As the novel coronavirus (COVID-19) continues to spread, we are helping our clients navigate the potential consequences to energy markets and attendant legal risks. The following are frequently asked questions addressing recent responses by the U.S. Federal Energy Regulatory Commission (FERC), North American Electric Reliability Corporation (NERC) and the organized wholesale markets to the current market conditions.
1. What is the status of FERC operations?
On March 13, 2020, FERC issued a news release outlining a number of steps it is taking in response to the COVID-19 pandemic, including these:
- FERC’s March open meeting scheduled for Thursday, March 19, has been canceled. FERC Commissioners will vote notationally on all matters that were to have been considered at the March meeting.
- FERC staff have been encouraged to telework starting Monday, March 16, until further notice.
- FERC’s headquarters building in Washington, D.C., will be closed to all outside visitors unless cleared for entry by the Office of Executive Director.
At present, FERC’s eFiling system and eLibrary remain operational to make and retrieve electronic filings. Despite FERC’s offices being closed to the public, certain activities, including prefiling meetings and settlement proceedings, have continued via remote access.
On March 19, FERC issued another news release regarding FERC’s response to the COVID-19 pandemic. Chairman Neil Chatterjee also released a statement and held a press conference to discuss FERC’s work and COVID-19 response.
Chairman Chatterjee announced that all technical conferences scheduled through May 2020 will be either conducted via conference call or WebEx or postponed. Chief Administrative Law Judge Carmen Cintron has postponed one hearing scheduled to start on April 7 and will make case-specific calls on other hearings as their start dates approach. Settlement conferences with FERC administrative law judges will continue via teleconference. In addition, Chairman Chatterjee announced that Caroline Wozniak will be FERC’s point of contact for all industry inquiries related to effects of COVID-19 on their FERC-jurisdictional activities. Members of the regulated community can email [email protected] to receive prompt responses to their questions from FERC staff.
FERC has also developed a landing page on its website where regular updates will be posted: https://www.ferc.gov/media/coronavirus.asp.
2. Can FERC grant regulated entities extensions of time to comply with filing deadlines in response to COVID-19?
On March 19, FERC issued notice extending, until May 1, 2020, deadlines for certain required filings that are due between now and that date. Those filings include nonstatutory items required by FERC such as compliance filings and responses to deficiency letters, and rulemaking comments, as well as forms required by FERC. The deadline extension also will apply to filings required by entities’ tariffs or rate schedules. However, there will be no extension of the deadline for FERC Form No. 6, the Annual Report of Oil Pipelines, which is still due on April 20, 2020. FERC explained that it needs the data from Form No. 6 to meet its statutory obligations regarding the oil pipeline rate index.
According to the notice, FERC will be receptive to requests for other deadline extensions and requests for other forms of relief. FERC indicated that entities may seek extensions for other deadlines and may seek waiver of FERC orders, regulations, tariffs and rate schedules, as appropriate, and that FERC will act expeditiously on those other requests. For example, one regulated entity filed a request to waive a tariff requirement for face-to-face meetings, which FERC granted.
Regulated entities have begun making filings in recent days requesting extensions of time to comply with commission-imposed deadlines due to effects of COVID-19. For example, on March 18, Alliance Pipeline L.P., an interstate natural gas pipeline with a settlement agreement obligation to file a rate case under Section 4 of the Natural Gas Act no later than April 1, 2020, requested a 60-day extension due to logistic complications arising from the new remote work requirements. On March 17, Albany Engineering Services, an engineering services provider for the hydroelectric industry, requested a one-year extension of time until March 31, 2021, to install a fish screen due to “unknown impacts related to the current COVID-19 pandemic.” FERC has yet to act on all of these requests, but we expect it to do so in the coming days, which is likely to result in additional extension requests from other regulated entities. Chairman Chatterjee has committed to giving waiver requests the commission’s full attention. As an example, he cited one regulated entity’s request to waive a tariff requirement for face-to-face meetings that was granted on March 19.
