On November 29, 2017, Rep. Tim Walberg (R-MI) introduced H.R. 4476, the PURPA Modernization Act of 2017 (the “Act”), which, if enacted, would significantly change the Public Utility Regulatory Policies Act of 1978 (PURPA). Rep. Walberg asserts that the Act would bring PURPA into the 21st century, foster competition, and “stop the gaming of a federal law at the expense of electricity customers to provide more affordable and reliable energy.”1 However, the proposed legislation also could substantially chill development of renewable energy projects in many markets.
The Federal Energy Regulatory Commission’s (FERC) Office of Enforcement (Enforcement) recently released its annual Report on Enforcement for the 2017 fiscal year. The Report takes a similar approach to prior annual reports in how it describes Enforcement’s work and priorities, provides statistics on Enforcement activities, and includes examples of non-public Enforcement matters that were closed without action. The Report reflects a busy year in Enforcement, with staff having opened 27 new investigations, worked on over 50, and litigated several market manipulation cases in federal district courts. This year’s Report also provides increased transparency into Enforcement’s market surveillance and analytics program, through which Enforcement conducts market screens and surveillance inquiries into possible market manipulation in electricity and natural gas markets. Many FERC Commissioners have urged market participants to study the annual report for guidance on how the Commission approaches compliance and enforcement.
For a more detailed summary of the Report and key highlights, please see our client alert, available here.
On November 13, 2017, the U.S. Court of Appeals for the 1st Circuit held in Allco Renewable Energy Ltd. v. Mass. Elec. Co.1 that a Qualifying Facility (QF) does not have a private right of action against a utility company under the Public Utility Regulatory Policies Act of 1978 (PURPA). Although the court’s finding is no surprise, it helps clarify PURPA’s complex enforcement mechanism.
On October 4, 2017, in a decision with significant implications for the energy project finance community, the Federal Energy Regulatory Commission (FERC or the “Commission”) granted a petition for declaratory order filed by the Ad Hoc Renewable Energy Financing Group (“Petitioners”)1 and held that certain non-managing (i.e., passive) “tax equity” interests in public utilities are not “voting securities” for purposes of Section 203 of the Federal Power Act (FPA).2 For that reason, FERC held that (1) the “issuance or transfer of such interests does not constitute a transfer of control with respect to the public utility and does not require” prior FERC authorization under Section 203(a)(1); and (2) “the acquisition of such interests by a holding company qualifies” under Section 203(a)(2) for the blanket authorization in Section 33.1(c)(2)(i) of FERC’s regulations.3 The decision expressly extends to Section 203 FERC’s precedent from the Section 205 context regarding whether certain tax equity interests are voting securities, a welcome outcome for sponsors of, and passive investors in, renewable energy projects.
On October 2, 2017, the Federal Energy Regulatory Commission (the “Commission”) terminated its inquiry into the need for, and potential effects of, modifications to the North American Electric Reliability Corporation (NERC) Critical Infrastructure Protection Reliability Standards (“CIP Standards”) regarding the cybersecurity of control centers used to monitor and control the bulk electric system. That inquiry, initiated, in part, in response to a 2015 cyberattack on Ukraine’s electric grid, sought industry and stakeholder feedback on whether the Commission should modify the CIP Standards to require (i) separation between the Internet and BES cyber systems in control centers performing transmission operator functions and (ii) “application whitelisting”—a computer administration practice used to prevent unauthorized programs from running—for such systems. After reviewing comments on its Notice of Inquiry (NOI), the Commission concluded that the risks and operational challenges that might result from requiring isolation or whitelisting do not outweigh the potential benefits.
Akin Gump oil and gas partner Marc Hammerson has co-written the article “Addressing the Generation Gap,” published by Petroleum Review.
On September 27, 2017, Sens. James M. Inhofe (R-OK) and Martin T. Heinrich (D-NM) introduced S. 1860, the Parity Across Reviews Act (“PARs Act”), which, if enacted, would add a $10 million value threshold to the requirement in Section 203(a)(1)(B) of the Federal Power Act1 for prior Federal Energy Regulatory Commission (FERC or “Commission”) authorization for transactions involving the merger or consolidation of FERC-jurisdictional facilities. The PARs Act also would require FERC to establish a 30-day postclosing notification requirement for such transactions involving facilities worth more than $1 million but less than $10 million. The PARs Act is identical to H.R. 1109, which passed in the House of Representatives on June 12, 2017.2
On September 19, 2017, the Court of Appeals of North Carolina (“Court”) held that companies that install solar panels on customer rooftops are “public utilities” under state law, at least when they retain ownership of the panel and sell the output to the customer. The ruling represents a blow to potential solar providers, and a victory for North Carolina’s franchised utilities, which believe that rooftop solar will undermine their rate base, increasing expenses for other customers.