At its regular meeting held March 21, 2013, the Federal Energy Regulatory Commission (“FERC” or “Commission”) issued several orders addressing pending electric industry matters. Selected orders acted upon by the Commission are summarized below. (Agenda items not summarized here will be addressed in separate memoranda.)

Item E-4: Southwest Power Pool, Inc., Docket No. ER12-1179-002

In this order, FERC granted in part and denied in part requests for clarification or rehearing of its order dated October 18, 2012, that conditionally accepted for filing, subject to further modifications, a proposal by the Southwest Power Pool, Inc. (“SPP”) to revise its Open Access Transmission Tariff (“Tariff”) to implement an Integrated Marketplace. The Integrated Marketplace includes major market-design components: (1) day-ahead energy and operating reserve market; (2) day-ahead and intra-day Reliability Unit Commitment process; (3) real-time balancing market; (4) price-based co-optimized energy and operating reserve procurement; (5) market-based congestion management process including a market for transmission congestion rights and allocation of auction revenue rights; (6) consolidation of sixteen Balancing Authority Areas in the SPP footprint into a single Balancing Authority Area operated by SPP; (7) multi-day reliability assessment performed prior to the day-ahead market to manage the commitment of long-start resources; and (8) market monitoring and mitigation with an internal market monitor. Rehearing or clarification was sought by various parties on nine issues: limited day-ahead mustoffer obligation; make whole payments; marginal losses; timing of compliance with Order No. 755; market-based congestion management; grandfathered agreements; seams and reserve sharing; implementation of market-to-market protocols with the Midwest Independent Transmission System Operator; and market power mitigation.

FERC required SPP to submit a further compliance filing to address certain issues, including: (a) to state in the Tariff that reporting on market manipulation “includes actions resulting in excessive day-ahead clearing prices”; and (b) proposed Tariff sheets in compliance with Order No. 755 regarding integration of various ramp-rate generators for frequency response, but allowing SPP to delay implementation of those Tariff provisions until one year following market start-up.

FERC denied rehearing/clarification regarding requests (i) for demonstration of deliverability; (ii) for formal Commission action on SPP’s informational report at 15 months of operation of the Integrated Marketplace; (iii) for allocation of day-ahead make whole payments to supply-increasing transactions; (iv) for a finding a transitional refund mechanism was not necessary and that certain entities would not be adversely affected by a lack of a transitional refund mechanism; (v) to shorten the time period (previously established at 180 days from market start-up) for SPP to comply with Order No. 681 regarding offering long-term transmission rights; (vi) for expanded congestion cost hedge as a transitional mechanism; (vii) for allocation of costs associated with grandfathered agreements that are carved-out of the Integrated Marketplace; (viii) that a need for market-to-market coordination has not been demonstrated and that SPP is instead required to negotiate a revised Joint Operating Agreement with MISO that includes a market-to-market mechanism; and (ix) for a finding that SPP’s market power mitigation plan would mitigate a generator that is in a constrained/congested area.

FERC clarified that: (1) local resources committed to address reliability issues will be deemed “SPP-committed” for purposes of eligibility for make whole payments; (2) incremental Auction Revenue Rights are to be allocated to those customers whose transmission service requests result in network additions; (3) its directive in the October order that SPP revise its Tariff to specify that entities that are in any of the other SPP footprints but that choose not to participate in the Integrated Marketplace will not be subject to the Integrated Marketplace’s rules and practices, but that this does not preclude SPP from proposing Tariff revisions requiring an external party that chooses to engage in transactions in the Integrated Marketplace from having to comply with the Integrated Marketplace’s rules and practices applicable to those transactions; and (4) it did not intend for all SPP customers to need to apply for Network Resource Interconnection Service (“NRIS”) and that its reference was to generators seeking SPP-wide NRIS.

