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Key Takeaways: Achieving Low-Cost Decarbonization Through Power Markets, Infrastructure and Grid Operations

McDermott hosted Rob Gramlich, Founder and President of Grid Strategies, LLC, on July 16 for a discussion of low-cost decarbonization strategies for the electricity sector. We framed the discussion around 2020 US Presidential Candidate Joe Biden’s recently announced goal of getting to zero carbon emissions from the electricity grid by 2035. Here are three takeaways from our conversation: 1. Three Areas of Change. Rob highlighted three areas where improvements can be made to substantially increase the deployment of wind and solar resources: Power markets, grid infrastructure and grid operations. With respect to power markets, Rob emphasized that regional transmission organizations (RTOs) can play a bigger role in achieving very fast dispatch over large geographic areas. With respect to infrastructure, he emphasized that new transmission lines will be required to reach the best wind and solar resources, but also that many of those new lines can be built on...

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FERC Announces Tax Reform Actions and Eliminates Income Tax Allowance for Master Limited Partnerships

FERC announced actions in response to the 2017 tax reform legislation and a revised income tax policy, which eliminates the income tax allowance for Master Limited Partnerships. Regulated entities should ensure that they comply with FERC’s orders regarding the treatment of income taxes and consider whether to file comments on the proposed rulemaking and notice of inquiry. Access the full article.

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Highly Anticipated FERC Rule Removes Barriers to Electric Storage

On February 15, the Federal Energy Regulatory Commission (FERC) issued a much-anticipated order designed to remove barriers to electric storage resource participation in organized wholesale electricity markets. The order—dubbed Order No. 841—creates new rules that require each regional transmission operator (RTO) and independent system operator (ISO) to revise its tariff to establish a “participation model” consisting of market rules that facilitate the participation of electric storage resources in the RTO/ISO markets. Order No. 841 will make it easier for electric storage resources to participate in wholesale power markets and access the accompanying revenue streams. Each RTO/ISO must file its tariff changes to implement Order No. 841 within 270 days (i.e., by November 12, 2018). FERC will review the filings and must approve all tariff changes. Each RTO/ISO will have an additional one year from the filing date to implement its new tariff provisions. FERC...

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FERC Rejects Department of Energy Proposal Benefitting Coal and Nuclear

On January 8, 2018, the Federal Energy Regulatory Commission (FERC) rejected the Department of Energy’s (DOE) Proposed Rule, which would have required organized wholesale electricity markets run by independent system operators (ISOs) or regional transmission organizations (RTOs) to establish tariff mechanisms for purchasing energy from eligible “reliability and resilience resources” and mandated a recovery of costs plus a return on equity for such resources. Eligible reliability and resilience resources would have to be (1) located within an RTO/ISO, (2) able to provide essential reliability services, and (3) have a 90-day fuel supply on-site. Practically, these requirements would limit participation to coal and nuclear plants. After reiterating support for “pro-competition, market driven” regulation of wholesale electricity markets, FERC rejected the Proposed Rule. Under the Federal Power Act, FERC may require RTOs/ISOs to implement tariff changes if there...

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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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FERC Issues Policy Statement on Storage Resources with Multiple Payment Streams

Last week, the Federal Energy Regulatory Commission (FERC) issued a Policy Statement to provide guidance on the ability of electric storage resources to recover costs through both cost-based and market-based rates concurrently. The Policy Statement appears intended to reconcile two lines of FERC precedent on this topic. The issue of multiple payment streams is one of particular concern for electric storage resources that, due to their technological capabilities, can switch from one type of service to another almost instantaneously. The Policy Statement is separate from FERC’s ongoing Notice of Proposed Rulemaking regarding electric storage resource participation in wholesale electricity markets (RTO/ISO markets), discussed here and here. FERC’s guidance stems from two orders with opposite outcomes – Nevada Hydro and Western Grid. In the 2008 Nevada Hydro order, FERC denied a hydroelectric storage project’s petition to be treated as a transmission facility...

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Environmental Organizations File Litigation Briefs Supporting New York’s ZEC Program

Two environmental organizations, Environmental Defense Fund (EDF) and Natural Resources Defense Council (NRDC), have weighed in to defend the legality of New York State’s Zero Emissions Credit (ZEC) program in ongoing litigation concerning that program.  This blog is tracking the ongoing litigation and this article summarizes the arguments made by EDF and NRDC in their recent filings. The ZEC program, which was approved by the New York Public Service Commission (NYPSC) in August 2016, compensates eligible facilities for the zero-emissions attributes of produced nuclear energy through long-term contracts with New York State Energy Research & Development Authority (NYSERDA) for the purchase of ZECs.  New York’s load-serving entities are required to purchase those ZECs from NYSERDA in proportion to their share of statewide load. The NYPSC determined that New York’s FitzPatrick, Ginna and Nine Mile facilities were eligible to participate in the ZEC program....

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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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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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