On June 30, 2020, the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) ruled en banc 10-1 in Allegheny Defense Project v. FERC to invalidate the Federal Energy Regulatory Commission’s (FERC) common practice of issuing tolling orders to extend the time for deciding rehearing requests under the Natural Gas Act (NGA) beyond the 30-day deadline set forth in the statute. The court found that a tolling order, in which FERC “grants rehearing” for the limited purpose of affording it additional time to act on a rehearing request, does not constitute “action” upon the rehearing request as required by the NGA. The decision reversed the approximately 50-year old D.C. Circuit precedent upholding the tolling order practice as permissible. The court derided the practice as an unauthorized way for FERC to stall for time while precluding parties aggrieved by FERC orders from seeking judicial review.
On May 21, 2020, FERC issued a policy statement to clarify its position regarding requests for waiver of tariff provisions. If finalized, the Policy Statement would revise how FERC treats requests for waiver of tariff provisions.
The proposed policy relates to FERC’s statutory authority to review and approve public utility rates, as set forth in Federal Power Act (FPA) sections 205 and 206, and the parallel provisions in Natural Gas Act (NGA) sections 4 and 5. FERC is concerned that its usual practice of waiving tariff provisions after the fact amounts to retroactive ratemaking in violation of the filed rate doctrine. (more…)
With the market evolving rapidly, we are pleased to provide you with the following enforcement updates:
- FERC extends deadlines for filing EQRs and Form No. 552 to June 1, 2020.
- Trading company challenges PJM FTR forfeiture rule.
- PJM submits tariff revisions to enhance rules for evaluating and managing credit risk.
- FERC establishes paper hearing to evaluate proposed rejection in bankruptcy.
- Parties file summary judgment motions and reply briefs in FERC v. Coaltrain Energy.
- Kraft conditionally withdraws its motion for sanctions in CFTC v. Kraft Food Group, Inc.
- Settlement discussions continue in FERC v. Richard Silkman et al.
- Comments filed on the request for technical conference and petition for rulemaking to update credit and risk management in the ISO/RTO markets.
- FERC issues Order 860-A on Connected Entity Information.
- Fourth Circuit finds FERC’s action timely in FERC v. Powhatan Energy Fund, LLC.
- CFTC approves proposed rule on position limits for derivatives.
- FERC issues notice of intent to revoke MBR authority to thirteen entities for failure to file EQRs.
- FERC approves a Stipulation and Consent Agreement between the Office of Enforcement and Emera Energy Incorporated.
As the novel coronavirus (COVID-19) continues to spread, Sidley is helping clients navigate the potential consequences to energy markets and attendant legal risks. The following frequently asked questions address actions by the U.S. Federal Energy Regulatory Commission (FERC) on April 2, 2020 in response to the current market conditions. This document updates energy regulatory FAQs published by Sidley on March 20, 2020.
The Federal Energy Regulatory Commission (FERC) and the North American Electric Reliability Corporation (NERC) announced yesterday they are taking steps to ensure that operators of the bulk electric system can focus their resources on keeping people safe and the lights on during this unprecedented public health emergency.
On June 4, 2019, the U.S. Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) offered non-binding advice to the Federal Energy Regulatory Commission (“FERC”) on how it should perform environmental reviews of greenhouse gas (“GHG”) emissions when it considers new natural gas pipeline projects. While the opinion in Birckhead v. FERC ultimately upheld FERC’s order permitting a new natural gas compressor station near Nashville, Tennessee, the court devoted several pages of dicta on what upstream and downstream GHG emissions data FERC should be gathering to comply with the National Environmental Policy Act (“NEPA”).
This update covers:
- FERC rescinds policy on Notices of Alleged Violations.
- Judge denies motion for new trial for first trader convicted of spoofing.
- CFTC charges former natural gas trader with fraudulently mismarking trades.
- CFTC’s Division of Enforcement issues first Public Enforcement Manual.
- FERC approves settlement with Dominion Energy.
- DOJ publishes new guidance on evaluating corporate compliance programs.
- CFTC staff issues research report on impact of automated orders in futures markets.
- CFTC settles case against Kraft Heinz and Mondelez International.
- Powhatan and FERC file appellate briefs on statute of limitations.
On March 21, 2019, the Federal Energy Regulatory Commission (“FERC”) initiated an Inquiry Regarding the Commission’s Policy for Determining Return on Equity (“ROE”) that was published in the Federal Register on March 28, 2019. FERC is seeking comments on this Notice of Inquiry (“NOI”) in eight general areas, including the role its base ROE plays in investment decision-making, and whether FERC should reevaluate how it uses the discounted cash flow (“DCF”) methodology to set ROEs for jurisdictional rates. The DCF methodology has guided cost-of-service ratemaking at FERC since the 1980s. It is used to ascertain an investor’s required return for investing in a firm, and is applied using a proxy group of firms that face similar risks to the entity whose ROE is being determined, which defines a “zone of reasonableness” for the ROE. The use of a proxy group is intended to satisfy the “Hope” and “Bluefield” standards (named for a pair of 20th Century U.S. Supreme Court cases) that an ROE is commensurate with returns on investments in other enterprises having corresponding risks to assure confidence in the financial integrity of the enterprise to allow it to maintain its credit and attract capital. Comments on the NOI are due on June 26, 2019 and Reply Comments are due on July 26, 2019.
On March 21, 2019, the Federal Energy Regulatory Commission (“FERC” or “Commission”) issued a notice of inquiry (“NOI”) in which the Commission addresses possible improvements to its electric transmission incentives policy. The NOI requests stakeholder comment on a wide range of issues related to the Commission’s current transmission incentives policies. FERC Chairman Neil Chatterjee said, “as I announced in November, I believe these policies are overdue for a fresh look with input from all stakeholders, not just those that happen to be parties to a pending complaint proceeding.” The NOI was published in the Federal Register on March 28, 2019. Comments on the NOI are due on June 25, 2019 and Reply Comments are due on July 25, 2019.
On February 21, 2019, the Federal Energy Regulatory Commission (FERC) issued Trailblazer Pipeline Company LLC (“Trailblazer”), FERC’s first order addressing how FERC applies its Revised Income Tax Allowance Policy Statement, as further revised on rehearing (collectively “Revised Policy Statement”), to a pipeline organized as a pass-through partnership that is not a master limited partnership (“MLP”) in a Natural Gas Act (“NGA”) section 4 rate case proceeding. FERC issued the Revised Policy Statement in response to the U.S. Court of Appeals for the D.C. Circuit’s (“D.C. Circuit”) decision in United Airlines, Inc. v. FERC (“United Airlines”), which found that FERC could not permit a specific MLP pipeline to recover an income tax allowance in its rates without further explaining why this did not result in the MLP’s investors “double recovering” their income tax costs, based on a concern that the investors’ pre-tax return on equity (“ROE”) also provided such compensation when calculated using the discounted cash flow (“DCF”) methodology. United Airlines did not consider other types of pass-through entities, such as non-publicly traded partnerships, or alternative methodologies to calculate ROE and the Revised Policy Statement did not address them directly. (more…)