann, Benjamin L. Tejblum, Kristen A. Berry, and Toks A. Arowojolu

On April 19, 2018, the Federal Energy Regulatory Commission (“FERC”) issued its much anticipated Final Rule to amend the pro forma Large Generator Interconnection Procedures (“LGIP”) and Large Generator Interconnection Agreement (“LGIA”) (“Order No. 845” or the “Order”). Order No. 845 aims to eliminate inefficiencies and to provide a more streamlined and transparent interconnection process by adopting several reforms. The Order’s objectives are three-pronged: (1) to improve reliability, (2) to promote more informed interconnections, and (3) to enhance generators’ interconnection processes by eliminating inefficiencies and bottlenecks.

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K&L Gates Energy Storage Handbook Volume 2 is Now Available!

 

 

As a courtesy to our clients and friends, the K&L Gates Power practice has updated the popular resource for you – the Energy Storage Handbook.

Designed as a basic primer on what energy storage is, how it is regulated and what sorts of issues are encountered when such projects are financed and developed, the Handbook is intended to highlight the most common regulatory and developmental issues faced by our clients and the industries we serve.

New In Version 2

To view Version 2 of the Energy Storage Handbook, please 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

FERC Rejects DOE’s Grid Reliability and Resilience NOPR

By William M. Keyser, Molly Suda, Gillian R. Giannetti and Toks A. Arowojolu

On January 8, 2018, the Federal Energy Regulatory Commission (the “Commission”) issued an order rejecting the Department of Energy’s (“DOE”) notice of proposed rule making (“NOPR”) that would have allowed fuel secure generation that would include coal and nuclear generation facilities with a 90-day fuel supply to “fully recover costs” to maintain the resiliency of the electric grid. The Commission found that the NOPR did not comply with Section 206 of the Federal Power Act (“FPA”). Instead, the Commission initiated a new proceeding to “examine holistically the resilience of the bulk power system” and directed regional transmission organizations (“RTOs”) and independent system operators (“ISOs”) to respond to questions outlined in the order addressing grid resilience issues by March 9, 2018. All other interested entities may submit reply comments by April 9, 2018. Commissioners LaFleur, Chatterjee, and Glick each issued separate concurring opinions.

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FERC FINDS CERTAIN PASSIVE INVESTMENTS DO NOT REQUIRE PRIOR APPROVAL FOR TRANSFER

By William M. Keyser, Molly Suda, Elizabeth P. Trinkle and Toks A. Arowojolu

On October 4, 2017, the Federal Energy Regulatory Commission (the “Commission”) issued an order allowing entities with certain passive investments to transfer those interests without receiving prior authorization from the Commission under Section 203 of the Federal Power Act (“FPA”). Specifically, the Commission found that passive tax equity interests in public utilities or public utility holding companies do not constitute voting securities for the purposes of Section 203. Thus, the transfer of these interests does not require Section 203 approval because such transfer does not constitute a transfer of control with respect to the public utility. In addition, the Commission found that the transfer of these passive investments by a holding company qualifies for blanket authorization under FPA Section 203 (a)(2).

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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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FERC Seeks Additional Comments on Proposed Primary Frequency Response Requirements for Electric Storage and Small Generating Facilities

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

In one of its first orders since regaining a quorum, the Federal Energy Regulatory Commission (“FERC”) issued a Notice of Request for Supplemental Comments (“Notice”) on August 18, 2017, seeking comments related to circumstances where electric storage resources should be required to provide primary frequency response and the costs associated with primary frequency response capabilities for small generating facilities.

The Notice builds off of comments received in response to FERC’s November 17, 2016 Notice of Proposed Rulemaking (“NOPR”). Along with a number of other proposals, the NOPR proposed to modify the pro forma Large Generator Interconnection Agreement and the pro forma Small Generator Interconnection Agreement to require all new large and small generating facilities, both synchronous and non-synchronous, to install, maintain, and operate equipment capable of providing primary frequency response as a condition of interconnection. The NOPR also proposed including minimum operating requirements for droop and deadband parameters and requirements to ensure timely and sustained responses to frequency deviations.

