Yesterday, the Federal Energy Regulatory Commission (FERC) issued Order No. 872 and implemented the largest overhaul to FERC’s regulations affecting Qualifying Facilities (QFs) in more than a decade. The order itself is 491 pages in length and there remain plenty of details to unpack in its implementation (including future proceedings to come at the FERC
D.C. Circuit Affirms FERC Order No. 841, Ensuring Storage Access to Wholesale Markets
On Friday, July 10, 2020, the U.S. Court of Appeals for the D.C. Circuit (“D.C. Circuit”) upheld the Federal Energy Regulatory Commission’s (“FERC”) Order Nos. 841 and 841A, which established a framework for electric storage resources’ (“ESRs”) participation in wholesale markets. The D.C. Circuit rejected the petitioners’ arguments that FERC exceeded its jurisdictional boundaries and
And Now the Second Circuit Upholds New York’s Nuclear Subsidy Program
Following up on our recent blog post regarding the Seventh Circuit’s decision to uphold Illinois’ nuclear subsidy program, two weeks later on September 27, 2018, the Second Circuit upheld a district court’s decision finding that New York’s nuclear subsidy program was not preempted by the Federal Power Act (Coalition for Competitive Electricity, et al.
Seventh Circuit Upholds Illinois’ ZEC Program and Leaves the Door Open for State Subsidization of Generation
On September 13, 2018, in Electric Power Supply Association v. Star (Case No. 17-2433 and 17-2445), the Seventh Circuit upheld a district court decision finding that Illinois’ zero emissions credit (ZEC) program (i.e., its nuclear subsidy) was not preempted by the Federal Power Act. With this decision, the Seventh Circuit adopted a narrow reading of the Supreme Court’s decision in Hughes v. Talen Energy Marketing, LLC (136 S. Ct. 1288 (2016)) (Hughes) (which struck down a Maryland generation subsidy program that required participation in the PJM capacity auction) and left the door open for states to subsidize generation of their choosing (as long as the state is not directly setting the wholesale market price). Thus, in subsidizing generation, states may achieve indirectly what they are prevented from ordering directly.
Under the Illinois program, certain nuclear generators in Illinois (i.e., Exelon’s Quad Cities and Clinton nuclear facilities) receive ZECs (initially priced at $16.50 per MWh) for each MWh of electric energy they produce. The price of a ZEC will drop if an Illinois-set market-price index (based on the annual average energy prices in the PJM auction and two of the state’s regional energy markets) exceeds $31.40 per MWh. The Illinois program does not require that the nuclear facilities participate in the PJM capacity auction (although it is acknowledged that the nuclear generators will very likely be participating in the PJM capacity auction). Illinois’ nuclear subsidy program was challenged by an association representing electricity producers and several municipalities.
Jurisdiction over the power sector is divided between the federal government and the states. The Federal Energy Regulatory Commission (FERC) has jurisdiction over wholesale power sales in interstate commerce, while the states have jurisdiction over retail power sales and generation facilities. State regulation of whole power sales would be preempted by the Federal Power Act, but the courts are still deciding where exactly the line between federal and state jurisdiction lies.
Continue Reading Seventh Circuit Upholds Illinois’ ZEC Program and Leaves the Door Open for State Subsidization of Generation
How Should Storage be Counted? FERC Is Asked To Decide the Role of Storage in Calculating QF Capacity
Is a co-located storage facility and wind or solar facility considered to be one qualifying facility (“QF”) under the Public Utility Regulatory Policies Act (“PURPA”)? Or multiple QFs? How will the aggregate capacity of such storage plus wind/solar QF(s) be measured? If the storage will only be charged from the co-located
Helping the Hook-Up: FERC’s Generator Interconnection Procedures Reform Seeks to Improve Information Flow, Recognizes Changing Technology and Opens Further Opportunities for Storage
The Federal Energy Regulatory Commission’s (“FERC”) long-awaited Order 845 (Reform of Generator Interconnection Procedures and Agreements) was issued on April 19 after over two years of consideration of the issues. Order 845 is the first grid-wide major reform of FERC’s Generator Interconnection Procedures and Agreements since Order 2003 was issued 15 years ago. Order 845 adopts reforms that are designed to address three goals: (1) improving certainty for interconnection customers, (2) promoting more informed interconnection decisions, and (3) enhancing the interconnection process.
