Jurisdiction

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Who will be paying for the impacts of on both distribution and transmission systems of widespread DER penetration, whether it is in the form of DER Aggregations under Order No. 2222, state-jurisdictional net energy metering (NEM), or stand-alone DERs (often PURPA facilities)? And, who will decide who bears such costs – FERC or state commissions?

Readers of this blog may know that Allco can be a thorn in the side of utilities with PURPA purchasing obligations. Allco is often successful in ensuring the rights of QFs under PURPA in district and appellate court cases. Sometimes, however, its positions inadvertantly benefit purchasing utilities, as its challenges have led to rulings that states cannot mandate the price of wholesale power unless acting under PURPA in the (non-ERCOT) continental United States. Indeed, in challenging a Connecticut statute that facially appeared to require utilities to pay a state-set price for wholesale power, Allco lost its case (Allco v. Klee), but its failure only was due to the fact that the court interpreted the Connecticut statute as not mandating the utilities to purchase power at the state-set price. The Second Circuit found that that while the state could “direct utilities to “enter into” contracts with specific bidders, that there was not sufficient evidence that “utilities will be ‘compelled … to accept specific bids.” This ruling would certainly provide grounds for a utility to reject a purchase contract with the price set by the state outside of PURPA’s avoided cost regime.

A recent dismissal of one of Allco’s challenges, although correctly decided by a Vermont district court on purely procedural grounds, should be of considerable interest to Vermont ratepayers, ISO-New England, and FERC in light of the position on the limits on FERC jurisdiction espoused by the Vermont Public Utility Commission (Vermont PUC). Indeed, it would be of immense interest to the industry in the unlikely event that the merits of the Vermont PUC’s stance against FERC jurisdiction, had been the grounds for the dismissal of the case. But, that position – that Vermont’s “Standard Offer Program” is “clearly” outside the jurisdiction of FERC because wholesale sales under the program are made in intrastate commerce – was not addressed on the merits.
Continue Reading The Vermont PUC Takes a Stance Against FERC Jurisdiction Over Wholesale Power Sales From Distributed Resources

Order No. 2222 goes to great length explaining why DER aggregators selling power are public utilities making FERC-jurisdictional sales under FPA Section 205. FERC holds “to the extent that a distributed energy resource aggregator’s transaction in RTO/ISO markets entails the injection of electric energy onto the grid and a sale of that energy for resale in wholesale electric markets, we find that the Commission has jurisdiction over such wholesale sales.” And, “to the extent a distributed energy resource aggregator makes sales of electric energy into RTO/ISO markets, it will be considered a public utility subject to the Commission’s jurisdiction.” This holding is no surprise. FERC has said for decades that sales by DERs at wholesale are FERC-jurisdictional. (The focus of this article is DERs not subject to an exemption under FPA Section 201(f).) A decade ago the Commission stated in CPUC:

We deny SMUD’s request that the Commission clarify that distribution-level facilities and distribution-level feed-in tariffs do not implicate Commission jurisdiction. The FPA grants the Commission exclusive jurisdiction to regulate sales for resale of electric energy and transmission in interstate commerce by public utilities. The Commission’s FPA authority to regulate sales for resale of electric energy and transmission in interstate commerce by public utilities is not dependent on the location of generation or transmission facilities, but rather on the definition of, as particularly relevant here, wholesale sales contained in the FPA.

FERC states it is “only exercising jurisdiction in this final rule over the sales by distributed energy resource aggregators into the RTO/ISO markets. Hence, an individual distributed energy resource’s participation in a distributed energy resource aggregation would not cause that individual resource to become subject to requirements applicable to Commission-jurisdictional public utilities.” But, it never explains why such participants are not subject to FPA Section 205. The mystery presented is why the DER participants in an aggregation that sell FERC-jurisdictional products (i.e., largely products other than demand response) are not subject to FERC jurisdiction and regulation. An explanation would better serve the public.
Continue Reading The Great Order No. 2222 Mystery: Why Aren’t DERs that Participate in Aggregations Subject to Public Utility Requirements?