The NOPR did not include provisions specific to electric storage resources, and several commenters noted that by failing to address electric storage resources’ unique technical attributes, the NOPR requirements could pose an unduly discriminatory burden on such resources. In response to these concerns, FERC seeks additional information to better understand (1) the performance characteristics and limitations of electric storage resources; (2) potential ramifications to electric storage resources from the proposed primary frequency response requirements; and (3) what changes are needed to address the issues raised by stakeholders. While the Notice sets forth a number of specific questions for commenters to address, in general, the Notice seeks comments on operational limitations or challenges and potential adverse effects if electric storage resources are required to provide primary frequency response. The Notice also seeks comments on whether there are reasonable parameters or requirements that could apply to electric storage resources’ provision of primary frequency response.

In response to the NOPR, commenters also suggested a need to further investigate the costs for small generating facilities to install frequency response capability and argued that the proposed requirement would impose disproportionate costs on small generating facilities. Accordingly, to further assess small generating facilities’ ability and cost to comply with the proposed primary frequency response requirement, the Notice seeks comment on:

  • The differences in costs to install, maintain and operate governor or equivalent controls for small generating facilities versus large generating facilities;
  • Whether recent technological advances in primary frequency response capability minimize or eliminate barriers to entry for small generating facilities; and
  • Whether an exemption is appropriate for all or a subset of small generating facilities based on disproportionate cost impacts.

Developers, owners, and operators of electric storage resources and small generating facilities should consider whether the proposed primary frequency response requirements materially affect the cost, operation, and/or feasibility of projects to be developed. The Notice offers interested stakeholders an additional opportunity to shape FERC’s interconnection policy to avoid barriers to the integration of electric storage resources and small generating facilities and ensure any unique features of these technologies are addressed in future rules. The invitation for additional comments suggests that FERC may be interested in building a record to support different treatment or rules for energy storage resources and smaller distributed energy resources compared to traditional generation. Comments are due 21 days after publication of the Notice in the Federal Register.

FERC Welcomes New Commissioners, Quorum Restored

By David L. Wochner, Sandra E. Safro, William M. Keyser, Molly Suda, Michael L. O’Neill, Jennifer L. Bruneau, Benjamin L. Tejblum, Elizabeth P. Trinkle and Gillian R. Giannetti

On August 3, 2017, the U.S. Senate confirmed President Trump’s nominations of Neil Chatterjee and Robert Powelson as Federal Energy Regulatory Commission (FERC) Commissioners and restored FERC’s quorum for the first time in nearly 180 days. The next step is for Mr. Chatterjee and Mr. Powelson to be sworn into their positions.

FERC has not had a quorum since February 3, 2017. In the interim, the Commission has accumulated a backlog of filings that will require formal Commission action, including

  • Applications under Section 4 of the Natural Gas Act (NGA) related to the rates and terms and conditions of service;
  • Applications related to interstate natural gas pipeline infrastructure under Section 7 of the NGA;
  • Applications related to the rates and terms and conditions of service for interstate oil and products pipelines under the Interstate Commerce Act;
  • Applications related to rates, rules, or charges for the transmission or wholesale sale of electric energy under the Federal Power Act;
  • Complaints challenging rates, rules, or charges for the transmission or wholesale sale of electric energy under the Federal Power Act; and
  • Petitions for declaratory orders seeking clarification from the Commission.

With FERC’s quorum restored, it also can move forward with rulemaking proceedings, including notices of proposed rulemaking that were issued before February 2017, as well as formal investigations and enforcement actions that require Commission authorization. It is unclear at this point how FERC will process and prioritize this backlog and how long it will take before the Commission is able to process filings on more traditional timeframes.

FERC does not hold a formal Commission meeting in August, but the Commissioners can vote notationally and therefore could begin issuing orders in the near term.

Below is a brief biography of FERC’s newest members.

