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Bill Rappolt is a partner in the firm's Washington, D.C. office. He is a member of the Energy Industry Team and Real Estate, Land Use and Environmental Practice Group.

On July 16, 2020, the Federal Energy Regulatory Commission (“FERC” or “Commission”) dismissed a petition filed by the New England Ratepayers Association (“NERA”) requesting that the Commission declare that certain sales of energy by net-metered, behind-the-meter generators are exclusively subject to federal jurisdiction.  If granted, the petition would have resulted in the rates for such sales being set at an avoided cost rate in accordance with the Public Utility Regulatory Policies Act of 1978 (“PURPA”) or wholesale market prices under the Federal Power Act (“FPA”), as applicable, rather than the interconnected utility’s retail rate.  The Commission declined to address the legal issues raised by the petition.  Instead, it determined that the issues presented in NERA’s petition do not warrant a generic statement from the Commission at this time because NERA failed to identify a specific controversy or harm that the Commission should address.  However, concurring opinions from two commissioners suggest that future fights may be imminent over the scope of FERC’s authority to regulate net metering transactions and the rates for such transactions.
Continue Reading FERC Rejects Net Metering Petition, But Fight Is Far From Over

On July 18, 2019, the Federal Energy Regulatory Commission issued Order No. 860.  The order requires entities with or seeking market-based rate authority (sellers) to submit certain data related to FERC’s market power analyses, including its indicative screens and asset appendices, into a “relational database” maintained by FERC.  The order also requires the submission of information associated with long-term firm sales.  When changes occur to data previously submitted, the relational database must be updated monthly by sellers.  The database will be used to, among other things, develop asset appendices and indicative screens for FERC filings that require a market power analysis.  Finally, Order No. 860 altered the deadline for “change in status” filings.  Beginning on January 1, 2021, sellers will need to comply with the order by making a baseline submission and using the “relational database” to make future market-based applications.
Continue Reading FERC Order No. 860 Mandates New Market-Based Rate Filing and Reporting Requirements for Sellers of Electric Energy

Faced with the onset of another wildfire season, and seeking to avoid both the prospect of utility-caused wildfires and the impacts of utilities’ Public Safety Power Shutoffs (PSPS) to avoid them, the California Public Utilities Commission (CPUC) recently took wide-ranging actions to expand the penetration of microgrids in California and enhance reliability and resilience of electric service.  The decision partially implements Senate Bill 1339 (SB 1339) and the CPUC’s related three part rulemaking (Rulemaking 19-09-009).  The CPUC’s decision focuses on behind the meter applications and directs California’s large Investor Owned Utilities (IOUs) to, among other things, develop standardized pre-approved system designs for interconnections, create methodologies to simplify utility inspections of proposed projects, and remove electric energy storage size restrictions from  IOUs’ net metering tariffs.

Continue Reading CPUC Issues Order Promoting the Development and Interconnection of Microgrids

On June 9, 2020, the Federal Energy Regulatory Commission (FERC) issued a regulation precluding construction authorization for pipelines approved pursuant to Sections 3 and 7 of the Natural Gas Act (NGA) until FERC acts on the merits of any timely-filed requests for rehearing or the time for filing a rehearing request has expired.  Parties seeking to construct new interstate pipeline facilities likely will contend FERC’s regulation is overbroad and burdensome.  They may contend that it imposes unnecessary delays on the construction of critical energy infrastructure already approved by FERC and found to be in the public interest.  The regulation precludes the construction of the entirety of the approved pipeline regardless of whether the scope of the rehearing request includes all of the facilities. The regulation is linked to concerns that landowners will be subject to eminent domain actions, yet ostensibly bars construction activity regardless of the basis of the rehearing request, for instance regardless of whether the rehearing request has anything to do with the exercise of condemnation rights.  Pipelines may contend that the regulation is inconsistent with the NGA, federal policy supporting the construction of needed energy infrastructure, and a recent executive order directing federal agencies to support the economic response to the COVID-19 outbreak.
Continue Reading FERC Issues Regulation Prohibiting Construction of Newly Approved Natural Gas Pipeline Facilities Until Resolution of all Rehearing Requests

