Insights

In one of the first rulings applying Loper Bright Enterprises v. Raimondo, the Supreme Court on Tuesday vacated and remanded the D.C. Circuit’s decision in Solar Energy Industries Association v. FERC for further consideration.

This has not been a joyful winter for energy industry executives. They have repeatedly awoken to alerts that substations in the Northwest and Southeast have been physically attacked and that a major engineering firm was the subject of a ransomware cyberattack that may have compromised utility data.

The North American Electric Reliability Corporation (NERC) has filed a petition requesting the Federal Energy Regulatory Commission (FERC) to approve its proposed reliability standard EOP-012-1, which would add to reliability standard obligations of NERC-registered Generator Owners with respect to extreme cold weather preparedness, including freeze protection measures for both new and existing generating units, enhanced cold weather preparedness plans, and annual training. A bullet summary of key aspects of the proposal is below. Comments on this proposal must be filed with FERC no later than December 1, 2022.

As the Federal Energy Regulatory Commission (FERC) considers changes to Order No. 860 requirements, it has now delayed the order’s effectiveness for three months to July 1, 2021, and in so doing, it has clarified its definition of “Affiliate” for market-based rate (MBR) purposes. 

In September 2020, the Federal Energy Regulatory Commission (FERC) reversed 40-year old precedent by revoking the qualifying facility (QF) status of the Broadview facility made up of a 160 MW solar array and a 50 MW battery storage resource, as well as inverters that convert the direct current (DC) electricity generated by the solar panels into alternating current (AC) electricity, which (after subtracting parasitic load) physically limit the capacity that can be delivered to the grid to 80 MW, ruling at that time that capacity must be measured based on the DC capabilities. Last week, FERC reversed that decision. With its reversal, FERC again will apply the 80 MW size limit for small power production qualifying facilities to the amount of power that can be delivered to the grid, allowing the QF to take output limitations into account, such as where inverters are necessary for the QF’s ability to convert DC power to AC power in order to put power onto the grid at the interconnection point. However, FERC’s order also finds that mechanical means of limiting output presents a special circumstance for demonstrating QF eligibility. As such, facilities self-certifying to QF status through FERC Form 556 should take care to fully justify such special circumstances. 

The Federal Energy Regulatory Commission’s (FERC) new rules under Order No. 860 take effect on April 1, 2021, and will change the way market-based rate (MBR) filings are made. FERC’s aim is to create a relational database to contain MBR seller information that ultimately will allow, among other things, for the automatic generation of an appendix of relevant affiliated assets and indicative market power screens. The first focus will be for each MBR seller to make a baseline submission to FERC’s MBR Portal between April 1 and August 2, 2021. 

Distributed energy resources (DER) are often too small on their own to meet participation requirements of the energy and capacity markets of Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs).  To encourage greater DER participation, FERC's Order No. 2222 requires that RTOs/ISOs allow DER to participate in RTO/ISO markets through an aggregator that would register as the market participant.  Importantly, Order No. 2222 turns the long-running debate over DER market participation from one of whether it should be done into one about how best to achieve it. 

Reversing its 40-year old precedent, the Federal Energy Regulatory Commission (FERC) revoked the qualifying facility (QF) status of a facility made up of a 160 MW solar array and a 50 MW battery storage resource, as well as inverters that convert the direct current (DC) electricity generated by the solar panels into alternating current (AC) electricity, which (after subtracting parasitic load) physically limit the capacity that can be delivered to the grid to 80 MW. FERC rejected prior precedent that applied the 80 MW size limit for small power production qualifying facilities to the amount of power that can be delivered to the grid and now finds that the size will be based on the rated capacity of the facility without regard to the fact that the output is limited such as when the inverters necessary for operation limit the facility’s output. 

The Federal Energy Regulatory Commission (“FERC”) issued Order No. 872, its much-anticipated decision adopting major revisions to its regulations implementing the Public Utility Regulatory Policies Act of 1978 (“PURPA”).  PURPA generally requires utilities to purchase power from certain renewable energy sources and cogeneration projects (“Qualifying Facilities” or “QFs”) at the utilities’ “avoided cost” in order to incent generation development using those fuel sources. 

Pursuant to Executive Order 13920, “Securing the United States Bulk-Power System” (the EO) issued May 1, 2020, which declared that threats by foreign adversaries to the bulk-power system (BPS) constitute a national emergency, on July 8, 2020, the Department of Energy (DOE) issued a Request for Information (RFI) seeking information regarding the energy industry’s current practices for identifying and mitigating vulnerabilities in the supply chain for BPS components. 

