Those of us who dwell in the economic/regulatory/public policy realm wonder about the origins of atrocious public policy. Where did it come from? Whose awful idea was this?
In the case of the Department of Energy’s Cash for Clunkers proposal, we pretty much know.
Robert Murray, owner of the coal mining company Murray Energy,[1] was a large fundraiser for candidate Donald Trump during the campaign.[2] After the election, Murray had a couple of meetings with President Trump at which the president promised Murray to do whatever he (and FirstEnergy) wanted Trump to do. I’m not making this up.[3]
What Murray wanted was for Rick Perry, the secretary of energy, to declare an emergency on the electric grid so that FirstEnergy would keep buying a lot of coal from Murray’s coal mining company. Again, I’m not making this up.
Now it seems that pesky government lawyers figured out that the supposed basis for such an action, Section 202(c) of the Federal Power Act, couldn’t possibly justify that. “The White House and the Department of Energy are in agreement that the evidence does not warrant the use of this emergency action.”[4]
At this point, a lot of us naively assumed it was safe to go back about our business. We were wrong.
Somebody came up with Plan B (or more like Plan 9) of using an even more obscure federal statute to tell FERC to have a rulemaking to subsidize the coal and nuclear clunkers in the country. So here we are.
FERC on Friday accepted ISO-NE’s updated cost of new entry (CONE) and offer review trigger price (ORTP), effective March 15, 2017 (ER17-795).
The RTO, which is required to recalculate the values every three years, will apply the revisions in Forward Capacity Auction 12 in February 2018 for the June 2021–May 2022 capacity commitment period, as well as in FCAs 13 and 14.
In its Oct. 6 order, the commission agreed with ISO-NE on every point and refuted every protest filed by the New England Power Generators Association (NEPGA). The RTO changed the reference resource on which it bases the CONE and net CONE values from the combined cycle gas turbine chosen in 2014 to a simple cycle generator, citing it as the most economically efficient, with a net CONE value of $8.04/kW-month. The grid operator cited the combined cycle turbine as the next most efficient resource type, with a net CONE of $10/kW-month.
| ISO-NE
NEPGA argued that zonal clearing prices in FCAs 7-9 were at or above $14.99/kW-month, which indicated that the actual CONE is higher than ISO-NE’s proposed value. The commission disagreed, saying “NEPGA has not persuaded us that the proposed net CONE value will result in a starting price that will limit investment and competition in the FCA.”
Regarding NEPGA’s comment that ISO-NE’s consultant on the Tariff revisions, Concentric Energy Advisors, listed a production tax credit value as 15 cents/kWh, rather than 1.5 cents/kWh, the commission noted that “this appears to be a typographical error that is not carried forward into Concentric’s calculation of the actual ORTP value.”
The commission also approved ORTP values of $7.856/kW-month for combined cycles, $6.503/kW-month for combustion turbines, $11.025/kW-month for onshore wind, $0/kW-month for energy efficiency, $1.008/kW-month for large demand response and $7.559/kW-month for mass-market DR. Offers below the technology-specific thresholds are subject to review by the RTO’s Market Monitor for buyer-side market mitigation.
FERC on Friday approved NYISO’s more stringent testing requirements for generators providing black start and system restoration services (ER17-2271). The changes, effective Oct. 8, require that generators participating in the Consolidated Edison local system restoration plan comply with all applicable testing requirements imposed by mandatory reliability standards.
The New York State Reliability Council (NYSRC) last November approved proposed reliability rule 133, which requires that all generators providing restoration services annually test their ability to energize a dead bus without support from the transmission system. NYSRC coordinates its reliability rules with NERC and the Northeast Power Coordinating Council.
New York skyline when half the city was in blackout due to a power failure during Hurricane Sandy in 2012. Midtown, with the Empire State Building, is in the background with the darkened East Village and other parts of downtown in the foreground.
Con Ed in 2016 became a NERC-registered transmission operator and must comply with NERC reliability standard EOP-005-2.3.
