Update courtesy of Utility Regulatory News #4055: The U.S. Court of Appeals for the District of Columbia Circuit has affirmed a pronouncement by the Federal Energy Regulatory Commission (FERC), which ruling adopted a tariff proposed by a regional transmission organization, PJM Interconnection. The tariff establishes a process by which a PJM member can be recognized as an aggregator of retail customers (ARC) for the purpose of entering the demand response efforts of individual retail customers into the wholesale market. While there was general consensus that some accommodation should be made for incorporating demand response into the market, the Indiana Utility Regulatory Commission (URC) had protested that aspect of the PJM tariff that designates electric distribution companies (EDCs), rather than the ARCs, as the party responsible for determining the eligibility of an end-use customer to place demand response into the market. According to Indiana, FERC’s decision to accept the tariff had been arbitrary and capricious and represented an unwarranted intrusion by federal authorities into rate-making matters that had been reserved for the states. Noting that FERC orders are entitled to due deference absent a showing of clear legal error or an abuse of discretion, the court held that there had been nothing patently improper about FERC’s ruling. The court pointed out that there was ample record evidence demonstrating that EDCs and ARCs were equally capable of handling the eligibility certification function, such that FERC’s agreement with PJM that EDCs should perform that task was neither arbitrary nor capricious. As to the arguments about federal interference with state rate-making authority, the court found that the URC had been unable to cite any particular section of the Federal Power Act that would proscribe the challenged tariff provisions. For the full story, subscribe to URN.

Update courtesy of Utility Regulatory News #4055: Vacating an earlier order in which it had declined to review the proposed merger of two Massachusetts-based holding companies, the Connecticut Public Utilities Regulatory Authority (PURA) has determined that the transaction could have implications for two Connecticut-based operating subsidiaries, thus justifying PURA oversight. At issue is the planned acquisition of NSTAR by Northeast Utilities (NU). The two proponents had contended that PURA approval was not necessary because NSTAR has no operations in Connecticut, and NU’s two Connecticut subsidiaries, Connecticut Light & Power Co. (CL&P) and Yankee Gas Services Co., would remain as separate but wholly owned subsidiaries of NU. They maintained that since there would be no direct change in control of CL&P or Yankee Gas, PURA authorization was not required. Initially, the PURA agreed with that position. However, urged by various parties to reexamine the details of the proposed acquisition, the PURA discovered that the post-merger NU would be subject to a modified form of corporate governance, which clearly could have operational ramifications for CL&P and Yankee Gas. The PURA observed that the “new” NU will be relocating its headquarters to Boston and will have a different president and chief executive officer. Additionally, it noted that NU’s post-acquisition board of directors will be composed quite differently, so as to give equal representation to NSTAR nominees. Agreeing that those changes could significantly impact service policies and protocols applicable to CL&P and Yankee Gas, the PURA declared that its approval of the merger would be needed after all. For the full story, subscribe to URN.

Update courtesy of Utility Regulatory News #4055: In acknowledgement that at some point new power plant emissions strictures are going to be implemented and enforced, the Indiana Utility Regulatory Commission and the Missouri Public Service Commission have laid the groundwork for compliance with those regulations, even though the new rules have been temporarily stayed by a federal appeals court. The two commissions focused on the Cross-State Air Pollution Rule (CSAPR), released by the U.S. Environmental Protection Agency in July. The CSAPR sets forth a schedule of state-specific limits on emissions of nitrogen oxide (NOx) and sulfur dioxide (SO₂) from electric generation facilities, and also provides an aggressive timeline for achieving the required reductions in NOx and SO₂. Although cognizant that the CSAPR was under appeal, the Indiana commission afforded Northern Indiana Public Service Co. special rate-making treatment for the recovery of costs incurred in planning for and initiating certain associated plant improvements and pollution control construction projects. The Missouri commission likewise addressed preliminary strategies for complying with the CSAPR, granting Ameren Missouri authority to engage in a form of emissions trading. Under that plan, Ameren would be permitted to exchange excess SO₂ allowances for a number of NOx allowances sufficient to satisfy the CSAPR requirements. Both commissions reasoned that regardless of any temporary stay of the regulations, it is inevitable that new emissions limits will eventually become mandatory. For the full story, subscribe to URN.

