The Federal Energy Regulatory Commission ("FERC") will host its November Open Meeting on Thursday, November 16, 2023. The Sunshine Act Meeting Notice issued November 9, 2023 indicates FERC's intent to act on several noteworthy items, some of which will be of particular interest for renewable and battery storage developers. These include a generator's request for a waiver from FERC's transmission open access requirements relating to its temporary ownership of transmission owner interconnection facilities, as well as an investor and developer's joint request for declaratory relief from regulation under certain provisions of the Federal Power Act ("FPA") and the Public Utilities Holding Company Act of 2005 ("PUHCA") that might otherwise result from ownership of energy storage facilities operating under state programs in New York. We also anticipate FERC will act on an offer of settlement regarding an Amended Full Requirements Power Purchase Agreement between a utility and an agency representing a group of municipal electric utilities that relates to that agency's own decision to divest itself of its generation portfolio several years ago.
In this post, we provide a high-level overview of several of these notable agenda items. At the end of the post, we also highlight FERC's recent release of the 2023 Chairman Reliability Report.
1. Horus Virginia I, LLC, Docket Nos. ER23-2893-000; TS23-8-000
In September 2023, Horus West Virginia I, LLC ("Horus"), owner of an 80 megawatt solar facility in Jefferson County, West Virginia, requested a temporary waiver of FERC's open access transmission tariff ("OATT"), open access same-time information system ("OASIS") and standards of conduct requirements in relation to its temporary ownership of interconnection facilities. Horus supplemented its request in October. Horus explained in its request that it exercised the option to build transmission owner interconnection facilities ("TOIF") under its Interconnection Construction Service Agreement with Potomac Edison ("Potomac") and PJM Interconnection, LLC, and that as soon as practicable after energization, it will transfer ownership of the TOIF to Potomac. Horus noted that absent waiver, as a result of exercising this option and temporarily owning the TOIF, Horus will be temporarily subjected to FERC's OATT, OASIS, and standards of conduct requirements established in Order Nos. 888, 889, 2004, and 717. Horus noted in its petition that it will not qualify for the Order No. 807 blanket exemption from the OATT, OASIS, and standards of conduct requirements as that exemption only applies to entities that own only Customer Interconnection Facilities ("CIF") and Horus will (temporarily) own both CIF and TOIF. Horus argued that FERC should grant the exemption because its temporary ownership of the TOIF will not raise any of the concerns sought to be addressed through requiring adherence to the OATT, OASIS, and standards of conduct requirements, and also for consistency with precedent. We expect FERC will issue an order on this temporary waiver request at the open meeting.
2. The Carlyle Group Inc. and NineDot Energy, LLC, Docket No. EL23-86-000
In July 2023, the Carlyle Group Inc. ("Carlyle") and NineDot Energy, LLC ("NineDot") filed a joint petition for declaratory order ("PDO") seeking exemption from regulatory requirements that might otherwise attach due to their ownership of interests in grid-charged battery energy storage systems ("BESS") that will participate in New York's Value of Distributed Energy Resources program and other Consolidated Edison Company of New York, Inc. ("Con Edison") programs. In the PDO, Carlyle and NineDot explained that these BESS are not eligible for status as qualifying facilities ("QFs") or exempt wholesale generators ("EWGs"), but that their upstream holding companies should receive exemption from requirements under PUHCA and blanket authorizations under section 203(a)(2) of the FPA similar to those afforded to QFs and EWGs. The PDO also asks for a ruling that the revenues associated with the BESS projects' participation in the Con Edison programs should not be counted toward Carlyle's limit on "public-utility company revenues" in 18 CFR § 366.3(c)(1). We expect FERC will act on this petition at the open meeting.
3. Duke Energy Progress, LLC, Docket Nos. ER22-682-000, ER22-682-003, and ER22-682-004
In December 2021, Duke Energy Progress, LLC ("Duke") filed an unexecuted Amended and Restated Full Requirements Power Purchase Agreement ("Amended FRPPA") between it and the North Carolina Eastern Municipal Power Agency ("NCEMPA"). The Amended FRPPA provides for NCEMPA's purchase of electricity from Duke in connection with NCEMPA's decision in 2015 to divest itself of its generation portfolio and take full requirements service from Duke instead. In the filing, Duke explained that the Amended FRPPA contains modifications to how capacity charges for NCEMPA will be developed in the future, arguing that the changes will ensure the FRPPA remains just and reasonable. In January 2022, NCEMPA filed a protest and motion for rejection of portions of the filing or, in the alternative, for suspension of the Amended FRPPA and the commencement of hearing procedures on the grounds that, among other things, Duke's filing violates cost causation principles, would result in unjust, unreasonable, and unduly discriminatory rates for NCEMPA, and does not align with Federal and State decarbonization policies. In February 2022, FERC issued an order accepting the revised FRPPA, suspending it for a nominal period subject to refund, and establishing hearing and settlement judge procedures. In doing so, FERC agreed with Duke that its then-current demand allocation method may fail to appropriately align costs with beneficiaries but did not agree that the record before it supported a finding that the Amended FRPPA would result in just and reasonable rates. The proceeding entered settlement negotiations following the Order, resulting in the filing of an Offer of Settlement and Settlement Agreement in July 2023, which was certified as uncontested in August 2023. We expect FERC will issue an order addressing the settlement offer.
In addition to these matters, the Sunshine Notice indicates FERC will discuss a variety of policy issues, which we believe will relate to customer matters, reliability, security and market operations, assessment of winter reliability, and the Office of Enforcement's 2023 activities.
It is also worth noting that on November 9, 2023, FERC issued the 2023 Chairman Reliability Report, which recaps the actions FERC has taken over the last year to help maintain reliability across several categories, including grid security, extreme weather preparedness, transmission, and the evolving resource mix.
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