The commission’s Oct. 6 order dismissed a protest from NRG Energy that the proposed change would give Con Ed “sole discretion to change black start testing rules at any time, without NYISO stakeholder or commission review, or adequate notice to affected generators.” NYISO had responded to NRG that any changes to its System Restoration Manual are subject to review by stakeholders, posted for review at least 15 days prior to a scheduled committee approval and must be approved by 58% of voting members of the applicable committee.
FERC agreed: “Of note, in this case, NYISO stakeholders have already reviewed and unanimously approved revisions to the System Restoration Manual that include specific black start testing requirements in the Con Edison plan.”
LS Power’s Republic Transmission last week won FERC approval for incentives to construct MISO’s first competitively bid transmission project.
FERC granted Republic’s requests for a return on equity adder of 50 basis points for participating in an RTO for the Duff-Coleman transmission project. The commission also approved the company’s request for recovery of prudently incurred costs if the project is abandoned for reasons beyond Republic’s control and use of a hypothetical 55% debt/45% equity capital structure until commercial operation (EL17-52).
Duff to Coleman planned route in yellow | Republic Transmission
FERC noted that its approval of the adder is subject to the overall 9.8% on ROE cap Republic promised in its project proposal.
FERC backdated the rate approval to May 15. While FERC was without a quorum for six months, Republic begun developing the Duff-Coleman project under the assumption that it would receive all requested incentive rates.
“Republic’s investors entered into the selected developer agreement and agreed to rate concessions with an expectation that the project would qualify for, and receive, the limited incentive rates requested prior to the expenditure of significant funds,” FERC said. The commission also found that MISO’s 2015 Transmission Expansion Plan established that the project will deliver cost benefits by relieving congestion and improving reliability, a requirement of incentivized rates under Order 679, which established incentive-based rates for transmission development over a decade ago.
Duff to Coleman route in red near Ohio River | Republic Transmission
For the remainder of 2017 and most of 2018, Republic will work on project design, environmental permitting and securing rights of way. Construction is slated to begin the fourth quarter of 2018.
Republic said it expects to encounter “construction risks and challenges,” most notably acquiring federal permitting to cross the Ohio River.
FERC on Friday rejected a bid by New England transmission owners to increase their returns on equity to the levels enjoyed before they were lowered by a 2014 commission order that was vacated by an appellate court earlier this year.
The commission said it would address the actual rate in a later remand order (ER15-414, EL11-66).
The D.C. Circuit Court of Appeals ruled in April that the commission had “failed to provide any reasoned basis” for setting the base ROE for a group of New England TOs at 10.57%, adding that the commission failed to meet its burden of proof in declaring the existing 11.14% rate unjust and unreasonable. (See Court Rejects FERC ROE Order for New England.)
National Grid’s Sandy Pond Substation in Ayer, Mass.
Led by Emera Maine, the TOs requested reinstatement of their previously allowed ROEs in June. Other parties included Central Maine Power, Eversource Energy, National Grid and Avangrid subsidiary United Illuminating.
The TOs claimed that the court’s decision “automatically” restored the parties to the rate in effect prior to the vacated Opinion No. 531. Because the commission lacked a quorum at the time of the filing, the TOs asked to begin collecting at the higher rate 60 days after the commission regained a quorum, which it did on Aug. 9, when new Chairman Neil Chatterjee and Commissioner Robert Powelson joined the commission. (See Quorum Restored, FERC Holds First Open Meeting Since January.)
To reduce the administrative burden on the commission, the TOs said they would leave the question of surcharges for the period before the court’s decision until FERC issued a remand order for Emera.
| ISO-NE
The commission disagreed that the D.C. Circuit decision returned TOs to their previous ROEs: “As the Supreme Court explained in Burlington Northern Inc. v. United States, which involved the substantively similar provisions of the Interstate Commerce Act, a ‘federal court[’s] authority to reject … rate orders for whatever reason extends to the orders alone, and not to the rates themselves.’”