Neil Chatterjee

Mr. Chatterjee most recently served as Senate Majority Leader Mitch McConnell (R-KY)’s senior energy policy analyst. While in this position, Mr. Chatterjee advised Senator McConnell on energy and infrastructure initiatives, including President Obama’s Clean Power Plan. Mr. Chatterjee worked previously as a Principal in Government Relations for the National Rural Cooperative Association and as an aide to House Republican Conference chairman Deborah Pryce (R-OH). Mr. Chatterjee grew up in Lexington, Kentucky near the heart of the coal industry. He earned his bachelor’s degree from St. Lawrence University in New York and a law degree from the University of Cincinnati. Mr. Chatterjee’s term expires on June 30, 2021.

Robert Powelson

Mr. Powelson has extensive regulatory experience, having served as a Commissioner at the Pennsylvania Public Utility Commission (PUC) and as President of the National Association of Regulatory Utility Commissioners. Mr. Powelson has served on numerous academic boards, including Drexel University’s Board of Trustees and Lincoln University’s Board of Directors. Prior to his position on the Pennsylvania PUC, Mr. Powelson worked as Chief Executive Officer and President of the Chester County, Pennsylvania Chamber of Business and Industry. He earned his bachelor’s degree from St. Joseph’s University and a master’s in government administration from the University of Pennsylvania. Mr. Powelson’s term expires on June 30, 2020.

In addition, the U.S. Senate Energy and Natural Resources Committee has scheduled a hearing for President Trump’s two other nominees, Richard Glick and Kevin McIntyre, for September 7, 2017, at 10 a.m. If approved by the Committee, Mr. Glick and Mr. McIntyre will then be ready to be scheduled for full Senate confirmation. Below is a brief biography for both nominees.

Richard Glick

Before President Trump nominated him for FERC, Mr. Glick served as General Counsel for the Democrats on the Senate Energy and Natural Resources Committee. Previously, Mr. Glick served as an energy and wind power lobbyist and advised U.S. Department of Energy Secretary Bill Richardson during the Clinton Administration. Mr. Glick earned his bachelor’s degree from The George Washington University and his law degree from the Georgetown University Law Center. If confirmed, Mr. Glick’s term would expire on June 30, 2022.

Kevin McIntyre

Mr. McIntyre is well-known among industry professionals, having served as co-head of Jones Day’s energy practice. While in private practice, Mr. McIntyre focused on government regulation of energy markets, electric and natural gas utilities, oil and natural gas pipelines, and co-authored several treatises on energy practice. Mr. McIntyre is actively involved in the Energy Bar Association, having served as on its Charitable Foundation’s Board of Directors. He also has served on the advisory board of Georgetown University Law Center’s Corporate Counsel Institute. Mr. McIntyre earned his bachelor’s degree from San Diego State University and his law degree from the Georgetown University Law Center. If confirmed, Mr. McIntyre’s term would expire on June 30, 2018. The White House press release announcing Mr. McIntyre’s nomination also states the White House’s intention to seek an additional term for Mr. McIntyre, to expire on June 30, 2023.

Trade Group Complains that PJM’s Frequency Regulation System Unduly Discriminates Against Energy Storage Resources

By William M. Keyser, Molly Suda, and Michael L. O’Neill                     

The Energy Storage Association (ESA) filed a complaint with the Federal Energy Regulatory Commission (FERC or Commission) alleging that PJM Interconnection, L.L.C. (PJM) has adjusted its system operations to unduly discriminate against certain market participants.  ESA argues that PJM changed the rules of its frequency regulation market, without prior FERC approval, and that those rule changes unduly discriminate against limited energy resource participants, such as energy storage providers.

FERC has set May 15, 2017, as the deadline for parties to comment, intervene, or protest ESA’s complaint.  Commenting and/or intervention are important procedural tools that allow interested parties to protect and advocate for their interests.  Given the potentially broad impact of this complaint on PJM’s energy and frequency regulation market design, numerous entities may seek to participate in this proceeding.  K&L Gates will continue to follow this proceeding closely.

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

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