The Federal Energy Regulatory Commission, Department of Energy, North American Electric Reliability Corporation and the North American Transmission Forum issued an Epidemic/Pandemic Response Plan Resource (“Resource”) yesterday, providing guidance to plan for and respond to an epidemic or pandemic event. It outlines planning, response, and recovery strategies, and recommended actions in scenarios ranging from a small outbreak to a severe pandemic outbreak, to complement business continuity plans and protect personnel health and safety.

On May 1, 2020, the President signed a new Executive Order (EO) declaring a national emergency regarding certain threats to the U.S. bulk-power system and broadly prohibiting acquisition, importation, transfer, or installation of any “bulk-power system electric equipment” where the transaction, by any person, involves property in which any foreign country or national thereof has an interest. Depending on how it is implemented, the EO has the potential to significantly disrupt the supply chain for electrical equipment for U.S. bulk-power systems, which include items used in electric generation projects and transmission systems. In order to prohibit a transaction, the Secretary of the Department of Energy, in consultation with other agencies, must determine that the transaction involves bulk-power system electric equipment “designed, manufactured, or supplied by persons owned by, controlled by, or subject to the jurisdiction or direction of a foreign adversary” and find that the transaction poses undue risks of sabotage or subversion of the bulk-power system, catastrophic effects to the security or resiliency of U.S. critical infrastructure or the U.S. economy, or otherwise presents an unacceptable risk to U.S. national security.

The New England Ratepayers Association (NERA) petitioned the Federal Energy Regulatory Commission (FERC) last week to assert jurisdiction over net metering programs created by states which allow a customer to receive credits on its retail electricity bill for generation from rooftop solar or other behind-the-meter generation in excess of what the customer uses to meet its on-site needs. This would be a significant change in FERC’s policy, established in 2001, which holds that there is no FERC-jurisdictional sale as long as the customer’s load during the relevant billing period exceeds the amount of energy deliveries credited to the customer during that period (called the “netting” period). If FERC grants NERA’s petition, and reverses its decades long precedent, it will increase the tension between FERC and the states and potentially undermine not only state objectives to incentivize renewable generation, but also the economic basis that retail customers relied upon when installing their on-site generation because, as NERA posits, any resulting rate likely will be lower than the value of the credits currently awarded under state net metering programs.

The Federal Energy Regulatory Commission (FERC) announced various measures to ease burdens of regulated entities so that the energy industry can focus on continuity, safety, and stability during the COVID-19 pandemic.

The Federal Energy Regulatory Commission (FERC) and the North American Electric Reliability Corporation (NERC) jointly issued compliance guidance notifying NERC-registered entities that they will consider the impact of the coronavirus outbreak as an acceptable basis for noncompliance with certain NERC Reliability Standards and related activities, as follows: 

The Federal Energy Regulatory Commission (FERC) must issue a show cause order within five years of alleged wrongdoing, according to the Fourth Circuit in FERC v. Powhatan Energy Fund, LLC, but as a result, FERC’s administrative enforcement process can linger almost indefinitely thereafter, particularly if the respondent opts to have its case heard de novo in district court.

On September 4, the North American Electric Reliability Corporation (NERC) issued a “Lessons Learned” from a March 5, 2019 cyberattack on a low-impact grid control center and several small power generation sites in the western United States.  NERC’s assessment provides guidance to NERC-registered entities on this incident, which was previously reported to the U.S. Department of Energy.

The North American Electric Reliability Corporation (NERC) proposes to assess an unidentified entity a $356,000 penalty for violations of the CIP-006-3c NERC reliability standard which governs physical security of cyber assets. The violation lasted 13 months and was determined to pose a serious risk to reliability. The case highlights the importance of following up promptly with NERC when violations are identified. Although the violations were self-reported, the entity received no credit for self-reporting because it waited too long to do so. The case also highlights the importance of having effective internal controls to ensure compliance.

The Federal Energy Regulatory Commission’s (FERC) 2018 Lessons Learned from Commission-Led CIP Reliability Audits shows, among other things, a major and recurring theme: NERC-registered entities must develop and implement accurate and thorough processes and procedures to demonstrate compliance with NERC’s Critical Infrastructure Protection (CIP) reliability standards. FERC encourages four activities:

Unmanned aircraft systems, or drones, have become increasingly prevalent in the energy industry, as highlighted in a recent North American Electric Reliability Corporation (NERC) Lesson Learned. Energy companies can improve safety and increase productivity by using drones to perform high-risk or tedious tasks such as major storm damage surveys; line repair; substation/switching station and line inspections; power plant, wind farm, and gas pipeline inspections; and infrastructure security. However, energy industry participants interested in such drone use must be aware of the Federal Aviation Administration’s (FAA) extensive regulation over their operation.