The commission concluded that leaving the current ROEs in place would not make the TOs any worse off following a remand order for Emera because, on remand, the commission will exercise its “broad remedial authority” to make whatever ROE the commission determines to be just and reasonable effective for the refund period and the entire period.”
In addition, the order said an immediate return to the previously allowed ROEs would “significantly complicate the process of implementing the commission’s order on remand.”
In 2014, FERC determined that a discounted cash flow (DCF) analysis of a proxy group of companies comparable to TOs produced a zone of reasonableness of 7.04 to 11.74%. The commission also concluded that TOs’ new just and reasonable ROE should be set at the upper midpoint of the zone of reasonableness — i.e., halfway between the midpoint and the top of the zone of reasonableness.
The D.C. Circuit ruled that the commission had not adequately shown that the existing ROE was unjust and unreasonable. The court explained that the Federal Power Act’s statutory “zone of reasonableness creates a broad range of potentially lawful ROEs rather than a single just and reasonable ROE.”
SPP stakeholders last week briefly discussed a recent American Electric Power complaint filed at FERC against the RTO and MISO related to overlapping congestion charges for pseudo-ties.
The Section 206 complaint (EL17-89) alleges that MISO violated its joint operating agreement with SPP by assessing congestion charges to AEP subsidiary Southwestern Electric Power Co. load that is pseudo-tied out of MISO and into SPP.
In its complaint, AEP said the MISO Tariff and Business Practices Manual are unjust and unreasonable in how they assess the congestion charges.
SPP and MISO have negotiated a memorandum of understanding to address the overlapping charges. The RTOs have said the MOU borrows elements from MISO’s coordination efforts with PJM but won’t result in major changes in coordination. (See MISO Interregional Plans with SPP Echo PJM Efforts.)
Staff said Friday it will file a response at FERC but won’t comment until then.
Light M2M Activity Results in $161K in Payments to SPP
In what staff described as a light month for market-to-market activity between SPP and MISO, the latter paid SPP more than $161,000 in August, reversing two months of payments in the opposite direction.
| SPP
Permanent flowgates accounted for most of the congestion, binding for 37 hours and resulting in $148,794 in M2M settlement charges to MISO. Temporary flowgates were binding for 83 hours, 131 hours less than the month before, giving SPP an additional $12,495.
SPP has collected $20.7 million in payments from MISO as of August. The M2M process between the two RTOs began in March 2015.
AEP’s Jacoby Continues as Chair
The committee approved its recommendation for AEP’s Jim Jacoby to serve a full two-year stint as chairman, effective Jan. 1. Jacoby’s term will expire Dec. 31, 2019.
FERC on Friday rejected SPP’s proposed cost allocation for its seams project with Associated Electric Cooperative Inc. (AECI), a Missouri-based collection of six generation and transmission cooperatives.
The commission ruled SPP had not shown that the proposed allocation on a regionwide, load-ratio share basis was “roughly commensurate” with the project’s benefits (ER17-2256, ER17-2257).
The project includes a new 345/161-kV transformer at AECI’s Morgan substation and uprating a related 161-kV line, both near Springfield, Mo. SPP estimated the project, intended to address persistent thermal and voltage problems, would cost $18.75 million. SPP asked FERC to approve a cost-sharing and usage agreement among the RTO, AECI and City Utilities of Springfield — along with Tariff revisions incorporating SPP’s negotiated share of the revenue requirements — in August.
| AECI
SPP General Counsel Paul Suskie said that although the RTO is disappointed, “we’re undeterred and confident we’ll be able to continue to work … with members to develop an appropriate cost allocation for this and future seams projects.”
“The ability to develop necessary and beneficial transmission improvements along our seams remains a high priority for SPP and its members,” Suskie added.
SPP had proposed to regionally fund the projects, as they solved congestion issues on its side of the seam. The RTO agreed to cover 89.1% of the $13.75 million transformer and 97% of the $5 million uprate, with AECI covering the remainder and being responsible for the projects’ construction, operations and maintenance.