Unless otherwise prohibited by law, FERC has discretion to grant extensions of time under “any statute, rule, or order” for “good cause” under 18 C.F.R. § 385.2008, provided the period required for action has not yet expired. Otherwise, the regulation permits FERC to grant a motion for an extension of time after the expiration of a specified time period if the movant demonstrates “extraordinary circumstances” that justify its failure to act in a timely manner.
Certain FERC-regulated entities have several near-term filing obligations — many of which require significant technical data and third-party service providers and experts. These filings are generally covered by FERC’s notice for extension of time to provide more flexibility on deadlines for certain required filings that are due on or before May 1, 2020. However, as noted, FERC has not extended the deadline for responding to FERC Form No. 6 (Annual Report of Oil Pipeline Companies). For example, FERC Form Nos. 1, 1-F, 2 and 2-A, which are annual reports required of the electric transmission utilities and natural gas pipelines, respectively, were scheduled to be due by April 20. Electronic Quarterly Reports for Q1 and FERC Form 561 Interlocking Director reports were each due April 30. In addition, FERC Form 552 reports are due by May 1. In addition, updated market power analyses (triennial reports) for public utilities must be filed in June for the Northeast and Southeast regions. Each of these filings is time-intensive and relies on significant input from multiple internal employees and external service providers (the availability of which is uncertain given current remote working conditions). And looking ahead, submissions by public utilities as part of FERC’s planned “relational database” are required in February 2021. Preparing for this significant and new compliance requirement (both on the part of FERC technical staff building and testing the database and market participants preparing the information for submission) might also be delayed and require extensions.
Entities requesting extensions of time must be mindful of statutory deadlines that FERC is not permitted to waive. For example, the commission may not extend the deadline for rehearing requests under the Federal Power Act, Natural Gas Act or Interstate Commerce Act beyond 30 days from the date of the underlying order. We anticipate that FERC will work to accommodate necessary extensions where possible. The financial crisis of 2008 demonstrated FERC’s willingness to address significant economic and industry-related disruptions where possible. But taking steps now toward receiving any required extensions is critical.
3. Can we expect delays in FERC action on pending matters due to COVID-19?
We expect a certain level of delays on pending matters before FERC due to challenges arising from new teleworking requirements. These delays may be compounded by the recent leadership changes at FERC given that FERC is already operating without its full complement of five commissioners. While the U.S. Senate confirmed James Danly to become a FERC commissioner on March 12, 2020, raising the total FERC commissioner count from three to four, Commissioner Bernard L. McNamee has already announced his departure once a quorum was assured (FERC needs at least three commissioners). There is typically a lag time for new commissioners to gain familiarity with FERC and its processes, but given that Danly had been serving as FERC’s General Counsel prior to his confirmation as Commissioner, this period may be truncated.
There are certain matters that FERC must act on within a specified period of time due to statutory mandates. For example, certain rate and tariff filings and transaction approvals under the Federal Power Act, Natural Gas Act and Interstate Commerce Act will take effect by operation of law in the absence of commission action. We expect FERC to prioritize these orders to prevent more consequential tariff filings from taking effect without commission action. Even before COVID-19 led to work disruptions, some consequential tariff filings took effect because FERC lacked a quorum to decide them.
Chairman Chatterjee remarked during a March 19 press conference that FERC plans to act on rehearing requests within 30 days to the extent possible. FERC is also expected to continue its practice of issuing “tolling orders” under the Federal Power Act, Natural Gas Act and Interstate Commerce Act during the pandemic to provide it with additional time to consider requests for rehearing of its decisions. Otherwise, FERC would need to issue a substantive order on rehearing within 30 days of receipt of a rehearing request. The U.S. Court of Appeals for the District of Columbia Circuit had been scheduled to hear oral arguments on the legality of FERC’s tolling order practice on March 31 in Allegheny Defense Project, et al. v. FERC (Allegheny Defense). However, the arguments were rescheduled to April 28 due to concerns over the spread of COVID-19. Recently, FERC created a new Landowner Rehearings group to further expedite landowner rehearing requests in Natural Gas Act section 7 certificate proceedings, which are at the heart of the Allegheny Defense case.
