Energy Law Blog

The changes brought about by evolutions in renewable energy technologies, and in some cases aggravated by the impacts of COVID-19, are likely to up-end traditional relationships between different forms of energy and the customers that use them. These changes are significantly impacting not just competitors, but their contract counter-parties, the risks they face, their credit-worthiness and their customers. Renewable generation equipment’s cost continues to decline. Output from solar and wind is available at $0 short-term incremental dispatch cost. Battery research is identifying ways to lengthen the duration of output from that form of storage, and to lower its cost. But…
On September 15, 2020, the Army Corps of Engineers published proposed revisions to a wide range of Nationwide Permits (NWP) issued under the Clean Water Act.  The revisions respond to Executive Order 13783, directing heads of federal agencies to review existing regulations that potentially burden development or use of domestically produced energy resources.  Accordingly, the proposed revisions affect NWPs commonly utilized by utility-scale wind and solar energy projects throughout the country.  The Corps will accept comments on the proposed revisions until November 16, 2020.  Here are highlights from the proposed revisions. NWP 12: Utility Line Activities As issued in 2017,…
The International Civil Aviation Organization (ICAO) has determined that 2019, rather than 2020, will be used as the emissions baseline for the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA).  Here are six carbon financing impacts coming out of ICAO’s decision. Click here for the full article: CORSIA Baseline Emissions Decision Also, see part one and two of this series.…
Pipeline development continues to be highly contested in Federal Energy Regulatory Commission (FERC) certificate proceedings and before trial and appellate courts.  Please see our discussion of six key topics for pipeline developers to be aware of. Click here for the full article: Natural Gas Pipeline Development Also, see part one of this series, “Tax Equity for Public Utilities.”…
On July 16, 2020, the Federal Energy Regulatory Commission (“FERC” or “Commission”) dismissed a petition filed by the New England Ratepayers Association (“NERA”) requesting that the Commission declare that certain sales of energy by net-metered, behind-the-meter generators are exclusively subject to federal jurisdiction.  If granted, the petition would have resulted in the rates for such sales being set at an avoided cost rate in accordance with the Public Utility Regulatory Policies Act of 1978 (“PURPA”) or wholesale market prices under the Federal Power Act (“FPA”), as applicable, rather than the interconnected utility’s retail rate.  The Commission declined to address the…
On July 18, 2019, the Federal Energy Regulatory Commission issued Order No. 860.  The order requires entities with or seeking market-based rate authority (sellers) to submit certain data related to FERC’s market power analyses, including its indicative screens and asset appendices, into a “relational database” maintained by FERC.  The order also requires the submission of information associated with long-term firm sales.  When changes occur to data previously submitted, the relational database must be updated monthly by sellers.  The database will be used to, among other things, develop asset appendices and indicative screens for FERC filings that require a market…
Faced with the onset of another wildfire season, and seeking to avoid both the prospect of utility-caused wildfires and the impacts of utilities’ Public Safety Power Shutoffs (PSPS) to avoid them, the California Public Utilities Commission (CPUC) recently took wide-ranging actions to expand the penetration of microgrids in California and enhance reliability and resilience of electric service.  The decision  partially  implements Senate Bill 1339 (SB 1339) and the CPUC’s related three part rulemaking (Rulemaking 19-09-009).  The CPUC’s decision focuses on behind the meter applications and directs California’s large Investor Owned Utilities (IOUs) to, among other things, develop standardized pre-approved system…
On June 9, 2020, the Federal Energy Regulatory Commission (FERC) issued a regulation precluding construction authorization for pipelines approved pursuant to Sections 3 and 7 of the Natural Gas Act (NGA) until FERC acts on the merits of any timely-filed requests for rehearing or the time for filing a rehearing request has expired.  Parties seeking to construct new interstate pipeline facilities likely will contend FERC’s regulation is overbroad and burdensome.  They may contend that it imposes unnecessary delays on the construction of critical energy infrastructure already approved by FERC and found to be in the public interest.  The regulation precludes…