Although there were tempting things to write about in last few months, client considerations meant not writing about certain “hot” topics such as net metering. The Order No. 841 oral argument at the D.C. Circuit, however, demanded an article. The only challenge to Order No. 841 involved distributed storage and its participation in wholesale markets. The oral argument already has been summarized by many and although a close call on whether the case will be dismissed for lack of injury or upheld on the “affects” clause, a victory for distributed storage is fairly likely. The oral argument proved to be interesting not so much for the future of Order No. 841, but for the future of FERC regulation of wholesale distribution service, a service that it has regulated for decades. It seems no one involved in the oral argument remembered that the D.C. Circuit once stated: “FERC’s assertion of jurisdiction over all wholesale transmissions, regardless of the nature of the facility, is clearly within the scope of its statutory authority.” That is, TAPS v. FERC gave FERC a seal of approval to regulate “wholesale distribution service,” as it is a form of transmission service in interstate commerce. FERC counsel’s decision not to mention this decision was puzzling and whether FERC will return to embracing it, if a DER Aggregation Final Rule is issued, will be interesting to watch.
Continue Reading Order No. 841 Oral Argument Analysis: Has Everyone Forgotten TAPS v. FERC?

It is somewhat common for a utility to determine not to challenge a new rule on power purchases issued by its state commission that is clearly in violation of PURPA or the FPA. This reluctance is understandable and often rests on a political decision: fighting a state commission over an issue may have a greater downside than upside with regard to the continuing relationship between the utility and its regulators. Utilities also sometimes ignore the illegality of new state laws requiring them to purchase energy from certain sources or at certain rates. Developers are less inclined to defer to state legislatures or regulators and often will challenge laws or state commission orders that appear facially unlawful. But, as such challenges can be costly, some preemptable state laws and regulations in some cases go unchallenged. Allowing such laws and regulations to remain in place can lead to unforeseen impacts and expenses for purchasing utilities and developers alike.
Continue Reading Preemptable State Laws and Regulations: The Failure to Challenge Can Have Adverse Impacts

Several months ago FERC issued an Intent Not to Act on New Mexico Public Regulation Commission’s (NMPRC) LEO standard, which (seemingly) was challenged by a QF’s (Great Divide) Petition for Enforcement under PURPA. The NMPRC had adopted a very strict LEO standard, that required that QFs must be ready to interconnect and deliver energy before any legally enforceable obligation may be created to purchase the power at avoided cost rates. Great Divide turned to federal district court for relief, as one might expect. There was an expectation that this case could provide some important guidance as to the current chasm between many purchasing utilities and the QF industry as to at what point of time a LEO should be found to have been established.

Instead, what the industry received was a lengthy order dissecting whether Great Divide had truly brought an implementation claim as opposed to an “as applied” claim. The court (2019 WL 2144829) found that Great Divide brought an “as applied” claim largely because Great Divide was challenging an NMPRC order finding it had no LEO rather than the rule (Rule 570) on which such order was based and/or the NMPRC’s interpretation of that rule.
Continue Reading District Court Order Provides PURPA Guidance – On “As Applied” Versus Implementation Claims

On June 3, 2019, the US. Court of Appeals for the Ninth Circuit issued a Memorandum Opinion (i.e., not for publication), that reinforced the scope of the role of the district and appellate courts in cases brought under the juridical review scheme of PURPA. In the case below, the plaintiff QFs (Plaintiffs) had succeeded in convincing FERC (in a declaratory order ruling) that the Montana Public Service Commission’s (MPSC) legally enforceable obligation (LEO) standard violated PURPA and that the QFs were entitled to declaratory relief. The QF plaintiffs went to district court to obtain confirmation and an order that the LEO standard that the MPSC had applied was illegal. Before the district court could rule, however, the MPSC set a new LEO standard that it placed into effect prospectively. Nonetheless, the district court provided declaratory relief that the prior LEO standard was unlawful. Both the Plaintiffs and MPSC appealed.

The district court had left all interested parties (including with purchasing utility, Northwestern Energy) with no guidance as to what LEO standard should apply to the Plaintiffs and other QFs that were denied contracts under the illegal LEO standard. The QFs wanted guidance, the MPSC wanted the entire matter found moot. The Ninth Circuit agreed with the MPSC, holding that the district court erred in concluding it could reach the merits of Plaintiffs’ request for declaratory relief. The court found that the request for declaratory relief was moot, given that the MPSC regulation under challenge had been changed before the district court issued its ruling.
Continue Reading Ninth Circuit Reinforces the Appropriate Role of Courts in PURPA Implementation Claims

The jurisdictional discussion in Order No. 841-A was lengthy. It could have been very short.