Order 845 revises FERC’s pro forma Large Generator Interconnection Procedures (“LGIP”) and Large Generator Interconnection Agreement (“LGIA”) to recognize the changing landscape of technology and is intended to provide interconnection customers with new opportunities to interconnect their projects faster and more cost-effectively. For example, transmission providers must now allow interconnection customers (at the interconnection customer’s option) to build the needed transmission owner interconnection facilities and stand-alone network upgrades in all cases. Previously, interconnection customers only had this option if the transmission owner could not meet the dates proposed by the interconnection customer. Thus, an interconnection customer has newly granted flexibility in the construction of the transmission owner interconnection facilities and stand-alone network upgrades. If the transmission owner returns a high cost estimate, then the interconnection customer can manage the construction of the transmission owner interconnection facilities. On the other hand, if the transmission owner cost estimate is reasonable, the interconnection customer can choose to leave the construction responsibilities for the transmission owner interconnection facilities and stand-alone network upgrade with the transmission owner. Interconnection customers can now make these decisions based on both timing and cost considerations.Continue Reading Helping the Hook-Up: FERC’s Generator Interconnection Procedures Reform Seeks to Improve Information Flow, Recognizes Changing Technology and Opens Further Opportunities for Storage
Michigan’s PURPA Overhaul – Updating Avoided Cost Calculations And Expanding Standard Offer Contracts
For the first time in almost 30 years, the Michigan Public Service Commission (MPSC) is overhauling its implementation of PURPA. The last time the MPSC evaluated Consumers Energy Company’s (Consumers) avoided cost methodology, the Midcontinent Independent System Operator (MISO) had not been created and the generation market was vastly different than it is today. The
When the Big One Hits, We’ll All Be Thankful for Grid “Resiliency”
Or so Secretary Rick Perry and the DOE would have us believe. Approximately three weeks ago, the DOE made its pitch to FERC and the energy industry that a lack of “resiliency” threatens the U.S. power grid. The responses are in. And the shock and bewilderment that immediately followed the release of the Secretary’s surprising
Transaction Structuring Matters: North Carolina Rejects Third-Party Rooftop Solar Power Purchase Agreements
A North Carolina appeals court has reminded energy developers in the state of the importance of structuring a transaction so as not to trigger the state’s utility franchise laws. For one unfortunate developer, that reminder came in the form of disgorged revenues and potential monetary penalties.
Earlier this month, on September 19, 2017, a North Carolina appeals court (in a 2-1 decision) upheld a decision of the North Carolina Utilities Commission (“NCUC”), which found that an environmental non-profit organization (NC WARN) was impermissibly operating as a North Carolina “public utility” when NC WARN entered into a power purchase agreement to own and operate solar panels on a church’s property and to charge the church based on the amount of electricity generated by the solar panels. (State of North Carolina ex rel. Utilities Commission et al. v. North Carolina Waste Awareness and Reduction Network, Case No. COA16-811). The North Carolina court found that such service by NC WARN infringed on the franchised utility’s electric service territory, contrary to North Carolina’s policy prohibiting retail electric competition and establishing regional monopolies on the sale of electricity. According to the court, NC WARN’s activities (in owning and operating the solar panels on the church’s roof and selling electricity from those solar panels to the church) were in direct competition with the franchised utility’s services as both entities were selling electricity to the franchised utility’s customer.
Continue Reading Transaction Structuring Matters: North Carolina Rejects Third-Party Rooftop Solar Power Purchase Agreements
Another Court Upholds a State Generation Program and Dismisses Challenges to Illinois’ Nuclear Subsidies
On July 14, 2017, and several weeks after the Second Circuit rejected challenges to Connecticut’s renewable energy procurement process and renewable energy credit program (see Allco Fin. Ltd. v. Robert J. Klee (Docket Nos. 16-2946, 16-2949)), the U.S. District Court for the Northern District of Illinois dismissed challenges brought by independent power producers and customers against Illinois’ nuclear subsidy program (Village of Old Mill Creek v. Anthony M. Star, Docket Nos. 17 CV 1163, 17 CV 1164). This Illinois decision further support the authority of states to promote generation of their choosing and represents another narrow reading of the Supreme Court’s recent ruling in Hughes v. Talen Energy (136 S. Ct. 1288 (2016)).
In the state program at issue in Old Mill Creek, Illinois created a “zero emission credit” (ZEC), a tradeable credit (modeled after a renewable energy credit) which represents the environmental attributes of one megawatt hour of energy from specified zero emission facilities (in this case, selected nuclear power plants interconnected with the Midcontinent Independent System Operator (MISO) or PJM Interconnection (PJM)). The effective purpose of this program is to subsidize Exelon’s Clinton and Quad Cities nuclear facilities in Illinois, which Exelon had threatened to shut down if it did not receive government support.
Continue Reading Another Court Upholds a State Generation Program and Dismisses Challenges to Illinois’ Nuclear Subsidies