Comment Period Coming to a Close for EPA's Proposed Rule Creating New Quality Assurance Program for Renewable Identification Numbers
On February 21, 2013, the U.S. Environmental Protection Agency (“EPA”) opened the comment period on a proposed rule that would create a Quality Assurance Program (“QAP”) to combat fraudulently-created Renewable Identification Numbers (“RINs”) – a serial number assigned to a volume of biofuel for the purpose of tracking its production, use and, trade. A public hearing on the proposal was held in Washington, D.C. on March 19, 2013. Interested parties must submit their comments no later than 30 days thereafter, or by April 18, 2013, if they hope to influence the rulemaking process.
The QAP is intended to respond to the growing problem of fraudulently-created RINs, a practice wherein RINs are created and sold without the manufacture of the corresponding volume of biofuel. It aims to establish a set of options, or quality assurance procedures, to verify RIN validity and then also creates an affirmative defense against civil liability for obligated parties who purchase RINs under a QAP program that are later found to be invalid. This proposed change amends the EPA’s original “buyer beware” approach, which imposed strict liability on all obligated parties that transferred or used invalid RINs, no matter the RIN’s origin. The “buyer beware” approach failed to stem the tide of invalid RINs from entering the marketplace, as more than $100 million in fraudulent RINs were identified in the three years after the creation of the standard. Indeed, the “buyer beware” approach led to unintended consequences for smaller, less established biofuels producers, as the increased risk of EPA enforcement actions led obligated parties to favor more established producers.
For more information on the proposed regulatory changes to the Renewable Fuel Standard program, specifically the QAP’s effect on the RIN market, download the recently published white paper by Stoel Rives lawyers Graham Noyes and Sara Bergan.
At today's open meeting, the Federal Energy Regulatory Commission (FERC) adopted a new rule that may be particularly helpful for variable energy resources (wind and solar) that, in the past, have been hit with pricey imbalance penalties, and for the transmission providers who have struggled to integrate those resources. The new rule adopted today requires transmission providers to provide generators with the option of scheduling transmission service on 15-minute intervals, rather than the typical 60-minute interval. With the shorter scheduling interval, generators will be able to better mitigate imbalance penalties, and transmission providers should be able to maintain reserves that more closely match the variable generation that is expected to be online. The bottom line--cost savings!
FERC also issued a Notice of Proposed Rulemaking (NOPR) in which FERC proposes to revise its policies governing the sale of ancillary services at market-based rates. FERC also proposes to require transmission providers outside of organized markets (e.g. WECC) to take into account resource speed and accuracy in determining regulation and frequency response reserve requirements. That consideration may help to establish a stated need for fast-acting resources, such as certain energy storage technologies. The NOPR also suggests other regulatory changes that, in part, aim to provide energy storage technologies with better access to providing ancillary services.
We will soon issue full clients alerts on the results of today's open meeting at FERC. If you would like to receive an electronic copy of our Energy Law Alerts, please follow this link: Sign Up - Stoel Rives Energy Law Alerts
The Federal Energy Regulatory Commission (FERC) recently issued an order rejecting a Common Facilities Agreement (CFA) under section 205 of the Federal Power Act (FPA) and related request for waiver from open access requirements. The CFA between Sky River and Windstar Energy involved a 9-mile, 230 kV generator tie-line in California known as the Wilderness Line. Sky River owns and operates a 77 MW wind facility and has an interest in the Wilderness Line along with several other Qualifying Facilities (QFs).
Windstar is developing a 60 MW wind facility for which it already has a generator interconnection agreement with SoCal Edison and the California ISO. Sky River entered into the CFA with Windstar to license a portion of Sky River’s interest in the Wilderness Line to enable the output from Windstar’s wind facility to reach the point of interconnection with SoCal Edison. In other words, the CFA served to support Windstar’s interconnection with SoCal Edison. Sky River sought approval of the CFA and the open access waivers on the basis that the gen-tie line is not an integrated component of the grid and was designed solely as an interconnection line.
FERC did not accept the CFA or the waiver from the open access transmission tariff (OATT) filing requirement. FERC determined that the CFA was an “attempt to govern transmission service for an unaffiliated third party over the Wilderness Line outside the context of an OATT, with all its attendant rights and obligations.” Further FERC noted that waiver of obligation to file an OATT applies only until such time as a request for transmission service is made and that any transmission over the Wilderness Line for non-owners must be made pursuant to an OATT.
Just a friendly reminder that the deadline to submit comments to the Federal Energy Regulatory Commission (“FERC”) on electric storage technologies is just around the corner. In its Request for Comments Regarding Rates, Accounting and Financial Reporting for New Electric Storage Technologies, FERC’s Office of Energy Policy and Innovation seeks comments on the following issues:
- The use of and rate treatment for storage facilities, including when it is appropriate to classify a storage facility as a transmission asset.
- The mechanisms by which a storage project that is used for multiple purposes may be compensated. Specifically, FERC seeks comment on whether a storage project may be compensated as transmission (e.g. for supporting unbundled transmission service by supplying reactive power) and also be compensated for providing ancillary services or for enhancing the value of merchant generation (e.g. by shifting output from an off-peak period to an on-peak period).
- The possibility of creating a stand-alone contract storage service and whether the storage provider would provide the service of electricity storage, enabling its customers to determine how to use their contracted share of the storage.
- Whether new accounting and reporting requirements should be created in order to facilitate cost of service or other rate policies for new storage technologies, such as chemical batteries and flywheels.
In addition to the issues outlined above and other specific questions posed by FERC in its Request for Comments, FERC invites comments on other related aspects of the storage issues not specifically addressed by FERC in the above-referenced document. Comments are due on Monday, August 9, 2010 and should reference Docket No. AD10-13-000.