Item E-10: Louisiana Public Service Commission and the Council of the City of New Orleans v. Entergy Corporation, Docket Nos. EL00-66-016, EL00-66-017, EL95-33-011

In this order, FERC denied the Louisiana Public Service Commission’s request for rehearing of FERC’s decision to invoke its equitable discretion to deny refunds for the 15-month refund period that followed the Louisiana Commission’s March 1995 complaint opposing Entergy Services, Inc.’s inclusion of interruptible load in certain rate calculations under the Entergy System Agreement. FERC affirmed its finding in its earlier order to exercise its discretion not to order refunds in this proceeding, because it found it appropriate under the circumstances presented to follow its general rule that new cost allocations or rate designs that do not reflect over-recoveries or other special circumstances will run prospectively from the date of the issuance of the order so that refunds will not lie. FERC emphasized that it has broad equitable discretion in determining whether and how to apply remedies, and it has exercised its remedial discretion through the development of a series of distinctions based upon the nature of the underlying matter that help determine whether refunds should be ordered. These distinctions clarify why FERC denied refunds in this matter. For example, FERC has drawn a distinction between rate design and cost allocation cases, for which refunds are generally not ordered, and over-recovery cases, for which refunds are generally ordered. FERC followed that same approach here in deciding to deny refunds, since the issues of inclusion or exclusion of interruptible load in allocating costs is a demand allocation dispute, rather than a case of cost over-recovery. In addition, FERC found the fact that Entergy cannot review and revisit past decisions if it were to order a refund to be an equitable ground for disfavoring refunds in this context. FERC also found that the case law cited by the Louisiana Commission to show a general FERC policy of awarding refunds only demonstrates that there is a general policy to award refunds in cases involving cost over-recovery, which is not the situation presented in this proceeding.

Item E-12: Gregory R. Swecker and Beverly F. Swecker v. Midland Power Cooperative and State of Iowa, Docket No. EL11-39-002

In this order, FERC denied rehearing of its December 15, 2011 order in which it found that the actions of Midland Power Cooperative (“Midland”) in disconnecting service to the Sweckers’ qualifying facility were inconsistent with Midland’s obligations under the Public Utility Regulatory Policies Act of 1978 (“PURPA”). In addition, in this order, FERC stated that in the absence of a settlement of the dispute concerning Midland’s determination of its avoided costs for purchasing the output of the Sweckers’ qualifying facility, it renewed its earlier decision to give notice of its intent not to act. FERC stated that it did not err in its December 15 Order finding that Midland must seek FERC’s approval to disconnect the Sweckers, since contrary to Midland’s argument, the disconnection of retail services is not solely within the Iowa Utilities Board’s jurisdiction. FERC reiterated that since the Sweckers have a qualifying facility with service to that facility pursuant to PURPA, PURPA does not allow service to a qualifying facility to be disconnected unilaterally at the sole discretion of the interconnected purchasing/selling electric utility, like Midland, simply because that electric utility also happened to be selling retail service. FERC held that disconnection in this circumstance may not occur without compliance with FERC’s regulations for authorization to be relieved of the obligation to sell to a qualifying facility. Although FERC acknowledged that there may be situations where failure to pay a bill would justify disconnection, disconnection is not justified until the Sweckers have had a chance to fully litigate the payment dispute with Midland. Thus, upon the conclusion of any federal court proceedings brought by the Sweckers to enforce PURPA, FERC will consider a petition to allow disconnection of the Sweckers from Midland for nonpayment. FERC also denied the Sweckers’ renewed request that FERC find that Midland’s avoided cost must be based on the rate Midland pays its wholesale suppliers. FERC stated that the avoided cost of a full requirements customer is the avoided cost of the full requirements customer’s supplier because it is the supplier that avoids generation when the full requirements customer purchases from a qualifying facility. Since FERC has consistently followed this approach, FERC will not initiate an enforcement proceeding on behalf of the Sweckers to establish an avoided-cost rate methodology inconsistent with this precedent. However, FERC stated that the Sweckers may themselves go to court to enforce PURPA if they wish to do so.