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Transmission Planning and Construction Right of First Refusal Ruled Unduly Discriminatory, Not Mobile-Sierra Protected

The provision contained in incumbent electric utility tariffs—conferring on the holder the right of first refusal (ROFR) to construct additions to the high-voltage electrical grid, regardless of who conceived of and proposed the addition—is unduly discriminatory, the U.S. Circuit Court of Appeals for the D.C. Circuit held in a July 1 decision in Oklahoma Gas & Electric Co. v. FERC, No. 14-1281.   The court’s decision upheld utility-specific applications of the FERC mandate—a central open-access innovation of the agency’s Order No. 1000 (Transmission Planning and Cost Allocation by Transmission Owning and Operating Public Utilities)—that directed independent system operators and regional transmission organizations (ISO/RTO) to remove from their existing tariffs and membership agreements the ROFR provision (Removal Mandate). Earlier in South Carolina Public Service Authority v. FERC, 762 F.3d 41 (D.C. Cir. 2014), the same court generally had upheld the...

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CFTC Proposes Reversing Course, Granting Private Right of Action in Energy Market Manipulation

Last week the Commodity Futures Trading Commission (CFTC) issued a notice of proposed order and request for comment proposing to allow a private right of action to enforce violations of the anti-manipulation, anti-fraud or scienter based provisions (Anti-fraud provisions) of the Commodity Exchange Act (CEA) in organized electricity markets.  The proposal is a controversial reversal of policy that critics say could open electricity market participants to increased costs and liability. After the Dodd-Frank Act expanded the CFTC’s jurisdiction under the CEA to include regulation of swaps, six regional transmission organizations (RTO) and independent system operators (ISO) petitioned the CFTC seeking exemptions from various provisions of the CEA for certain energy products traded in the electricity markets that the RTOs/ISOs administer.  These products include physical energy products traded with the ISOs/RTOs as well as financial transmission rights and other...

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Timing Is (Almost) Everything: FERC Implements D.C. Circuit Guidance on NEPA Review of Multiple Pipeline Construction Projects

In the wake of two recent D.C. Circuit decisions, the Federal Energy Regulatory Commission (FERC) has begun to implement its new policy concerning the review of natural gas pipeline construction proposals under the National Environmental Policy Act (NEPA). To decide whether a NEPA review must include other projects proposed by the pipeline, FERC will look at the timing and maturity of other proposals and the independence of the projects. In the first decision, Delaware Riverkeeper Network, the U.S. Court of Appeals for the D.C. Circuit held that FERC failed to consider the cumulative environmental impact of four projects that had been separately proposed by the same pipeline. The D.C. Circuit held that the projects were not financially independent and were “a single pipeline” that was “linear and physically interdependent,” so the cumulative environmental impacts must be considered concurrently. In the second decision, Minisink Residents for Environmental...

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Certificated Natural Gas Storage Capacity Is Based on Science, Not Sales, FERC Rules

The Federal Energy Regulatory Commission (the Commission) issued an order on Thursday, March 19, 2015, refusing to allow the abandonment of certificated working gas capacity when the reason for the request was unrelated to the physical characteristics of the storage facility and unsupported by engineering or geological data.  The applicant had sought the abandonment authorization for the sole purpose of reducing its lease payments, which are largely based on the certificated working gas capacity of the facility. The order, Tres Palacios Gas Storage LLC, 150 FERC ¶ 61,197 (2015), was issued following an  application by Tres Palacios Gas Storage LLC (Tres Palacios) for authorization to abandon a significant amount of its certificated working gas storage capacity in a salt dome storage facility in Matagorda and Wharton Counties, Texas.  Tres Palacios claimed that abandonment was justified because market conditions were such that it could not sell the capacity at...

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FERC Commissioner Moeller Convenes Public Meeting Focusing on Resolving Natural Gas Supply Challenges for Electric Generators

Commissioner Philip Moeller of the Federal Energy Regulatory Commission (FERC) held a public meeting on September 18, 2014 to discuss ideas to facilitate and improve the way in which natural gas is traded and to explore the concept of establishing a centralized natural gas trading platform.  Although not an official FERC conference, the ideas at issue were an extension of FERC’s recent focus on gas-electric coordination.  During the well-attended meeting, Commissioner Moeller presided over a large roundtable discussion of stakeholders, including electric generation owners, natural gas producers, pipelines and marketers, who engaged in a spirited discussion of whether natural gas supplies are meeting the needs of electric generators and improvement in supply practices.  The central focus of the meeting was the creation of a natural gas information and trading platform containing bids and offers for the purchase and sale of commodity and capacity for receipt...

