DOE Opens Informal Comment Period on FPA Section 202(c) Emergency Authority

Since First Energy Solutions Corp. asked DOE to issue a Federal Power Act (FPA) Section 202(c) emergency order requiring PJM to provide full cost recovery to certain nuclear- and coal-fired generators last month, energy industry organizations have responded to the request, and DOE has opened an unofficial comment period using its 202(c) authority.

On March 30th, a diverse group of energy industry trade associations* submitted a joint request to DOE Secretary Perry to establish a formal notice and comment period of at least 60 days to allow interested parties to respond.  These groups argued that First Energy’s request has far-reaching implications for the PJM markets and on a broad spectrum of parties, making the opportunity for meaningful stakeholder involvement imperative.

While DOE has not formally responded to the energy industry trade associations, last week, DOE opened an unofficial comment period and updated its website to provide an email address intended for the receipt of all public comments and requests related to FPA Section 202(c).  DOE made clear, however, that:

Establishment of this email address does not establish a “docket,” and those submitting correspondence do not constitute parties or intervenors to any proceeding.  Further, submission of correspondence to the Department does not in any way limit or prevent the ability of the Secretary to act on any application, or pursuant to section 202(c) without application, in any way and at any time as he deems appropriate.

DOE has not indicated how long the informal comment period will remain open, but states that any additional information related to 202(c) procedures will be announced on its website.

Energy industry organizations continue to respond to First Energy’s request.  The American Public Power Association urged Secretary Perry in an April 9 submittal to reject First Energy’s request, arguing that no emergency exists within the meaning of FPA Section 202(c), and that FERC already considered and rejected First Energy’s arguments in the proposed grid resilience pricing rule.  In addition, the Electric Power Supply Association submitted a letter to President Trump last Friday, stating that no emergency warranting the use of 202(c) authority exists, and that “[s]ince all electricity suppliers face the challenges of current market conditions . . . federal and state policies should be pursued on a fuel neutral basis to best serve consumers.”

 

* These groups included Advanced Energy Economy, the American Council on Renewable Energy, the American Forest & Paper Association, the American Petroleum Institute, the American Wind Energy Association, the Electric Power Supply Association, the Electricity Consumers Resource Council, the Independent Petroleum Association of America, the Interstate Natural Gas Association of America, the Natural Gas Supply Association, and the Solar Energy Industries Association.

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Former FERC Commissioners Weigh In on CPP Repeal

Former FERC Commissioners Norman Bay, John Norris, and Jon Wellinghoff submitted a comment to EPA’s Clean Power Plan (CPP) repeal docket, responding to EPA’s suggestion that the CPP may impermissibly tread on FERC’s functions and authority.  Characterizing this idea as “unfounded,” the former commissioners argue that the CPP respects the boundaries between EPA and FERC.  They argue that “none of FERC’s authorities under the [Federal Power Act] would be in any way diminished or altered if the CPP were fully implemented.”  They also point to other federal regulations—under the Clean Air Act as well as promulgated by other agencies, such as the Occupational Health and Safety Administration  and the Bureau of Land Management—that may increase generator costs, arguing that these agencies cannot be precluded from exercising their statutory authority because of FERC’s authority over wholesale electricity markets.

The comments also focus on the state/federal balance in energy regulation and the fact that FERC “routinely considers the impacts of state public policies on the areas it regulates.”

The comments attach a May 15, 2015 letter from FERC to EPA about the CPP, noting that FERC’s suggestions were solicited and incorporated throughout the development of the CPP. For example, FERC held four technical conferences concerning the CPP.  And EPA included a reliability safety valve and altered the compliance deadlines in response to consultation with FERC.

Further, the former commissioners state “that the CPP is consistent with ongoing trends in the power sector, is achievable at reasonable cost, and does not pose threats to reliability.”  They argue that in spite of recent changes to the grid—from changing resource mix to technological innovations—regulators and grid operators have maintained safe, reliable, and affordable electricity.  They point to studies showing the feasibility of CPP compliance and note that they can think of no instance where a Clean Air Act regulation “has been responsible for endangering resource adequacy,” citing this as “a powerful tribute to the robust system of policies, institutions, planning processes, and operating practices” protecting reliability.

Comments on the proposed repeal are currently due April 26.

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Utility Seeks DOE Emergency Assistance to Resolve Alleged Market Emergency

At the end of March, FirstEnergy Solutions Corp. (FirstEnergy) sent a letter to the Department of Energy (DOE) requesting that the agency issue an emergency order under Section 202(c) of the Federal Power Act.  Section 202(c) allows for orders during times of war and emergencies that require “temporary connections of facilities and such generation, delivery, interchange, or transmission of electric energy [that] will best meet the emergency and serve the public interest.”

According to FirstEnergy, there currently exists an emergency in PJM because PJM’s power markets fail to compensate nuclear and coal-fired generators for the full value of the benefits they provide.  As a result, many of these units are either planning to retire or are at risk of retirement.  FirstEnergy, whose generation subsidiary filed for bankruptcy a few days after the letter to DOE, has requested that DOE order PJM to enter into contracts that provide full cost recovery for certain nuclear and coal-fired generators that have a 25-day fuel supply onsite.

