This regular publication by DLA Piper lawyers focuses on helping clients navigate the ever-changing business, legal and regulatory landscape.
- FERC proposes five-year “safe harbor” on interconnection for certain types of electrical lines. On March 19, the Federal Energy Regulatory Commission issued a notice of proposed rulemaking that would significantly reduce the regulatory burdens upon energy project developers that construct generator lead lines (so-called gen-tie lines) that are intended to connect their projects to the nation’s electrical grid. Normally, developers that do this are obligated to make any excess capacity available to third parties unless they can justify their own planned future use of the line and thus obtain a waiver from FERC. Seeing this as a regulatory burden, FERC, in its rulemaking, proposes to create a five-year “safe harbor” in which there is a rebuttable presumption that the gen-tie owner has definitive plans to use the excess capacity on the line for its own purposes.
- CFTC votes to relax a consumer-protection measure. The Commodity Futures Trading Commission has indefinitely suspended a customer-protection measure that it had adopted in response to the collapse of MF Global in 2011. The issue relates to margin, which is the good-faith money that market participants put up in order to back their positions in futures markets. When MF Global collapsed, it left $1.6 billion missing from customer accounts. Two years later, the CFTC passed several new customer safeguards. An important one of those safeguards was a rule about how brokers post their own funds, known as residual interest. The rule said brokers must cover gaps in customer margin with their own funds the next day after discovering a shortfall. But after December 2018, brokers would have had to contribute residual interest that same day, not the next day. On March 17, the agency voted to eliminate that change scheduled for 2018, instead maintaining the “day two” deadline unless the commission later decides otherwise.
- High court hears review of EPA rules on power plant emissions. On March 25, the US Supreme Court heard arguments in a case that tests the Environmental Protection Agency’s rule that governs the release of mercury, arsenic and other hazardous pollutants into the air from coal and oil-fired power plants. Lawyers from the coal and power industries say the EPA rule may be the most costly ever adopted under the Clean Air Act. The high court has ordinarily ruled in favor of regulatory agencies that put forward reasonable interpretations of their statutory mandates, but quite recently, the conservative justices have been skeptical of what they see as regulatory overreach. The rule sets emission standards for about 600 electric power plants across the nation and is intended to force about a 90 percent reduction in emissions of mercury and other toxic metals and gases.
- FERC and other electric-power experts urge nation to step up cybersecurity protections. Experts agree that the United States is vulnerable to cyberattacks on its electric grid, which could cripple the nation for a substantial period of time if they are well planned and if enemies can get past the safeguards that are in place. According to an April 1 report by the Oxford Club, LLC, the nation’s utilities are expected to spend $7 billion annually on cybersecurity by 2020 to prevent such attacks. Although the Federal Energy Regulatory Commission, which has jurisdiction over interstate electric utilities, is not mandating that utilities spend money for cybersecurity, it has sounded the alarm. Jon Wellinghoff, a former chairman of FERC, has said that the power grid as presently constituted is “too susceptible to a cascading outage” because of its reliance on a few critical substations. An internal FERC report suggests that if hackers can disable as few as nine substations – if they get the right ones – and sabotage one of the few companies that manufacture electrical transformers, the result could be a total blackout lasting up to 18 months.
- Energy Department study points to continued growth of wind power. On March 12, the US Department of Energy released a study indicating that wind power could provide more than a third of the country’s electricity by 2050 and could also result in a net savings in energy costs paid by consumers. Wind energy use has tripled since 2000, and wind now supplies nearly five percent of the nation’s electric power. The study states that continued growth in the use of wind power could also help the nation’s meet its goals on slowing the pace of client change and dramatically reduce air pollution. The report also emphasized the importance of regulatory and other government policies that support wind power in the coming years as the technology becomes cheaper and more available. According to the report, wind-friendly tax policies, for example, must continue in order to minimize market uncertainty about future returns on investments in wind turbines that generate electricity. The report predicted that by 2030, wind would account for 20 percent of the electricity generation in the US.