The RTO said it planned to allocate its share of the two projects by inserting their revenue requirements into the annual transmission revenue requirement of its highway/byway regional cost allocation methodology. Highway/byway funding considers facilities of 300 kV or above as highway facilities, with their costs allocated on a regionwide, postage-stamp basis; facilities between 100 and 300 kV are categorized as byway facilities, with two-thirds of the costs assigned to the host zone and one-third allocated regionwide.
Projects below 100 kV are allocated entirely to the host zone, while upgrades that operate at two difference levels — such as transformers — are allocated based on the facilities’ lower operating voltage.
Xcel Energy and Westar Energy protested the RTO’s filing.
Xcel opposed the Morgan transformer’s cost allocation, contending that SPP provided insufficient evidence that the proposed cost allocation reflects its benefits. The company said there is no “default rule” that customers in SPP’s 19 transmission zones “should bear the costs of a transmission facility in cases where the owner of the facility is located outside [the footprint].”
| SPP
The company also said SPP failed to provide information on the project’s benefits to transmission owners or loads in the Southeastern Regional Transmission Planning (SERTP) region that would justify a broader cost allocation to AECI’s fellow SERTP members.
FERC sided with Xcel’s argument that SPP had not provided specific information on the transformer project’s regionwide benefits and had not offered “sufficient evidence to demonstrate that these claimed economic benefits accrue throughout the SPP footprint.” The commission said the RTO’s own analysis indicated the project does not provide economic benefits to at least 11 of the 19 transmission zones.
Because SPP failed to support its cost allocation, FERC said it did not need to address Westar’s allegation of a lack of transparency regarding SPP’s negotiations with AECI. The utility had argued all affected parties have a right “to analyze the methodology and rationale by which SPP and AECI negotiated and substantiated the cost allocation ratios proposed in the filings.”
The commission said its rejection does not preclude the RTO from proposing an alternative allocation or making another filing that demonstrates the project provides regional benefits.
SPP stakeholders in July reiterated their support of the project, despite a nearly 50% cost increase due to additional work to upgrade the 161-kV line. (See “Board Reaffirms Seams Project with AECI,” SPP Board of Directors/Members Committee Briefs: July 25, 2017.)
The commission in 2015 rejected SPP’s attempt to create a new class of seams transmission projects, saying its plan to identify projects outside the Order 1000 interregional planning process was “too broadly drawn” (ER15-2705). FERC did allow SPP to make filings on a project-by-project basis for non-Order 1000 facilities. (See FERC Rejects SPP Proposal for Seams Transmission Projects.)
BOSTON — The transmission projects proposed to bring renewable energy to New England all promise fixed-cost contracts, hundreds of jobs, big cuts in CO2 emissions, and millions in consumers savings and tax revenues.
How to choose? That was the question Friday at Raab Associates’ New England Electricity Restructuring Roundtable.
Representatives of five transmission projects proposed in July in response to the Massachusetts solicitation for 9.45 TWh/year of hydro and Class I renewables (wind, solar or energy storage) tried to explain why their projects should be among those selected in January. Contracts awarded under the MA 83D request for proposals are to be submitted in late April. (See Hydro-Québec Dominates Mass. Clean Energy Bids.)
The solicitation is a collaborative effort by the Massachusetts Department of Energy Resources and the state’s distribution utilities: Eversource Energy, National Grid and Unitil. DOER Commissioner Judith Judson attended the session, as did Angela M. O’Connor, chair of the Massachusetts Department of Public Utilities, along with 225 others in person and more streaming the event online.
William Hazelip, National Grid vice president of business development, said only his company’s projects meet the key goals set out in the state’s Global Warming Solutions Act of 2008 and the 2016 Act to Promote Energy Diversity, namely to facilitate the financing of new clean energy resources and to minimize “leakage.”
National Grid partnered with Citizens Energy on the Granite State Power Link, an HVDC transmission line from northern Vermont to New Hampshire to deliver 1,200 MW of new wind power from Canada, and the Northeast Renewable Link, a 23-mile AC line from Rensselaer County, N.Y., to Hinsdale, Mass., to deliver 600 MW of new wind, solar and small hydro into the New England grid.
