In the wake of a January 2019 court ruling holding that the states and applicants for water quality certifications cannot indefinitely stall federal time limits for state action by repeatedly withdrawing and resubmitting their applications, federal energy regulators are being asked to rule that states have waived their rights to issue water quality certifications.
On January 25, 2019, the United States Court of Appeals for the District of Columbia Circuit issued an opinion in Hoopa Valley Tribe v. Federal Energy Regulatory Commission. The court’s basic holding addresses language in Section 401 of the Clean Water Act providing that a state’s water quality certification requirements shall be waived with respect to a federally jurisdictional application if the state “fails or refuses to act on a request for certification, within a reasonable period of time (which shall not exceed one year) after receipt of such request.” In its recent ruling, the court strictly construed the one year limit for state action, saying it couldn’t be gamed by repeatedly withdrawing and refiling the application, because that would usurp the federal regulatory scheme.
At issue in Hoopa Valley Tribe are PacifiCorp’s Klamath River hydropower facilities in California and Oregon. PacifiCorp applied for relicensing in 2004, and met all milestones except state water quality certification. A 2010 settlement agreement with a consortium of stakeholders included an agreement between the states and the licensee “to defer the one-year statutory limit for Section 401 approval by annually withdrawing-and-resubmitting the water quality certification requests that serve as a pre-requisite to FERC’s overarching review.” A Native American tribe (which was not a signatory to the settlement agreement) petitioned FERC for a declaratory order that California and Oregon had waived their Section 401 authority and that PacifiCorp had correspondingly failed to diligently prosecute its licensing application for the Project. FERC rejected the tribe’s petition.
On appeal, the DC Circuit said the issue was whether a state waives its Section 401 authority when, pursuant to an agreement between the state and applicant, an applicant repeatedly withdraws-and-resubmits its request for water quality certification over a period of time greater than one year. The court then said determining the effectiveness of this scheme was “an undemanding inquiry” given the statutory language which sets a maximum of one year for states to consider the certification request. The court says that each resubmitted request wasn’t really a “new” request, so FERC acted arbitrarily and capriciously in finding that the states hadn’t failed to act. The opinion offers strong language saying states’ “deliberate and contractual idleness” cannot be used to “usurp FERC’s control over whether and when a federal license will issue.” The court remanded the case to FERC with a directive to proceed with its review of, and licensing determination for, the project.
Now, parties are invoking the Hoopa Valley Tribe ruling in requests to the Commission for orders finding that states have waived their certification rights through the withdrawal-and-resubmission process. On February 28, 2019, Exelon Generation Company, LLC requested a declaratory order that Maryland has waived its authority to issue a water quality certification for Exelon's Conowingo Hydroelectric Project, by failing to timely act on Exelon's request for certification.
Similarly, in February, Dan Dinges, president and CEO of Cabot Oil & Gas Corporation, filed a letter with the Commission, urging prompt approval of the Constitution natural gas pipeline. Dinges described dhe Constitution Pipeline, of which Cabot is one of the developers, as having been blocked by the state of New York, and noted that the DC Circuit had held in abeyance a case relating to the Constitution pipeline’s certification pending action on the Hoopa Valley Tribe case because they raised “common questions of law.”
In his letter, Dinges cites the Commission’s failure to act on the Vineyard Wind capacity auction waiver request, points to New England’s constrained pipelines and fuel security concerns, and argues that “the gamesmanship of the State of New York has never been more suspect” in the wake of the Hoopa Valley Tribe ruling. He urged the Commission to act on the Constitution Pipeline. Subsequently, the Commission posted notice allowing parties to the Constitution Pipeline case an opportunity to comment on the impact of the ruling on that case.
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Showing posts with label DC Circuit. Show all posts
Showing posts with label DC Circuit. Show all posts
FERC 2015 report on demand response, advanced metering
Monday, December 21, 2015
Staff of the Federal Energy Regulatory Commission have released their tenth
annual report on demand response and advanced metering. The FERC staff report, 2015 Assessment of Demand Response and Advanced Metering, provides an update on deployment of demand response and advanced metering.