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Environmental Impact Analysis Required for Natural Gas Facilities Clarified in Court Decision Denying Residents’ Challenge to Compressor Siting Approval

A New York town’s challenge to the Federal Energy Regulatory Commission’s (FERC) siting authorization for a natural gas pipeline compressor station was rejected by the U.S. Court of Appeals for the D.C. Circuit in Minisink Residents for Environmental Protection and Safety v. FERC.  The court’s August 15 decision denying the petition for review of residents of the Town of Minisink, when read in conjunction with its decision earlier this year in Delaware Riverkeeper Network v. FERC, delineates the scope of environmental impact analysis that the court will require of FERC  under the National Environmental Policy Act (NEPA). Residents of the Town protested the compressor station’s location and urged FERC and Millennium to pursue an alternative site referred to as the Wagoner Alternative.  The Wagoner Alternative would have resulted in the compressor station being located in a less populous area but would have required the replacement of a seven mile pipeline...

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Appeals Court Validates FERC Regional Planning Mandate as Reasoned Evolution of the Open-Access Electricity Transmission System

The Federal Energy Regulatory Commission’s (FERC) Order No. 1000 mandate that going forward the high-voltage electric transmission grid be planned and fairly financed regionally by all of its operators and beneficiaries, survived myriad challenges from 45 petitioners in the unanimous August 15 decision of a three-judge panel of the U.S. Court of Appeals for the D.C. Circuit in South Carolina Public Service Authority v. FERC.  The rigorous 97-page opinion rejected challenges coming from all directions to the 2011 rulemaking entitled "Transmission Planning and Cost Allocation by Transmission Owning and Operating Public Utilities." According to the panel, nearly all of the challenges misapprehended Order No. 1000’s regional planning mandate.  The court repeatedly emphasized that Order No. 1000’s mandate is nothing new, but rather the next step in evolving efforts under section 206 of the Federal Power Act to combat undue discrimination.  That evolution, the...

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D.C. Circuit Rules that FERC May Not Segment Its Evaluation of the Environmental Impact of Related Natural Gas Pipeline Construction Projects, Regardless of Whether They Are Separately Proposed

The D.C. Circuit Court of Appeals recently issued an opinion holding that the Federal Energy Regulatory Commission (FERC) violated the National Environmental Policy Act (NEPA) when it segmented its evaluation of the environmental impact of four separately proposed but connected projects to upgrade the “300 Line” on the Eastern Leg of Tennessee Gas Pipeline Company’s natural gas pipeline system.  Going forward, the court’s ruling will likely compel proponents of interrelated or complimentary pipeline projects to seek their certification on a consolidated basis and will require FERC to evaluate their cumulative impact. Tennessee Gas’s challenged Northeast Project was the third of four proposed upgrade projects to expand capacity on the existing Eastern Leg of the 300 Line.  The Northeast Project added only 40 miles of pipeline, while the four proposed projects combined to add approximately 200 miles of looped pipeline.  FERC approved Tennessee Gas’s first...

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Divided Court of Appeals Panel Vacates FERC Order 745 on Compensation of Demand Response

FERC’s Order No. 745 requiring independent regional grid operators  (RTOs and ISOs) in limited circumstances to compensate providers of state-authorized demand response services in the same amounts that they compensate electricity generators was vacated in a May 23, 2014 decision by the majority of a three-judge panel of the U.S. Court of Appeals for the D.C. Circuit in Electric Power Supply Association v. FERC.  Siding with challengers — principally electricity generators — Judge Brown writing for the two-judge majority held that FERC exceeded its Federal Power Act (FPA) jurisdiction over electricity wholesales and intruded impermissibly on retail jurisdiction reserved to states by “lur[ing]” retail customers into the wholesale markets of regional grid operators with “rich” incentives to reduce retail purchases and consumption whenever a net benefit accrues to the wholesale market in the form of lower market-clearing prices in the wholesale market.  Even if...

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FERC Defers to Exclusionary State and Local Laws in Transmission Planning

In three separate rehearing orders issued last Thursday, May 15, 2014, the Federal Energy Regulatory Commission reversed course on its decision in Order No. 1000 to prohibit references in transmission tariffs to state laws such as rights of first refusal (ROFR) to build transmission expansions.  The Commission determined on further consideration that excluding such state and local laws from transmission tariffs could lead to inefficiencies and delays in the regional transmission planning process because regions would have to spend time and resources evaluating potential transmission developers that would ultimately be prohibited by state or local law from developing a transmission project.  Commissioner Norris issued a statement opposing the Commission’s orders on the basis that they will exclude non-incumbents from participating in the regional transmission planning process, choking innovation and insulating incumbents from competition. Order No. 1000...

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