Regulatory Updates

5th Circuit Dismisses Challenge to FERC Enforcement Authority

Natural gas
On June 8, 2017, the U.S. Court of Appeals for the Fifth Circuit dismissed TOTAL Gas & Power North America, Inc.’s (“Total Gas”) claims that the Federal Energy Regulatory Commission (“FERC”) lacks authority to adjudicate violations of the Natural Gas Act and impose civil penalties for market manipulation violations.  Specifically, Total Gas argued that, under Section 24 of the Natural Gas Act, only district courts of the United States may adjudicate violations of the Natural Gas Act and assess associated civil penalties.  Total Gas also argued that adjudication by a FERC Administrative Law Judge of a Natural Gas Act violation and imposition of civil penalties would violate the Constitutional guarantees of the Appointments Clause, the Fifth Amendment’s Due Process Clause, and the Seventh Amendment’s right to a jury trial.  The Fifth Circuit found that Total Gas’ arguments were not ripe, as the FERC has not yet found that Total Gas has violated the Natural Gas Act or assessed any associated civil penalties.

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United Stated District Court of Illinois Dismisses Zero Emission Credit Nuclear Subsidy Complaint

Zero Emissions
On July 14, 2017, a federal district court judge in Illinois granted the state’s motion to dismiss a complaint brought by wholesale generators against the state’s Zero Emission Credit (“ZEC”) nuclear subsidy program. The Illinois Future Energy Jobs Act created the ZEC program and requires utilities to enter into contracts to purchase the zero-carbon environmental attributes from qualifying nuclear generation facilities. The Illinois ZEC program is in response to New York’s original Zero Emission Credit program aimed at preserving the zero-carbon attributes of struggling high-cost nuclear generation in the wholesale market, as well as the preservation of local jobs and property taxes.

In Illinois, the district court dismissed the plaintiff generators’ ZEC complaint for failure to state a claim. The generators’ complaint was largely based on the recent Supreme Court case Hughes v. Talen Energy Marketing, which found a Maryland state regulatory program to violate FERC’s exclusive wholesale jurisdiction by providing subsidies to selected generators that paid the difference between the generator’s costs and the actual market clearing price. The Supreme Court also articulated that “tethering” a subsidy to a generator’s participation in the wholesale market is impermissible.

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D.C. Circuit Court of Appeals Emphasizes FERC’s “Passive and Reactive Role” under Section 205 of the Federal Power Act

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On July 7, 2017, the U.S. Court of Appeals for the District of Columbia Circuit issued an important opinion on the scope of the Federal Energy Regulatory Commission’s (“FERC”) authority under Section 205 of the Federal Power Act. Specifically, the D.C. Circuit in NRG Power Marketing, LLC v. FERC found that FERC exceeded its Section 205 authority when it directed modifications to a PJM Interconnection, L.L.C. (“PJM”)—a Regional Transmission Organization—proposal impacting its generation capacity auctions.

For background, in 2012, PJM submitted to FERC a proposed reform to its Minimum Offer Price Rule intended to prevent new wholesale market entrants from entering artificially low bids into its capacity auctions, which would have depressed clearing prices in the auction. PJM’s proposal set forth two new exceptions to the Minimum Offer Price Rule: (1) a competitive entry exemption; and (2) a self-supply exemption. In addition, PJM’s proposal sought to extend the duration of the Minimum Offer Price Rule for new generators from one to three years. 

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EPA Seeks Revision to Waters of the United States Rule

On June 27, 2017, the Environmental protection Agency (“EPA”) and the U.S. Army Corps of Engineers issued a proposed rule redefining the “waters of the United States,” which are the bodies of water subject to federal EPA regulation under the Clean Water Act.  The EPA’s proposed rule would rescind the current definition of “waters of the United States,” which was adopted in 2015 but subsequently stayed by the Sixth Circuit, and re-codify it with the pre-2015 definition.  Issuance of this proposed rule constitutes the first step of a two-step process outlined in President Trump’s February 28th Executive Order aimed at rescinding EPA’s 2015 expansion of the Waters of the United States rule (“WOTUS”).  In a future second step, the agencies will issue a separate proposed rulemaking to establish a new definition consistent with Justice Scalia’s plurality opinion in Rapanos v. United States.  Such a revision could reduce the number of bodies of water subject to federal regulation under the Clean Water Act and return regulatory power of waterways to the states. 

A comment date will be set once the rule is published in the Federal Register.

The pre-publication version of the rule is available here:  

If you have questions, please contact Derek Dyson or Gregory Jones.

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

ferc compliance 300

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

Navajo Article

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

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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