On January 7, 2019, the Federal Energy Regulatory Commission (FERC or “the Commission”) issued an Order approving a settlement between its Office of Enforcement (Enforcement) and Algonquin Gas Transmission, LLC (Algonquin) for violating the terms of the FERC certificate (“Certificate”) for the Algonquin Incremental Market (AIM) Project, which authorized Algonquin to expand its natural gas pipeline system in the northeast.1 While the violation appears to be relatively minor, Algonquin will nevertheless pay a civil penalty of $400,000 and submit semiannual environmental compliance monitoring reports for up to two years. As explained below, certificate compliance historically has not been a focus of FERC’s enforcement efforts, but this case and other recent FERC actions suggest that could be changing.
On January 8, 2019, the Federal Energy Regulatory Commission (FERC) issued a Final Rule amending its regulations governing the maximum civil monetary penalties assessable for violations of statutes, rules and orders within FERC’s jurisdiction. The Final Rule is a result of the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, which requires each federal agency to issue an annual inflation adjustment by January 15 for each civil monetary penalty provided by law within the agency’s jurisdiction. The adjustments in the Final Rule represent an increase of approximately 2.5 percent for each covered maximum penalty. FERC’s adjusted maximum penalty amounts, which will apply at the time of assessment of a civil penalty regardless of the date on which the violation occurred, are set forth here and will become effective upon publication in the Federal Register.
On January 4, 2019, the United States District Court for the District of Maine handed the Federal Energy Regulatory Commission (FERC or “the Commission”) a victory in FERC v. Silkman, a long-running market manipulation enforcement action against Competitive Energy Services (CES) and its managing member, Richard Silkman (the “Respondents”) for allegedly engaging in manipulative conduct in connection with an ISO New England demand response program. FERC and the Respondents each filed cross-motions for summary judgment on the Respondents’ defense that FERC’s claims are time-barred since FERC filed its district court enforcement action more than five years after the conduct occurred. The court resolved the motions in FERC’s favor, finding that the five-year statute of limitations only required FERC to initiate administrative proceedings against respondents within five years, with any subsequent district court enforcement action being subject to a separate limitations period beginning when the penalty is assessed administratively. The court’s decision is significant for the litigants because it allows FERC’s enforcement case to proceed. But, for reasons explained below, its effect beyond this litigation is uncertain and probably limited.
On September 27, 2018, the U.S. Court of Appeals for the Second Circuit (Second Circuit) affirmed a district court’s finding that New York’s Zero Emissions Credit (ZEC) program is not preempted by federal law.1 The Second Circuit’s opinion follows a similar affirmation by the Seventh Circuit regarding Illinois’ ZEC program, and likewise interprets the Supreme Court’s decision in Hughes v. Talen Energy2 to prohibit state generation subsidies only if they are explicitly “tethered” to federal wholesale electricity markets.
On September 24, 2018, the U.S. District Court for the Eastern District of Virginia denied defendants’ motion to dismiss the Federal Energy Regulatory Commission’s (FERC or “the Commission”) complaint in FERC v. Powhatan Energy Fund, LLC, an electricity market manipulation case.1 Defendants had argued that nearly all of FERC’s enforcement action was time-barred since FERC filed its federal district court complaint more than five years after most of the conduct occurred. In rejecting that argument, the court gave FERC an important procedural victory—but also highlighted the difficulty in applying the generic five-year statute of limitations for government claims to enforcement actions brought under the Federal Power Act’s (FPA) unique “de novo review” procedures. Based on this difficulty—and the court’s recognition that defendants’ argument seems more consistent with the FPA statutory scheme and the purpose of the statute of limitations—the court stayed further proceedings so that defendants could consider pursuing an interlocutory appeal in the U.S. Court of Appeals for the Fourth Circuit.
In a surprisingly terse opinion, the U.S. Court of Appeals for the Seventh Circuit (Seventh Circuit) recently affirmed a district court’s finding that Illinois’ Zero Emissions Credit (ZEC) program is not preempted by federal law. The holding serves as a green light for states currently considering or moving forward with similar generation subsidy programs, and foreshadows the likely outcome for an identical challenge to New York’s ZEC program pending before the U.S. Court of Appeals for the Second Circuit (Second Circuit).
The U.S. Senate and House of Representatives recently passed legislation regarding the Federal Energy Regulatory Commission’s (FERC or Commission) review of certain transactions as well as judicial review of rate changes that become effective as a result of a FERC deadlock. First, H.R. 1109, introduced by Reps. Tim Walberg (R-MI) and Debbie Dingell (D-MI) and passed by the House on September 13, 2018, adds a $10 million value threshold for prior FERC authorization for transactions involving the merger or consolidation of FERC-jurisdictional facilities under Section 203(a)(1)(B) of the Federal Power Act (FPA). H.R. 1109 also requires FERC to establish a 30-day post-closing notification requirement for such transactions involving facilities worth more than $1 million. Second, the “Fair Ratepayer Accountability, Transparency, and Efficiency Standards Act” or “Fair RATES Act” (S. 186), introduced by Sen. Edward Markey (D-MA) and passed by the Senate on September 4, 2018, amends Section 205 of the FPA to treat any inaction by FERC that allows a rate change to take effect as an order for the purposes of rehearing and judicial review.
On August 31, 2018, NorthWestern Corporation (NorthWestern) petitioned the Federal Energy Regulatory Commission (FERC or Commission) to revoke the qualifying small power production facility (QF) status of four wind projects planning to integrate batteries at their respective sites, raising new questions for the treatment of energy storage under the Public Utility Regulatory Policies Act of 1978 (PURPA). At issue is whether wind or solar generation facilities and co-located storage should be treated as a single QF—and if so, how to calculate the facility’s aggregate “power production capacity”—or whether co-located storage facilities should be treated as separate QFs.