Section 1252(e)(3) of Energy Policy Act of 2005 (EPAct 2005) directed the FERC to prepare and publish an annual report covering six sets of items:
Based on 2013 data from the Energy Information Administration, the report suggests a 37.6 percent overall penetration rate. It also shows a slightly higher percentage of residential customers have an advanced meter (37.8 percent) than do customers in the commercial (36.1 percent) or industrial (35.2 percent) customer classes.
At the same time, the FERC report shows a 4.9 percent drop in nationwide total potential peak reduction from retail demand response programs between 2012 and 2013, or a drop of 1,408 MW of demand response capability. It also notes legal uncertainty over FERC’s final rule on demand response compensation in organized wholesale electric markets, Order No. 745, given that the U.S. Court of Appeals for the D.C. Circuit vacated and remanded that order in Electric Power Supply Association v. FERC, No. 11-1486 (D.C. Cir. May 23, 2014). FERC's appeal of the EPSA v. FERC decision is now pending before the U.S. Supreme Court, with a final decision expected in early 2016.
Section 1252(e)(3) of Energy Policy Act of 2005 (EPAct 2005) directed the FERC to prepare and publish an annual report covering six sets of items:
- saturation and penetration rate of advanced meters and communications technologies, devices and systems;
- existing demand response programs and time-based rate programs;
- the annual resource contribution of demand resources;
- the potential for demand response as a quantifiable, reliable resource for regional planning purposes;
- steps taken to ensure that, in regional transmission planning and operations, demand resources are provided equitable treatment as a quantifiable, reliable resource relative to the resource obligations of any load - serving entity, transmission provider, or transmitting party; and
- regulatory barriers to improved customer participation in demand response, peak reduction and critical period pricing programs.
Based on 2013 data from the Energy Information Administration, the report suggests a 37.6 percent overall penetration rate. It also shows a slightly higher percentage of residential customers have an advanced meter (37.8 percent) than do customers in the commercial (36.1 percent) or industrial (35.2 percent) customer classes.
At the same time, the FERC report shows a 4.9 percent drop in nationwide total potential peak reduction from retail demand response programs between 2012 and 2013, or a drop of 1,408 MW of demand response capability. It also notes legal uncertainty over FERC’s final rule on demand response compensation in organized wholesale electric markets, Order No. 745, given that the U.S. Court of Appeals for the D.C. Circuit vacated and remanded that order in Electric Power Supply Association v. FERC, No. 11-1486 (D.C. Cir. May 23, 2014). FERC's appeal of the EPSA v. FERC decision is now pending before the U.S. Supreme Court, with a final decision expected in early 2016.
Court overturns FERC Order 745 on demand response
Friday, May 23, 2014
A federal appellate court has overturned the Federal Energy Regulatory Commission's key ruling on demand response -- when electricity customers respond to signals about the scarcity of electricity by temporarily reducing their consumption -- and how it should be compensated.
A smart grid technology, demand response can be a key tool in reducing the cost and environmental impact of society's electricity needs. In most US markets, as the demand for electricity rises (such as during a summer heat wave), grid operators turn to increasingly expensive generating units for new supply to meet that demand. Those "peaking" units -- used primarily to supply energy during times of peak demand -- are thus relatively expensive. In many cases, they also rely on fuels like oil that lead to increased emissions of pollutants and carbon dioxide.
Demand response offers an alternative solution. Customers participating in demand response programs agree to reduce their consumption of power from the grid when so instructed by the grid operator. For example, an office building might commit to temporarily reduce its air handling load, or a factory to reduce or pause its manufacturing operations.
This can provide much the same benefits as generation, by balancing electricity supply and demand, for a lower cost than generation solutions and without causing incremental air emissions. Demand response can also avoid the need to develop new or upgraded transmission lines, because it solves the problem through reduced energy flows. Demand response programs therefore provide benefits to the entire grid, and have been established by both organized wholesale markets and vertically integrated utilities across the country.