Several entities have voiced their opposition to emergency action.  PJM sent DOE a response requesting that DOE not take any action at this time, stating that there is no immediate threat to reliability and that PJM’s tariff provides a process to determine whether the retirement of certain nuclear and coal plants would create reliability concerns.  The Environmental Defense Fund and the Natural Resources Defense Council filed a joint letter arguing that an emergency order is unnecessary and would undermine ongoing FERC efforts regarding reliability.  The Sierra Club similarly told DOE that there is no reliability emergency in PJM, and that if DOE does not outright reject FirstEnergy’s request, then it should open a formal proceeding to solicit public comment before acting.

Although DOE has yet to act on FirstEnergy’s request, its website lists several examples of emergency orders it has issued under Section 202(c) over the past two decades, including orders in response to the California energy crisis, the Northeast Blackout of 2003, Hurricane Rita, and a decision by Mirant Corporation to cease generation of electricity at its Potomac River Generating Station.  More recently, DOE has issued Section 202(c) orders regarding coal-fired units not in compliance with EPA’s Mercury and Toxics Standards (MATS).

In April 2017, DOE issued emergency Order No. 202-17-1 in response to a request by the Grand River Dam Authority to keep a non-MATS-compliant coal unit online to ensure reliability in SPP.  Although the Grand River Dam Authority had two other generation units, one was offline because of a lightning-caused fire and the other had construction delayed because of flooding.  SPP filed a letter of support explaining that keeping this first unit online was needed for reliability.  DOE agreed that there was an emergency and ordered that the first unit remain online until one of the Grand River Dam Authority’s other units was brought online or SPP determined that generation from the first unit was no longer needed to maintain grid reliability.

A few months later, DOE issued emergency Order No. 202-17-2.  There, PJM filed a letter requesting an emergency order to preserve the reliability of the bulk power transmission system in the area east of Richmond, VA.  Two coal-fired units in that area were planned to be deactivated because of failures to comply with MATS, but PJM determined that the generation from these units was necessary to prevent the possibility of uncontrolled power disruptions.  DOE ordered that these two units were to operate as directed by PJM as needed to address reliability for 90 days.  DOE has since issued a series of 90 day extensions of the emergency order, the most recent of which allows the two units to continue operating under certain conditions until June 11, 2018.

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DOE Compiles Publicly-Available Transmission Data in its in Annual U.S. Transmission Data Review

Yesterday, DOE released its 2018 Annual U.S. Transmission Data Review, which gathers and presents, in a unified framework, data on the U.S. transmission system from the Energy Information Administration, Edison Electric Institute, the North American Electric Reliability Corporation, and FERC.  DOE explains in the report’s introduction that the agency “has broad responsibility for developing and supporting the implementation of energy policies that serve the public interest.  Ensuring that timely and accurate data on key subjects is widely available to the public is one of those responsibilities.”

The Annual U.S. Transmission Data Review focuses on six topics:

  • The amount of existing transmission infrastructure—the transmission lines, transformers, circuit breakers, capacitor banks, and other equipment that make up the transmission systems—as well as planned transmission construction and investment;
  • The reliability performance of the transmission system in recent years;
  • Transmission system utilization (i.e., how the transmission system as a whole is used in day-to-day operations to facilitate electricity flows);
  • Management of current transmission constraints, defined as limitations on power flows resulting from individual pieces of equipment, operational limits, and transmission system capacity to deliver electricity from one area to another;
  • Transmission congestion—when transmission constraints limit the ability of system users to transfer power in the amounts they desire—including the economic costs of congestion developed by individual market operators; and
  • Transmission planning emerging from FERC-mandated regional transmission planning processes, as well as other, interconnection-wide planning activities.
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FERC to Address Impacts of the Tax Cuts and Jobs Act

This month, FERC issued a Notice of Inquiry and two Orders to Show Cause relating to the December 2017 Tax Cuts and Jobs Act.  That tax overhaul, among other things, reduced the federal corporate tax rate from a maximum 35% to a flat 21% rate.  FERC had received letters from a number of entities, including a bipartisan group of state attorneys general and ratepayer advocates, requesting that FERC act to ensure that the savings from lower tax rates are passed through to consumers.

The first Order to Show Cause is directed to thirty-three entities with FERC-jurisdictional stated transmission rates.  The federal corporate tax rate is one component of a stated transmission rate and these rates currently do not reflect the new, lower rate of 21%.  The second Order to Show Cause is directed to fifteen entities with FERC-jurisdictional formula rates that have a fixed line item in their formula rates for a 35% federal corporate income tax rate and which may prevent the use of the new lower tax rate.  FERC found that these stated and formula rates may no longer be just and reasonable and ordered that each of these entities either propose a revision to its rate to reflect the new federal corporate income tax or show cause as to why it should not be required to do so.

FERC’s Notice of Inquiry seeks comment on the effects of the Tax Cuts and Jobs Act on FERC-jurisdictional rates (both electric and gas pipeline rates) and potential ways to adjust FERC-jurisdictional entities’ transmission or transportation revenue requirements so that customers do not overpay for service.  In particular, it asks whether and, if so, how FERC should address the Tax Cuts and Jobs Act’s changes to accumulated deferred income taxes and bonus depreciation.  Comments are due by May 21, 2018.

Separately, FERC has also proposed a rule that would establish a process for determining which FERC-jurisdictional natural gas pipelines may be collecting rates that are too high and would require interstate natural gas pipelines to file a one-time report on the rate effect of the Tax Cuts and Jobs Act.

At the state level, many states, such as Hawaii, Tennessee, Montana, and Massachusetts, as well as the District of Columbia, are taking action to ensure that tax savings are passed through to retail utility customers.

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