Proposals | National Grid
“The intent of the Diversity Act is clear: It’s about adding new resources to reduce emissions,” Hazelip said. He said leakage — cutting the state’s emissions while increasing them in neighboring regions — would be pronounced with the proposals that rely mostly on existing hydro resources in Quebec.
“Today, the existing hydro is being exported to New York and Ontario,” Hazelip said. “That reduces the use of thermal units and reduces greenhouse gas emissions. Using the Mass. RFP to contract for those resources will only redirect the energy to Massachusetts and raise emissions in New York and Ontario.”
Chris Huskilson, CEO of Nova Scotia-based Emera, made a pitch for his company’s proposed Atlantic Link project, a 375-mile submarine HVDC transmission line extending from New Brunswick to Plymouth, Mass., near the retiring Pilgrim nuclear plant and close to the Boston load center.
“For us, the primary word is ‘diversity.’ [Atlantic Link] provides diversity of supply and allows you to access wind in Maine, wind in the Maritimes, hydro from Newfoundland and potentially hydro from Quebec.”
The project would become operational in December 2022 and deliver 5.69 TWh of clean energy per year to Massachusetts at a fixed price for 20 years.
At 5.7 TWh, Emera’s project would fulfill only half of the RFP, leaving room for another project that can provide supply diversity, Huskilson said.
Atlantic Link Project | Emera Energy
In addition, Atlantic Link terminating “in the southern part of Massachusetts means that it supports the system in the location that really needs that support,” Huskilson said. “The loss of the Pilgrim nuclear plant is going to be something that the system will have to find ways to recover from and the opportunity to connect with this transmission project directly to that location … is a very good opportunity.”
Certainty is Best
Transmission Developers Inc. partnered with Hydro-Québec on the New England Clean Power Link, which includes a submarine cable under Lake Champlain and an overland section to a proposed converter station in Ludlow, Vt., to connect to the existing Coolidge substation. It would bring 1,000 MW of hydropower, solar and wind from Canada.
“The one word for us as we differentiate our project from other projects is ‘certainty’ — on price, on construction, on support, and the certainty of our ability to execute and execute with support, from the governor’s office on down,” TDI CEO Donald Jessome said.
In addition to having all the permits needed for the project, Jessome said TDI also has reserved slots at the manufacturing facilities for production of the cable, which will take a year to produce.
“We know exactly what our project costs and how long it will take and have mapped out every step,” Jessome said. “We know who’s going to be maintaining our project, [Vermont Electric Power Co.] and ABB, once it’s up and running. And of course, we have very good financial backing through the Blackstone Group.”
Focus and Options
Avangrid subsidiary Central Maine Power partnered with Hydro-Québec on the New England Clean Energy Connect, a 145-mile, 320-kV HVDC line that would carry 1,200 MW of hydro and wind energy from Canada to Maine. The company also teamed with NextEra Energy on the Maine Clean Power Connection, a new 345-kV connection from western Maine to the New England grid with capacity options of 460 to 1,110 MW, allowing varying combinations of wind, solar and storage facilities in eastern Canada and far western Maine.
CEO Sara Burns said CMP “focused on the route, focused on the costs and focused on responding with a strong case that we can deliver. … We focused on giving Massachusetts ratepayers a cafeteria plan to choose from.”
Burns said the company is controlling costs by developing lines mostly on a route that the company controls.
“These cost conversations do not have to be too complicated,” Burns said. “If you’re on the route, it drops the prices. We have the route, have the team, have the support.”
Patrick Smith, vice president for transmission business development at Eversource, said the RFP “did specifically contemplate the use of hydroelectric power as qualifying for participation.”
Eversource is partnered with Hydro-Québec on Northern Pass, a 192-mile line to bring 1,090 MW of hydropower to New England — up to 9.4 TWh/year for 20 years starting in December 2020. Hydro-Québec’s proposals with TDI, Eversource and Avangrid all include two proposals each, one pure hydro and one with a wind energy component.