Update courtesy of Utility Regulatory News #4054: Careful to stress that its ruling should not be taken as an indication of its opinion on the merits, the U.S. Court of Appeals for the District of Columbia Circuit has temporarily halted implementation of the U.S. Environmental Protection Agency’s (EPA’s) new Cross-State Air Pollution Rule (CSAPR). The CSAPR, issued in July 2011 but modified by the EPA itself just three months later, was crafted to address complaints by certain states that toxic emissions emanating from power plants in upwind states were wafting over downwind states. The CSAPR applies to 27 states and sets forth an aggressive timeline for decreases in such pollutants as nitrous oxide and sulfur dioxide. Various states, electric utilities, and industrial groups appealed the rule, however, arguing that the compressed schedule for compliance and the extent of the emission reductions required would cause irreparable economic harm and could jeopardize service reliability. The court found that the petitioners had met the evidentiary threshold for a stay, and it agreed with them that the issues surrounding their appeal should be formally designated as “complex.” For the full story, subscribe to URN.

Update courtesy of Utility Regulatory News #4054: The California Public Utilities Commission has approved changes to certain of its renewable energy plans, so as to incorporate recent legislative amendments to the state’s renewable portfolio standard (RPS) program, which amendments increase from 20% to 33% the proportion of the state’s retail electricity sales that must come from renewable resources by the end of 2020. The commission said that its program modifications would offer power sellers further guidance for complying with RPS requirements. One commissioner voiced concern that as the overall percentage of renewables in electric supply portfolios continues to rise, so, too, does the associated cost of electricity. He cautioned that while the goals of the RPS initiative are sound, regulatory authorities must work to prevent related implementation costs from becoming so onerous that commercial and industrial customers feel they have little recourse but to exit their present utility systems or leave the state all together in order to assure their economic survival. To that end, he urged the commission to examine the market opportunities represented by the emerging shale gas industry. Because such activities have contributed to substantial reductions in natural gas prices, he deemed developing shale gas markets to be an important consideration. For the full story, subscribe to URN.

Update courtesy of Utility Regulatory News #4054: Reviewing the methodology used by Rocky Mountain Power for its purchases of energy and capacity from wind-based qualifying small power production facilities (QFs), the Wyoming Public Service Commission has adopted a permanent avoided-cost pricing method for the utility. Referring to it as a “partial displacement differential revenue requirement” approach, the commission said that the new method involves two primary changes from previous avoided-cost rate formulas. First, capacity deferrals for all wind QFs will be premised on a wind proxy and will no longer be limited to 50 megawatts per year. Second, the timing and amount of such deferrals will depend on the need for and the costs of a wind unit or a combined-cycle combustion turbine, as reflected in the utility’s most recent integrated resource plan. In rejecting a counter-proposal for “front-loaded” capacity payments to wind QFs, the commission said that such treatment would be tantamount to rate basing of the facilities, a measure that is reserved solely for utility-owned generating resources and thus would be inapt for wind QFs. According to the commission, use of a wind proxy should produce QF rates sufficient to promote growth in the wind power industry in the state. For the full story, subscribe to URN.

Update courtesy of Utility Regulatory News #4037: In authorizing a natural gas local distribution company (LDC), Columbia Gas of Ohio, to begin following a standard choice offer (SCO) bidding structure rather than continue adhering to its longtime standard service offer (SSO) process, the Ohio Public Utilities Commission has in essence paved the way for the LDC to depart from the natural gas supply market.