On May 28, 2020, the IRS proposed long-awaited regulations that address key areas of uncertainty in existing guidance for Internal Revenue Code Section 45Q (45Q) carbon capture and sequestration tax credits. Although some questions remain unanswered, the regulations are a significant step towards reducing regulatory uncertainty and fostering a functional market for 45Q credits. This article will focus on the regulations’ key takeaways for transaction structuring, while also highlighting technical clarifications of significant import for this nascent industry. Recapture One of the most significant questions facing potential participants in the 45Q market was whether and how the IRS would address…
On May 21, 2020, the Federal Energy Regulatory Commission (“FERC” or “Commission”) approved two orders by 3-1 votes revising its methods to estimate electric, natural gas and oil utilities’ returns on equity (“ROE”).[1]  Return on equity is one of the most contentious issues in cost-of-service proceedings before FERC, and FERC’s guidance is unlikely to alter that.  In many important ways, the guidance significantly deviated for electric utilities and pipelines, which raises a number of issues regarding whether such deviations are supported by each industry’s risks. Revised Guidance for Calculating ROEs FERC guidance was provided in two separate orders. …
On May 1, 2020, President Trump issued Executive Order 13920 (“Executive Order”), which prohibited certain transactions involving bulk-power system electric equipment manufactured or supplied by persons owned by, controlled by, or subject to the jurisdiction of a foreign adversary that poses an undue risk of catastrophic effects on the security or resiliency of U.S. critical infrastructure or the national security of the U.S.  The Executive Order poses several potential problems for electric industry participants, particularly renewable generation owners, developers and investors, which will likely cause uncertainty in equipment procurement decisions.  The Executive Order and its potential issues are discussed below.…
The Federal Energy Regulatory Commission (“FERC” or “Commission”) issued on April 16, 2020 two orders[1] largely denying requests for rehearing of its prior decisions that, among other things, subjected to minimum offer price thresholds energy resources participating in PJM Interconnection, L.L.C.’s (“PJM”) capacity market which receive so-called “State Subsidies”.[2]  FERC  reaffirmed that a resource within broadly-defined categories (e.g., renewable resources) receiving State Subsidies must offer capacity in PJM’s forward capacity market at or above an administratively-established price floor (i.e., the minimum offer price rule, or “MOPR”), regardless of such a resource’s actual incremental costs.  Potential and likely…
Members of the Sheppard Mullin Energy, Infrastructure and Project Finance Team wrote an article published in the March 16, 2020 edition of Tax Notes Federal regarding the practical impacts on tax equity financing for renewable energy projects of a private letter ruling (“PLR”) published by the IRS in late 2019.  The PLR addressed normalization and loss disallowance rules applicable to public utilities.  These rules have posed significant challenges to public utilities that want to own renewable energy generation facilities, make efficient use of the tax benefits they provide (via the tax equity market) and recover their costs from ratepayers. In our experience…
Last week the Federal Energy Regulatory Commission (“FERC”) continued to issue orders, notices, and guidance related to the current novel coronavirus pandemic, the health and safety of FERC and energy industry employees, and the continued reliability of the U.S. energy sector.  A summary of FERC’s relevant actions are provided below, including information regarding FERC’s operating status, extensions for filing deadlines and efforts to ease regulatory burdens during this crisis. Essential Services Joined with the National Association of Regulatory Utility Commissioners (“NARUC”) in urging all state authorities to designate utility workers as essential to the nation’s critical infrastructure. FERC and NARUC…
A Washington state federal court recently addressed claims relating to rates that cryptocurrency mining companies pay for electricity in Grant County, Washington. The court rejected all of the miner’s legal claims. The dispute focused on the rate classification that this utility applied to crypto miners as explained below.  Due to various risks, the electric utility assigned the miners to a newly created rate class referred to as “Evolving Industries,” resulting in a higher rate class for the miners.  The miners were I-“rate” with this decision. This decision is just one facet of the interplay between energy companies and blockchain technology,…