“Has the cost been compared to the current ISO clearing price for power plus transmission, and are these cost savings below that?” asked Steve Cowell, president of E4TheFuture, which advocates for “clean, efficient energy” for residential customers.
“There are additional benefits beyond the clearing price of the energy,” Jessome responded. “There’s the capacity benefit these projects are going to bring to the marketplace. There’s diversity, there’s the fact that you’re now displacing gas during winter peak periods, so you’ve got a gas price benefit. So, you have to look at [it as] a basket. If you look at it in isolation, it’s not as good a story as it is when you look at it terms of the totality of all these benefits.”
Two California Energy Commissioners are recommending the agency deny a permit to construct NRG Energy’s proposed Puente Power Project natural gas-fired plant in Oxnard, casting into doubt the chances that the facility will be built.
Commissioners Janea Scott and Karen Douglas, who are preparing a proposed decision on the 260-MW project, last week said they intend to issue a notice recommending denial of the project, which is opposed by some on environmental grounds.
“It is clear to us that the project will be inconsistent with several laws, ordinances, regulations or standards and will create significant unmitigable environmental effects,” the commissioners said. This requires study of feasible alternatives, they said, referencing Sept. 29 comments filed by CAISO in which it said a new, expedited request for offer (RFO) process would need to be launched to ensure that current facilities slated for retirement are closed in accordance with environmental laws.
| NRG
About 2,000 MW of generation in the area is due to retire by 2020 because of once-through-cooling regulations, and Puente is intended to replace NRG’s retiring Mandalay and Ormond Beach plants.
After issuing the notice, the commission will take comments and hold a public hearing, and all five commissioners can accept, modify or reject the proposed decision.
“We acknowledge that this statement is unusual but observe that it in no way impairs the rights of the applicant or any other party,” Scott and Douglas said. “All procedural requirements will continue to be honored.” They said they made the decision early in the process because of timing considerations raised by CAISO regarding the RFO.
The CEC is reviewing the construction and operating permit for the facility. The California Public Utilities Commission has already authorized Southern California Edison to enter into a long-term resource adequacy contract with NRG for the plant’s capacity.
NRG told RTO Insider on Friday that it is “very disappointed” with the decision. “We believe the record fully supports the approval of Puente. NRG favors California’s move to a carbon-free electrical grid but remains concerned about local reliability during the transition.”
On Aug. 16, CAISO issued a study on Puente saying it could not be affordably substituted with any alternatives. (See Metcalf Reliability-Must-Run Draws Scrutiny.) But in Sept. 29 comments to the CEC, CAISO led off with a different perspective: “The Moorpark [sub-area] study demonstrates that preferred resource alternatives are technologically feasible to meet local capacity requirements.” Under California policy, “preferred” resources refer to non-emitting resources such as energy efficiency, demand response, distributed energy and storage.
CAISO noted that several parties had raised concerns over the resource portfolios it had examined in its study, which included three different combinations of distributed, reactive and storage resources. “But these concerns do not detract from the central finding that a combination of preferred resources and/or reactive power devices can meet the local capacity requirements for the Moorpark sub-area if procured and implemented in a timely manner.”
In comments filed with CEC on Sept. 29, NRG said the project will not have significant environmental impacts, complies with laws and “will result in many reliability, environmental and economic benefits.” It added that alternative resources examined by CAISO “do not exist in sufficient quantities to satisfy the sub-areas [local capacity requirements] need” and could not be deployed in time.
The City of Oxnard in its comments said the plant, proposed for a dune area near the open ocean, would be in a hazardous location and will lead to more pollution. “Puente remains the wrong project in the wrong location,” the city said.
The next CEC Puente Power Project Committee conference is scheduled for Oct. 11 at the commission’s headquarters in Sacramento.
FERC said last week that a proposed revision to the Federal Power Act that would increase the right to appeal rate changes may have only limited effectiveness.
Danly
General Counsel James Danly told the Senate Energy and Natural Resources Committee’s Energy Subcommittee on Tuesday that S. 186, which would allow parties to seek judicial review of rate changes in the case of commission inaction, “only partially advances the interests of an exceedingly narrow category of aggrieved parties in very rare occasions of commission inaction.”