4. Will FERC’s enforcement priorities change in light of COVID-19?
According to Chairman Chatterjee, FERC plans to exercise its enforcement discretion to take these extenuating circumstances into account as FERC evaluates compliance and enforcement matters. For example, FERC’s Office of Enforcement is postponing audit visits and investigative testimony and will adjust other deadlines as appropriate. Enforcement also will be flexible and will act expeditiously in granting extensions and waivers of compliance filings, forms and electric quarterly reports, as appropriate.
Chairman Chatterjee directed FERC staff, including the Office of Enforcement, to work with companies in these trying times to provide informal guidance and advice that reasonably balances what is happening on the ground with applicable compliance requirements. According to Chairman Chatterjee, “This Commission will not be in the business of second guessing the good-faith actions that companies take to keep the lights on. I’m committed to ensuring that industry can focus on continuity, safety and stability — not regulatory or enforcement matters that are not mission-critical during this crisis.”
5. Has NERC provided any guidance regarding grid reliability amid potential COVID-19 effects?
On March 18, FERC and NERC issued a joint news release announcing steps to ensure that operators of the bulk electric system can focus their resources on keeping people safe and the lights on during the current COVID-19 pandemic. FERC and NERC are using regulatory discretion to advise all registered entities that they will consider the impact of the COVID-19 outbreak in complying with reliability standards. In particular, the release notes:
- The effects of COVID-19 will be considered an acceptable basis for noncompliance with obtaining and maintaining personnel certification, as required in Reliability Standard PER-003-2, for the period of March 1 to December 31, 2020. Registered entities should notify their regional entities and reliability coordinators when using system operator personnel that are not NERC-certified.
- The effects of COVID-19 will be considered an acceptable reason for case-by-case noncompliance with reliability standard requirements involving periodic actions that would have been taken between March 1 and July 31, 2020. Registered entities should notify their regional entities of any periodic actions that will be missed during this period.
- Regional entities will postpone on-site audits, certifications and other on-site activities at least until July 31, 2020. Registered entities should communicate any resource effects associated with remote activities to their regional entities.
FERC and NERC will continue to evaluate the situation to determine whether to extend these dates, with the shared goal to ensure that all registered entities balance concerns for the health and welfare of their workforce while staying focused on the mission of supplying power to consumers across North America.
6. What actions are the regional transmission organizations (RTOs) and independent system operators (ISOs) taking in response to the COVID-19 pandemic?
Each of the RTOs/ISOs has issued releases related to its plans for dealing with the COVID-19 pandemic. These actions generally include hosting stakeholder and other meetings remotely, implementing business continuity plans, taking additional measures to protect operational personnel and restricting visitor access facilities. To date, the RTOs/ISOs have not reported any significant COVID-19 impact on their systems or markets.
Further details about these actions can be found here:
- California Independent System Operator Corporation – http://www.caiso.com/Documents/CaliforniaISOExtendsVisitor-MeetingRestrictions-May1.pdf
- Electric Reliability Council of Texas – http://www.ercot.com/services/comm/mkt_notices/archives/4479
- ISO New England Inc. – http://isonewswire.com/updates/2020/3/11/iso-new-england-implements-actions-in-response-to-the-corona.html
- Midcontinent Independent System Operator, Inc. – https://www.misoenergy.org/stakeholder-engagement/coronavirus-disease-covid19/
- New York Independent System Operator, Inc. – https://www.nyiso.com/covid
- PJM Interconnection, L.L.C. – https://www.pjm.com/about-pjm/newsroom/info-connection.aspx
- Southwest Power Pool, Inc. – https://www.spp.org/newsroom/press-releases/meghan-sever/
In addition, the RTO/ISOs require market participants to submit annual officer certifications annually by April 30. As part of these certifications, market participants attest to compliance with applicable minimum participation criteria. The certification forms for a number of the RTOs/ISOs appear to include a requirement to have the officer’s signature notarized. We have seen positive indications from these RTOs/ISOs that the notary requirement will be excused, but the April 30 deadline remains in place for now.