While demand response's value to the grid is clear, how to compensate customers for their curtailment remains a key question. In 2011, the Federal Energy Regulatory Commission issued a landmark order known as Order No. 745. In Order No. 745 (116 page PDF), the Commission ruled that organized wholesale energy market operators must pay demand response resources the market price for energy, known as the locational marginal price (LMP), when those resources have the capability to balance supply and demand as an alternative to a generation resource and when dispatch of those resources is cost-effective. Order No. 745 thus represented a major step forward for both demand response providers as well as all customers in markets with demand response program.
But some energy industry associations did not like the rule, and challenged the legality of Order No. 745. The Electric Power Supply Association appealed the Commission's order to a federal court. Meanwhile, other groups supported the rule, including industrial energy consumers and environmental advocates.
Today the D.C. Circuit Court of Appeals agreed with the appellants, holding that the Commission overstepped its jurisdictional bounds by encroaching on the states’ exclusive jurisdiction to regulate the retail market. The court ruling, issued in the case Electric Power Supply Association v. Federal Energy Regulatory Commission (44-page PDF), vacates Order No. 745 and remands it back to the Commission.
If the Commission is to require fair compensation for demand response providers, it will have to find a new way to do so -- and one that would survive renewed judicial challenge. In the meantime, grid operators are faced with a challenge (and an opportunity): whether and how to revise the way they pay customers for demand response. As demand response's value remains beyond debate, the economic and environmental pressures that led to Order No. 745 remain strong, so expect this issue to continue to play out over the next year.
A smart grid technology, demand response can be a key tool in reducing the cost and environmental impact of society's electricity needs. In most US markets, as the demand for electricity rises (such as during a summer heat wave), grid operators turn to increasingly expensive generating units for new supply to meet that demand. Those "peaking" units -- used primarily to supply energy during times of peak demand -- are thus relatively expensive. In many cases, they also rely on fuels like oil that lead to increased emissions of pollutants and carbon dioxide.
Demand response offers an alternative solution. Customers participating in demand response programs agree to reduce their consumption of power from the grid when so instructed by the grid operator. For example, an office building might commit to temporarily reduce its air handling load, or a factory to reduce or pause its manufacturing operations.
This can provide much the same benefits as generation, by balancing electricity supply and demand, for a lower cost than generation solutions and without causing incremental air emissions. Demand response can also avoid the need to develop new or upgraded transmission lines, because it solves the problem through reduced energy flows. Demand response programs therefore provide benefits to the entire grid, and have been established by both organized wholesale markets and vertically integrated utilities across the country.
While demand response's value to the grid is clear, how to compensate customers for their curtailment remains a key question. In 2011, the Federal Energy Regulatory Commission issued a landmark order known as Order No. 745. In Order No. 745 (116 page PDF), the Commission ruled that organized wholesale energy market operators must pay demand response resources the market price for energy, known as the locational marginal price (LMP), when those resources have the capability to balance supply and demand as an alternative to a generation resource and when dispatch of those resources is cost-effective. Order No. 745 thus represented a major step forward for both demand response providers as well as all customers in markets with demand response program.
But some energy industry associations did not like the rule, and challenged the legality of Order No. 745. The Electric Power Supply Association appealed the Commission's order to a federal court. Meanwhile, other groups supported the rule, including industrial energy consumers and environmental advocates.
Today the D.C. Circuit Court of Appeals agreed with the appellants, holding that the Commission overstepped its jurisdictional bounds by encroaching on the states’ exclusive jurisdiction to regulate the retail market. The court ruling, issued in the case Electric Power Supply Association v. Federal Energy Regulatory Commission (44-page PDF), vacates Order No. 745 and remands it back to the Commission.
If the Commission is to require fair compensation for demand response providers, it will have to find a new way to do so -- and one that would survive renewed judicial challenge. In the meantime, grid operators are faced with a challenge (and an opportunity): whether and how to revise the way they pay customers for demand response. As demand response's value remains beyond debate, the economic and environmental pressures that led to Order No. 745 remain strong, so expect this issue to continue to play out over the next year.
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