This blog today takes a personal turn as I relate the tale of FERC’s jurisdiction over energy storage resources (ESRs) connecting to a public utility’s distribution system to sell wholesale power. There is only reason that the tale is long…

Yesterday, FERC issued an order on a Petition for Declaratory order from Sunrun, asking that FERC waive the QF certification filing requirements for separately-interconnected, individual residential rooftop solar PV systems and related equipment with maximum net power production of 20 kW or less that Sunrun provides financing for but which the homeowner has an option to purchase, where such 20 kW or less systems may aggregate to over 1 MW within a one-mile radius; and that in a Form No. 556 submitted for a cluster of rooftop PV systems that exceeds 20 kW, the Commission waive the requirement in Item 8a of Form No. 556 to include information regarding the facilities covered by the first requested waiver (i.e., 20 kW or less facilities), even if they are within one mile of the cluster that exceeds 20 kW that is being certified).

Although the Petition garnered minimal opposition, largely in the form of requests to delay action until (anticipated) PURPA reform occurred, FERC chose to act. FERC granted both waivers, agreeing with prior statements that solar generation facilities installed at residences or other relatively small electric consumers such as retail stores, hospitals, or schools do not present a compelling need for QF registration. The burden of such filings was considered to be too great in light of the lack of benefits. The second waiver was granted for similar reasons, as the fact that new client homeowners are added frequently and existing client homeowners may at any time exercise their option to purchase their 20-or-less kW PV systems would create a major burden on entities with business models such as Sunrun.
Continue Reading FERC’s Sunrun Order Should Surprise No One, But May Lead to More Interesting Cases

On April 1, 2019, FERC issued deficiency letters to all the ISOs/RTOs that submitted Order No. 841 (Storage Rule) compliance filings: CAISO, ISO-NE, MISO, NYISO, and PJM. Generally such letters ask the RTOs and ISOs to explain in much greater detail how their tariff provisions permit energy storage resources (ESRs) to participate in their markets. It appears that FERC wants each requirement imposed by Order No. 841 to be discussed in the specific context of ESRs, such that if a tariff provision does not specify that ESRs are covered or subject to a provision, the ISO or RTO must explain why the provision nonetheless applies to ESRs. There are only a handful of Order No. 841 compliance deficiency letter issues relevant to distribution-connected ESRs (i.e., a form of DER). The most interesting question actually arguably is relevant to both distributed ESRs and transmission-connected ESRs, although in one deficiency letter (MISO) the question was asked only as to distributed-ESRs. That question is: How is the ISO/RTO is going to prevent ESRs from paying twice for “charging for later discharge” energy? It will be interesting to see what “prevention methods” FERC finds adequate.

Under Order No. 841, FERC found that an ESR should pay the wholesale market price (the nodal LMP in particular) for charging energy used for later discharge in the wholesale market. FERC was not “persuaded by commenters who argue that developing metering practices that distinguish between wholesale and retail activity is impractically complex.” Even though FERC expects that wholesale and retail loads typically can be distinguished, it did recognize that, particularly for distributed DERs with retail load, the task may be too complex. In Paragraph 321 of Order No. 841, FERC stated: “we require each RTO/ISO to prevent resources using the participation model for electric storage resources from paying twice for the same charging energy. To the extent that the host distribution utility is unable – due to a lack of the necessary metering infrastructure and accounting practices – or unwilling to net out any energy purchases associated with a resource using the participation model for electric storage resources’ wholesale charging activities from the host customer’s retail bill, the RTO/ISO would be prevented from charging that resource using the participation model for electric storage resources electric wholesale rates for the charging energy for which it is already paying retail rates.”

This paragraph gives ISOs and RTOs an “out” if a distributed ESR is located within a distribution utility that will not net out wholesale purchases from the retail bill. In such cases, the RTO/ISO should not bill the ESR at wholesale for its charging energy. Indeed, where load is not distinguished, answering FERC’s deficiency letter question may be quite simple. Several ISOs/RTOs explained on compliance that they would not assess a wholesale charge unless the retail and wholesale loads could be distinguished:

  • MISO Tariff Attachment HHH, Section 6 states “To the extent the [ESR] is paying retail rates for energy associated with wholesale charging activities, the [ESR] shall complete Appendix 3 to this agreement in order for MISO to exclude settlement at wholesale prices for the same charging energy.”
  • The CAISO provided ESRs several options, including one where the CAISO does not charge such ESRs for their charging because the distribution utility already has done so at a retail rate.

The difficult and interesting question is what happens if the ISO/RTO has a method for distinguishing wholesale and retail load. …
Continue Reading Order No. 841 (Storage Final Rule) Deficiency Letters – The Double Charging Issue