Alerts and Updates

Energy, Environment and Resources Update

Issue 13 | May 2016

Energy

FERC—National Labs Discuss Grid Modernization

At its April 21, 2016 meeting, the Federal Energy Regulatory Commission (FERC) invited representatives from the Department of Energy’s (DOE) National Renewable Energy Laboratory, Pacific Northwest National Laboratory, Idaho National Laboratory, Sandia National Laboratories and Lawrence Berkeley National Laboratory to discuss their collective efforts to modernize the nation’s electric grid. The panelists emphasized that a combination of a changing electric supply mix, threats to resiliency and reliability from extreme weather to cyber terrorism, an aging infrastructure and new market opportunities all make grid modernization an important priority, both for DOE and the nation as a whole. To meet these challenges, DOE has undertaken a five-year grid modernization initiative with the goal of developing a grid that is “resilient, reliable, flexible, secure, sustainable, and affordable.”

Among the issues highlighted by the panelists is DOE’s research into advanced computing to allow for more effective integration of renewable generation. With better modeling, wind and solar generation can be balanced alongside conventional power to maintain grid stability. DOE is also involved in several multiyear, multimillion-dollar research and development projects to enhance grid systems operations and control. Working with a variety of private partners, it hopes to develop by 2020 the “architecture, framework, and algorithms for controlling a clean, resilient, and secure power grid.” Energy storage is another area of focus for DOE’s grid modernization efforts, especially given the likely increase in battery and electric power vehicles. Finally, DOE’s representatives noted the importance of security and resilience in any grid modernization project; this includes identifying, detecting and protecting the grid from any threats or hazards, as well as improving response and recovery once incidents occur.

DOE’s presentation was followed by a discussion with the FERC commissioners on potential areas of collaboration between the national laboratories and the Commission. Among the ideas considered were including FERC staff in many of the laboratories’ consulting committees, opportunities for using FERC’s knowledge of electric markets in bringing DOE’s research into practical application and working with FERC to develop test markets for various grid innovations. FERC Chairman Norman C. Bay emphasized that grid modernization was a major priority for the Commission and that he hoped to develop a productive working relationship with DOE’s national laboratories.

FERC Grants Complaints Based on Affiliate Abuse

In a pair of almost-identical complaints brought by a coalition of wholesale power generators led by the Electric Power Supply Association (Complainants), the Federal Energy Regulatory Commission’s (Commission) affiliate abuse rules were recently put to the test. Electric Power Supply Association v. FirstEnergy Solutions Corp., 155 FERC ¶ 61,101 (2016); Electric Power Supply Association v. AEP Generation Resources, Inc., 155 FERC ¶ 61,102 (2016). Each complaint alleged misconduct by two affiliated companies, one a franchised public utility, and the other a market-regulated power sales entity (generator). In each case, the utility and the generator had entered into a power purchase agreement (PPA), under which the utility had agreed to purchase the generators’ output. The PPA provided for the output to be resold by the utility into the PJM Interconnection, LLC energy market, rather than being used to supply the utility’s retail customers.

Complainants contended that this PPA arrangement constituted affiliate abuse. In general, no wholesale sale of electric energy or capacity may be made between a franchised public utility with captive customers and a market-regulated power sales affiliate without first receiving authorization from the Commission. The Commission has waived this rule where the applicant has shown that the utility’s retail customers are not captive customers, i.e., that they may choose among various retail suppliers. The respondents in the two cases had both been granted waivers that allowed the generators to sell power to their affiliate utilities under other supply agreements (agreements not the subject of the instant complaints). Those waivers had been incorporated into the generators’ market-based rate tariffs.

The Commission’s analysis of the complaints turned on whether the utility’s customers are de facto captive. The PPAs under review contained a feature—a distribution rate rider—that was not present in the other supply agreements. Upon review, the Commission determined that the distribution rate rider caused certain costs associated with the PPA transactions to be charged to all retail customers of the utilities, regardless of a retail customer’s retail supplier. This, the Commission found, caused the retail customers to become captive. The Commission held that the prior waivers did not apply to the PPAs under review and, accordingly, granted the complaints. In today’s highly competitive wholesale energy market, where generators have seen fuel price variations and a continued influx of renewable resources, utilities and generators need to be cognizant of the Commission’s affiliate rules when formulating PPAs.

ENVIRONMENTAL 

NYC Council Approves Plastic Bag Fee

By Seth v.d.H. Cooley

Joining the ranks of a growing number of cities and communities across the United States and around the globe, New York City will soon move to limit the use of plastic bags in the retail and grocery sectors. On May 5, 2016, a plastic bag fee bill (Intro. No. 209-A, 2014) was passed by City Council, and it is expected to be signed by Mayor Bill de Blasio soon.

Some jurisdictions have enacted bans, and others have instituted charges or taxes that are remitted to the government. New York City’s bill calls for a fee (five cents per bag) to be retained by retailers, to offset the cost of the bags. It is estimated that more than nine billion plastic bags are provided to customers in New York City each year, and it is anticipated that institution of the fee may reduce that number by 60 percent. Certain exemptions from the fee are built into the law: restaurant takeout/delivery, retail produce and prescription medication sales are all exempt, as are emergency food providers.

New York City’s plastic bag bill is the most recent reflection of how mandated consumer packaging waste reduction is, culturally as well as legally, becoming an accepted sustainability tool. Voluntary waste reduction measures are also being increasingly implemented in the private sector by corporate sustainability leaders such as Unilever.

For More Information

Duane Morris Energy, Environment and Resources Practice

Duane Morris Energy, Environment and Resources Attorneys

Energy, Environment and Resources Services

 Electricity  Natural Resources
 Energy  Nuclear
 Energy Facility Construction  Oil
 Environmental  Renewable Energy and Sustainability
 Natural Gas, LNG and Biogas  Water

Archived Issues

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.