On May 21, 2020, the Federal Energy Regulatory Commission (“FERC” or “Commission”) approved two orders by 3-1 votes revising its methods to estimate electric, natural gas and oil utilities’ returns on equity (“ROE”).[1]  Return on equity is one of the most contentious issues in cost-of-service proceedings before FERC, and FERC’s guidance is unlikely to alter that.  In many important ways, the guidance significantly deviated for electric utilities and pipelines, which raises a number of issues regarding whether such deviations are supported by each industry’s risks.
Continue Reading FERC Issues Revised Guidance Regarding Return on Equity Calculations

The Federal Energy Regulatory Commission (“FERC” or “Commission”) issued on April 16, 2020 two orders[1] largely denying requests for rehearing of its prior decisions that, among other things, subjected to minimum offer price thresholds energy resources participating in PJM Interconnection, L.L.C.’s (“PJM”) capacity market which receive so-called “State Subsidies”.[2]  FERC  reaffirmed that a resource within broadly-defined categories (e.g., renewable resources) receiving State Subsidies must offer capacity in PJM’s forward capacity market at or above an administratively-established price floor (i.e., the minimum offer price rule, or “MOPR”), regardless of such a resource’s actual incremental costs.  Potential and likely ramifications of the Commission’s actions, arguments opponents of the April 16 Orders are likely to raise and potential paths forward for industry market participants are set forth below.  Additionally, the most promising arguments that could be used to invalidate the April 16 Orders, some of which are discussed below, have not been raised before or addressed by FERC.

Continue Reading FERC Reaffirms Controversial Energy Capacity Decisions: Insights and Analysis

Members of the Sheppard Mullin Energy, Infrastructure and Project Finance Team wrote an article published in the March 16, 2020 edition of Tax Notes Federal regarding the practical impacts on tax equity financing for renewable energy projects of a private letter ruling (“PLR”) published by the IRS in late 2019.  The PLR addressed normalization and loss disallowance rules applicable to public utilities.  These rules have posed significant challenges to public utilities that want to own renewable energy generation facilities, make efficient use of the tax benefits they provide (via the tax equity market) and recover their costs from ratepayers.

Continue Reading Walking the Path of Utilities’ Ownership of Wind and Solar

Last week the Federal Energy Regulatory Commission (“FERC”) continued to issue orders, notices, and guidance related to the current novel coronavirus pandemic, the health and safety of FERC and energy industry employees, and the continued reliability of the U.S. energy sector.  A summary of FERC’s relevant actions are provided below, including information regarding FERC’s operating status, extensions for filing deadlines and efforts to ease regulatory burdens during this crisis.

Continue Reading FERC Orders, Notices, and Other Guidance Regarding the Novel Coronavirus

On February 20, 2020, the Federal Energy Regulatory Commission (“Commission” or “FERC”) issued several orders narrowing New York Independent System Operator, Inc.’s (“NYISO”) buyer-side market power mitigation rules in its mitigated capacity zones,[1] including NYISO’s proposal to exempt up to 1,000 megawatts (“MW”) of renewable resources from NYISO’s buyer-side market mitigation rules in a capacity auction year (“NYISO Renewable Exemption Order”).  The Commission’s actions will significantly impact renewable resources in NYISO, PJM Interconnection, L.L.C. (“PJM”), and potentially other organized markets.  Rejection of the proposed MW exemption will hinder renewable resources’ participation in NYISO’s capacity auction by: (i) requiring them to bid no lower than an established price floor, regardless of their actual incremental costs; and (ii) tightening currently-available mitigation exemptions. 

Continue Reading FERC Continues to Squeeze Renewable Resources Participating in Wholesale Electric Capacity Markets

The Federal Energy Regulatory Commission (“FERC”) requested comments on a proposed rulemaking to revise its regulations under the Public Utility Regulatory Policies Act of 1978 (“PURPA”). The Notice of Proposed Rulemaking (“NOPR”), among other things, would diminish benefits that have been afforded to Qualifying Facilities (“QFs”), including the availability and value of the “PURPA-put.” The proposed changes also could potentially block certain wind and solar projects that previously would have qualified as small power production facilities from receiving that designation. The NOPR presents uncertainty for renewable developers, as well as other non-utility generators. Adoption of the proposed changes may hinder the development of some renewable energy projects. Comments on the proposed rulemaking are due within 60 days of its publication in the Federal Register.
Continue Reading FERC Proposes Major Changes to PURPA Regulations Impacting Qualifying Facility Rates and Requirements; Throwing Roadblocks in the Path of Renewable Energy Development