Ohio has traditionally deemed an LDC that switches from the SSO auction method to the SCO format to be “exiting” from the natural gas merchant business. Under the SCO approach, every customer eligible to participate in the state’s choice program is assigned to a supplier based on competitive bidding outcomes, but with all SCO customers actually paying the same monthly rate as other SCO customers, regardless of who their individual supplier may be. With an SSO auction, on the other hand, the LDC solicits bids for gas supplies on behalf of its customers, such that the LDC itself remains the customer’s listed supplier. The commission stated that its previous experience in switching to SCO-based auctions had produced favorable pricing results for consumers, and it rejected contentions from the Office of Consumers’ Counsel that residential customers generally receive no quantifiable cost savings or other benefits from SCO procedures.

The commission explained that there was no direct evidence that SCO protocols inhibit market entry by competitive suppliers or depress participation by smaller-volume customers. The commission said that education and awareness are always key to successful solicitations, whether auctions are conducted according to SCO or SSO principles. For the full story, subscribe to URN.

Update courtesy of Utility Regulatory News #4037: Although acknowledging that a corporate outsourcing arrangement between a natural gas local distribution company (LDC) and an independent consultant was of a significant magnitude, the Maryland Public Service Commission nevertheless has determined that negotiation of the contract was within the LDC’s managerial prerogative and that it did not require formal preapproval by the commission.

The LDC, Washington Gas Light Co., had entered into the agreement with Accenture for Accenture to perform a number of administrative tasks, ranging from customer service to human resources to information technology to supply procurement to finance and accounting. The Office of People’s Counsel (OPC) had protested the arrangement, arguing that the breadth of services included rendered it tantamount to turning over the reins of a public utility to an unregulated entity. The OPC expressed special concern about diminutions in service, particularly with respect to residential customers. The OPC further worried about the economic risks that would be borne by ratepayers should Accenture default. The commission, however, observed that Accenture employees would be bound by the same tariffed service requirements as the LDC’s own personnel, and thus Accenture’s assumption of responsibility for the listed functions should not impede the delivery or reliability of service.

The commission also related that its own job is to regulate, not manage, let alone micromanage, utilities within its jurisdiction. According to the commission, the roles assigned to Accenture under the contract are of just the nature that fall solely to utility management, thus making prior approval of the agreement by the commission unnecessary. For the full story, subscribe to URN.

Update courtesy of Utility Regulatory News #4037: Citing last spring’s earthquake in Japan, ongoing economic woes, and faltering Congressional enthusiasm for carbon regulation, the North Carolina Utilities Commission has retreated from its prior showing of strong support for an electric utility’s proposal to further develop and expand its nuclear facilities.

The utility, Duke Energy Carolinas, had announced plans to augment its Lee Nuclear Station in South Carolina. When the project was first proffered, the utility had averred that growing demand, as well as the likelihood of carbon legislation within the foreseeable future, made it prudent to add more nuclear resources to the utility’s generation portfolio. However, given the questions about nuclear safety that had arisen since the Japan earthquake, and noting that Duke Energy has suffered continued load loss as a result of the moribund economy, the commission found that the utility’s present nuclear plans might be too ambitious.

Moreover, the commission pointed out that recent changes in the political composition of Congress made carbon regulation a more distant possibility rather than a nearer-term certainty. Consequently, the commission, while still allowing Duke Energy to proceed with certain aspects of its plan, decided that the project should have a cost cap, which the commission set at $120 million for the four-year period ending December 31, 2013. For the full story, subscribe to URN.

Fortnightly has opened the nominations process for this year’s Top Utility Lawyers honors.

You’ll find the nomination form here …
And the FAQ document here …
And last year’s Top Lawyers article here.

Nominations are invited from executives at utility and energy companies, regulatory agencies, and trade associations serving the U.S. electric and gas industries. Eligible nominees include attorneys at law firms and private practices, as well as in-house counsel. Nominations from law firms, self-nominations, and intra-company nominations are considered on an informational basis only and will not be counted as votes.

Thanks for your nominations!