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Department of Energy Proposes Rule Benefiting Coal and Nuclear to FERC

On September 28, 2017, the US Department of Energy (DOE) submitted a proposed rule to the Federal Energy Regulatory Commission (FERC) that, if implemented, could reshape organized wholesale electricity markets. Citing electric grid reliability and resiliency issues like the 2014 Polar Vortex and recent hurricanes, DOE asked FERC to enact a new compensation system for coal and nuclear power plants—dubbed “fuel-secure resources” by DOE. Coal and nuclear plants have been retiring prematurely and, according to DOE, the retirements are “threatening the resilience of the Nation’s electricity system.” In order to stem the tide of retirements, DOE submitted to FERC a proposed rule requiring organized wholesale electricity markets run by independent system operators (ISOs) or regional transmission organizations (RTOs) to develop and implement market rules that “accurately price generation resources necessary to maintain the reliability and resiliency” of the bulk...

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IRS Issues Additional Guidance on Beginning of Construction Rules for Renewable Projects

On December 15, 2016, the Internal Revenue Service released Notice 2017-04, which provides welcome guidance on how to meet the “beginning of construction” requirements for wind and other qualified facilities. There has been much uncertainty about when construction of these types of facilities begins for renewable energy tax credit purposes. The Notice (1) extends the “Continuity Safe Harbor” placed in service date for projects that started construction before 2014; (2) provides that the “combination of methods” rule set forth in prior guidance only applies to facilities on which construction begins after June 6, 2016; and (3) clarifies that for purposes of the 80/20 Rule, the cost of new property includes all costs properly included in the depreciable basis of the new property. Read the full article here.

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FERC Proposes to Remove Barriers to Wholesale Market Participation for Electricity Storage and Distributed Energy Resource Aggregators

On November 17, 2016, the Federal Energy Regulatory Commission (FERC) issued a notice of proposed rulemaking (NOPR) that, if adopted, would require organized wholesale electricity markets (RTO/ISO markets) to modify their open access transmission tariffs and market rules to accommodate electric storage resources and allow participation of distributed energy resource aggregators. This NOPR is part of FERC’s ongoing efforts to remove barriers to participation in wholesale electric markets. FERC recognizes that electric storage resources and distributed energy resources are often constrained by antiquated wholesale market rules that were, as FERC puts it, “developed in an era when traditional generation resources were the only resources participating in the organized wholesale electricity markets.” This NOPR will promote far greater market participation by storage resources of all types, including batteries, flywheels, compressed air and pumped hydro, as well as...

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CaliforniaFirst PACE Program Finances Clean Energy Projects for Commercial Property

Property assessed clean energy (PACE) programs are an innovative mechanism for financing energy efficiency and renewable energy improvements on private property.  They also present a number of challenges to investors—for one, the variance between different programs (even within a particular state) and an understanding as to how particular programs work remains an impediment to investors and to scalability.  This post provides a brief overview of PACE programs generally and one particularly popular PACE program – CaliforniaFirst. Overview of PACE PACE programs vary by state, but most allow property owners to finance clean energy projects through a voluntary property assessment paid as a line item on their property tax bills.  Thirty-two states and the District of Columbia have enacted PACE-enabling legislation and there are active PACE programs in 19 states and the District of Columbia.  While most of these states provide financing for commercial PACE...

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Massachusetts Legislation Spurs Offshore Wind Power Development

On August 8, 2016, Massachusetts Governor Charlie Baker signed into law a major energy bill aimed at putting Massachusetts at the forefront of states developing offshore wind power. The law, An Act Relative to Energy Diversity (H. 4568), requires Massachusetts electricity distribution companies to procure 1,600 megawatts (MW) of offshore wind energy by June 30, 2027. The United States currently has no offshore wind generation, but Rhode Island wind developer Deepwater Wind is nearing completion of a 30 MW offshore wind farm, which will be the first of its kind in the country. In a statement, Governor Baker’s office said the bill “spurs the development of an emerging offshore wind industry…and represent[s] the largest commitment by any state in the nation to offshore wind.” The new law requires Massachusetts distribution companies and the Department of Energy Resources (DOER) to jointly develop a competitive bidding process for offshore wind energy generation...

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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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Key Developments in the Photovoltaic Sector in Italy

The regulatory framework for solar photovoltaic plants in Italy is constantly evolving. Plant owners, asset managers and investors need to stay informed in order to adapt to developments in this sector and avoid adverse outcomes. The following highlights the key updates in this market in the last 12 months. Read the full article.

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Oil and Gas in Egypt

Egypt has suffered from significant social and political unrest.  This resulted in a drop in oil and gas production levels at the same time as domestic energy consumption was rising.  Egypt was facing a serious energy crisis. The election of Abdel Fattah al-Sisi as president in June 2014 proved to be a turning point: There has been a substantial reduction in the level of fuel subsidies. Significant steps have been taken to repay debts owed to international oil and gas companies. There is ongoing diversification of energy sources, with more renewable power projects and increasing imports of liquefied natural gas (LNG). The future looks positive.  A number of agreements have recently been signed by international oil and gas companies and it seems Egypt is still a destination for international investment. Read the full article in Oil & Gas Financial Journal.

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Bankruptcy Courts Fail to Enlighten on Electricity as Goods or Services

Is electricity goods or services?  That seemingly simple yet confounding question is illustrated by three recent bankruptcy cases (all of which consider whether an electricity provider is entitled to an administrative expense priority under Bankruptcy Code Section 503(b)(9) for “the value of goods received by the debtor” in the ordinary course within 20 days prior to the automatic stay): In Hudson Energy Services, LLC v. Great Atlantic & Pacific Tea Co, Inc., 2013 WL 5212141 (S.D.N.Y. Sept. 16, 2013) (A&P), the court held that because electricity is consumed only after it is measured (at the customer’s meter), electricity is a “thing that is movable at the time of identification” (UCC 2-105) and accordingly should be characterized as goods under the UCC, which is the reference standard for Section 503(b)(9). The bankruptcy court in In re NE OPCO, Inc., 501 B.R. 233 (Bankr. D. Del. 2013), agreed with A&P that the meaning of goods under Section...

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Get LinkedIn to Updates on Mexico’s Energy Reforms

The energy reforms in Mexico have generated significant interest from energy investors around the world. McDermott has created a new LinkedIn Group, McDermott Discussion Group: Mexico’s Energy Reforms, to discuss legislative developments and their impacts on the changing energy private investment climate. Members of our team are well studied in these reforms and we will be posting updates on legislative developments and market updates. We encourage group member discussion and comments as well. Group participants stand to gain insight from our lawyers who are studying the reforms, from their peers who are also considering opportunities in Mexico, and from Mexican government officials who are tasked with executing the reforms.  The impact of the reforms will be felt across the board, covering the oil, gas and power sectors. Click here to join our group. If you have any questions or technical issues, please contact Taylor Shekarabi.

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