Regulatory Updates

Substantive Issues of Focus Identified for FY 2017 and FY 2018 in FERC’s 2018 Congressional Performance Budget Request

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On May 23, 2017, the Federal Energy Regulatory Commission (FERC) published its Fiscal Year 2018 Congressional Performance Budget Request and FY 2016 Annual Performance Report (available here). FERC sought a funding request of approximately $367.6 million. The funding request is an increase of about $48.4 million above its fiscal year (FY) 2017 funding, an approximate increase of 15.2 percent. FERC, which is an independent federal agency, recovers the full cost of its operations budget through annual charges and filing fees levied on the entities it regulates, and deposits its revenue in the U.S. Treasury so that it has a net zero effect on the federal appropriations budget. FERC is obligated to show that its performance is aligned with its strategic goals, and so its FY 2018 budget request to Congress includes programmatic goals that support its mission of reliable, efficient, and sustainable energy while aiming to ensure just and reasonable rates, terms, and conditions.

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Legislation Introduced to Approve Extended Operations of NGS to 2019

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The Naanish doo Iina Task Force (the Navajo Nation Negotiation Team), released an statement (here) regarding extending the operations of the Navajo Generating Station through December 2019, while also assisting the Navajo Nation in laying a solid foundation for economic development in the areas of water management, waste management, and renewable energy development, among others. DWGP attorney, Derek Dyson, is a member of the Naanish doo Iina Task Force.

Cybersecurity Executive Order

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On May 11, 2017, President Trump issued an Executive Order on Strengthening the Cybersecurity of Federal Networks and Critical Infrastructure (available here). The Executive Order directs federal agencies to strengthen cybersecurity and risk assessments, adopt appropriate and equivalent standards, and to engage and seek input from various critical infrastructure entities. It requires numerous reports, which may ultimately be classified “in full or in part,” to be presented to the White House addressing whether the country is adequately prepared to defend itself against cyber threats. Effective immediately, heads of executive departments and agencies shall use The Framework for Improving Critical Infrastructure Cybersecurity developed by the National Institute of Standards and Technology, or any successor document, to manage the agency’s cybersecurity risk. See Section 1(c)(ii) of the Executive Order. Within 90 days, agency heads are required to provide risk management reports to the Secretary of Homeland Security and the Director of the Office of Management and Budget who shall jointly assess each report “to determine whether the risk mitigation and acceptance choices set forth in the reports are appropriate and sufficient to manage the cybersecurity risk to the executive branch enterprise in the aggregate.” See Section 1(c)(iii) of the Executive Order.

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California’s Investor Owned Utilities Seek New Cost Recovery From Community Choice Aggregators

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On April 25, 2017, California’s investor owned utilities, Pacific Gas & Electric, San Diego Gas & Electric, and Southern California Edison (collectively, the IOUs), filed a joint application (available here) with the California Public Utilities Commission (CPUC) seeking to shift more of their generation costs to the most significant competition the IOUs have ever faced: the new wave of community choice aggregators (CCAs). First recognized in 2002, California allows CCAs to carve out electricity customers from existing IOU service territories under California bill no. AB 117 (available here). Over the course of fifteen years, the CPUC has established policies and methodologies for apportioning a share of the cost of generation and other non-bypassable charges to departing electric customers on a continuing basis for ten years. The CPUC approved the Power Charge Indifference Adjustment (PCIA), which CCA customers are charged to compensate IOUs for above market costs associated with energy procurement originally intended, in part, for the departing customers. AB 117 required this cost-recovery mechanism to not exceed an amount necessary to ensure the IOUs’ remaining customer rates are financially indifferent to CCA development. The legislation also required the cost-recovery mechanism to be applied only up to the expiration of the energy procurement contracts that existed at the time a CCA is formed, not to be applied to any future IOU energy procurement contracts.

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CPUC and California Energy Commission to Discuss Community Choice Aggregators

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On May 19, 2017, the California Public Utilities Commission (“CPUC”) and the California Energy Commission (“CEC”) will hold a joint en banc hearing to discuss the changing state of retail electric choice in California, including non-traditional electricity services such as Community Choice Aggregators (“CCAs”).

According to the CPUC and the CEC, by the end of 2017, thirty to forty percent of California’s investor-owned electric utility customers will be receiving some type of electricity service from an alternative source and/or provider, such as CCAs. These trends prompted both commissions to identify and understand the challenges and opportunities that lie ahead for California as a result of this market change.

In 2002, the California legislature passed AB 117 allowing all cities, counties, or groups of cities and counties to provide an electric power supply source to customers within their jurisdictions that are currently served by the three California investor-owned utilities (“IOUs”), namely Pacific Gas and Electric Company, Southern California Edison Company, and San Diego Gas & Electric Company.

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FERC Delegates Authority to Address Lack of Quorum

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On February 3, 2017, the Federal Energy Regulatory Commission (“Commission” or “FERC”) issued an order (“Delegation Order”) (as subsequently amended) delegating authority to Commission staff to issue orders and to perform acts the Commission may find necessary in order to fulfill its statutory and regulatory obligations. The Commission deemed issuance of the Delegation Order, which is effective February 4, 2017, as necessary due to its impending lack of quorum as a result of Commissioner Norman C. Bay’s resignation from FERC effective February 3rd. At that time, FERC will be left with only two Commissioners, one short of the minimum for a quorum necessary to take action.

Under the Delegation Order, FERC provides its staff with authority to take action on rate and other filings made pursuant to the Natural Gas Act, the Federal Power Act, or the Interstate Commerce Act if the Commission is required to take action in the period during which the Commission lacks quorum. Specifically, the Delegation Order delegates to Commission staff the authority to accept and suspend such filings and to make them effective, subject to refund and subject either to (1) further Commission order or (2) hearing and settlement judge procedures. The Delegation Order makes clear that staff’s

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NIST Releases Proposed Updates to Its Framework for Improving Critical Infrastructure Cybersecurity

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On January 10, 2017, the National Institute of Standards and Technology (“NIST”) released proposed updates to its Framework for Improving Critical Infrastructure Cybersecurity (“Framework”) through Draft Version 1.1. The revised Framework provides updated information on managing cyber supply chain risks, introduces methods for measuring cybersecurity effectiveness, and supplies further details on the voluntary steps that organizations can take to reduce their cyber-security risks. Interested parties may respond to the specific questions posed by NIST, or otherwise provide feedback and comments, on the proposed Framework through April 10, 2017. NIST intends to publish a final Framework Version 1.1 around the fall of 2017.

Throughout the revised Framework, NIST provides updated cyber supply chain risk management considerations, including a new section 3.4 on “Buying Decisions.” This section provides updated information on how to make the best buying decisions given the reality that imposing cybersecurity requirements on a supplier is not always possible. Other sections that incorporate cyber supply chain risk

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