The bill, sponsored by Sen. Ed Markey (D-Mass.), was prompted by the commission’s 2-2 deadlock in September 2014 over whether it should reject the results of ISO-NE’s eighth Forward Capacity Auction because of unchecked market power. The 2017-18 auction results became “effective by operation of law” (ER14-1409). Under the FPA, rates take effect 60 days after they are filed with FERC, absent a commission order to the contrary. (See FERC Commissioners at Odds over ISO-NE Capacity Auction.)
Catch-22
Under Section 313 of the FPA, parties must seek rehearing of FERC orders before filing an appeal in federal court. But in the case of FCA 8, because the commission never issued an order, challengers were blocked from seeking rehearing or challenging the auction results in court — a catch-22 that the legislation intends to address.
Last October, the D.C. Circuit Court of Appeals rejected an effort by Public Citizen and Connecticut officials to force FERC to rule on the legality of the auction. It agreed with the commission that there can be no rehearing or appellate review when there is no order in a Section 205 proceeding. (See Court Asked to Force FERC Action on Disputed ISO-NE Capacity Auction.)
Danly told the subcommittee he knew of only five other instances in which a utility’s filing has taken effect by operation of law under the FPA or the Natural Gas Act without a commission order.
Under S. 186, the absence of commission action that results in a filing taking effect would be considered an order, allowing rehearings and appeals.
“The proposed legislation offers the possibility for aggrieved parties to pursue further administrative and judicial process when a disputed rate goes into effect even though half of the seated commission would not have accepted the rate in an order,” Danly observed. “Oddly, under the current statutory framework, a party who manages to persuade only one of four commissioners, and loses on a 3-1 vote, may request rehearing at the commission and seek redress at a court of appeals. However, a party that is perhaps more persuasive and manages to convince two of four commissioners, resulting in a 2-2 split — and thus no commission order — is currently barred from seeking rehearing and appellate review.”
Danly noted that any party can file a Section 206 challenge alleging rates are unjust and unreasonable — albeit at increased cost and a higher burden of proof than Section 205 filings.
But he said the legislation may not provide the relief its sponsors intend.
“Should the commission’s inaction be the result, as in the ISO-NE case, of a 2-2 split, a similar result could obtain for a later order on rehearing,” Danly said. “In that case, there would be another 2-2 split and no order on rehearing would issue. In such a case, it would be exceedingly unlikely that a court of appeals would entertain a petition for review.
“Moreover, even if a court of appeals accepted the petition, the court would almost certainly remand the case back to the commission for further adjudication. When sitting in review of agency action, courts of appeals review the evidentiary record compiled below and the reasoning the agency employed — as reflected in its orders — to support its decision based on that record. In the case of a serial 2-2 split, no orders would issue and such a review would be impossible. Remand would appear to be the court’s only option.”
FERC Supports $10M Threshold on Merger Approvals
Danly told the committee FERC supports two other bills that would modify FPA Section 203 to set a minimum value threshold of $10 million for mergers of jurisdictional facilities subject to commission approval (H.R. 1109 and S. 1860).
The change would align this provision of the FPA, which currently has a $50,000 threshold, with other sections of the act that already set $10 million as the trigger, he said.
It would also “ease the regulatory burden on industry without impeding the commission’s regulatory responsibilities,” Danly said. “Transactions below the proposed threshold are unlikely to impose a significant negative impact on competition or the rates of utility customers.”
He said the commission has other tools to address market power concerns that could arise from mergers. “For example, if an entity with market-based rates obtained the opportunity to exercise market power as a result of such transactions, the commission could limit or eliminate its ability to engage in transactions at market-based rates. Additionally, the commission has a range of market power mitigation measures that limit market power within the organized wholesale electric markets. Finally, if the exercise of market power involves market manipulation or violation of a commission rule, regulation, order or tariff provision, the commission can bring an enforcement action.”
