FERC Initiates Pipeline Rate Investigation Terminates 38 Proceedings

FERC Initiates Pipeline Rate Investigation Terminates 38 Proceedings

The Federal Energy Regulatory Commission (FERC) opened an investigation and ordered a hearing on March 20, to determine whether or not the Stagecoach Pipeline & Storage Company has been “substantially over-recovering its cost of service, resulting in unjust and unreasonable rates.” FERC also discovered that “38 gas companies have complied with the filing requirements of Order 849 and terminated their FERC Form 501-G proceedings without any further action.”

In July 2018, FERC directed every interstate natural gas pipeline company to file Form 501-G, which is “a one-time report that provides a rough estimate of the pipeline’s return on equity before and after passage of the Tax Cuts & Jobs Act and changes to the Commission’s income tax allowance policies in response to rulings by the D.C. Circuit.”

The March 20 order for the investigation follows FERC’s review of the 501-G, as well as other filings by Stagecoach. FERC is concerned that the earnings Stagecoach receives “may exceed its actual cost of service, including a reasonable rate of return on equity.” The hearing and investigation will determine if the existing rates are indeed “just and reasonable in accordance with section 5 of the Natural Gas Act.

FERC has not determined “a just and reasonable return on equity for Stagecoach, and therefore set this issue, among others, for hearing before FERC’s administrative law judges.” Stagecoach was directed by FERC to “file a cost and revenue study for the latest available 12-month period within 75 days of the issuance of its order.”

FERC listed “the 38 companies whose FERC Form 501-G proceedings were terminated without further action:”

  • Cheniere Creole Trail Pipeline
  • Cheyenne Plains Gas Pipeline Company
  • Cimarron River Pipeline
  • Colorado Interstate Gas Company, L.L.C.
  • Crossroads Pipeline Company 
  • Dauphin Island Gathering Partners
  • DBM Pipeline, LLC
  • Destin Pipeline Company, L.L.C.
  • Florida Gas Transmission Company, LLC
  • Florida Southeast Connection, LLC
  • Golden Pass Pipeline LLC
  • Gulf Crossing Pipeline Company LLC
  • Kinder Morgan Illinois Pipeline LLC
  • Kinder Morgan Louisiana Pipeline LLC
  • KO Transmission Company 
  • MarkWest Pioneer, L.L.C.
  • Midcontinent Express Pipeline LLC 
  • Mojave Pipeline Company, L.L.C.
  • National Grid LNG, LLC
  • NGO Transmission, Inc.
  • Pine Needle LNG Company, LLC 
  • Rockies Express Pipeline LLC
  • Rover Pipeline LLC
  • Ruby Pipeline, L.L.C. 
  • Sabal Trail Transmission, LLC
  • Sabine Pipe Line LLC
  • Sea Robin Pipeline Company, LLC
  • Sierrita Gas Pipeline LLC
  • Stingray Pipeline Company, L.L.C.
  • TransColorado Gas Transmission Company LLC
  • Trans-Union Interstate Pipeline, L.P.
  • Transwestern Pipeline Company, LLC
  • UGI Mt. Bethel Pipeline, LLC
  • UGI Sunbury, LLC
  • USG Pipeline Company, LLC
  • Venice Gathering System, L.L.C.
  • West Texas Gas, Inc.
  • WTG Hugoton, LP
FERC Staff Issues Energy Infrastructure Update for January 2019

FERC Staff Issues Energy Infrastructure Update for January 2019

On March 12, the Federal Energy Regulatory Commission (FERC) released their Energy Infrastructure Update for January, related to natural gas and hydropower, and covering the highlights for electric generation and transmissions.

In January, two liquefied natural gas (LNG) pipeline projects were certified, and another four were proposed. There were no updates to any storage or import/export LNG projects. In January 2018, seven LNG pipelines were certified, and there are no other differences in totals for that month last year.

For nonfederal hydropower, one capacity amendment was filed, and nothing new was issued or placed in service.

For new generation in-service electric generation, there was one new natural gas unit, compared to three in 2018. There were no nuclear power or oil units, compared to three in January 2018. There were no hydropower or biomass units, the same as in 2018. Wind power had four new units, compared to 12 last year. There were no updates to geothermal steam power, compared to one in January 2018. There were 18 new solar power units added, compared to 44 in 2018. In total, 23 new units were added, one-third of the 69 units added in January 2018.

There were a number of proposed additions and retirements of units by February 2022. For coal there was one proposed addition and 54 retirements; for natural gas there were 265 proposed additions and 94 retirements; there were 12 proposed additions for nuclear power and nine retirements; for oil, there were 18 proposed additions and 25 retirements; hydropower had 238 proposed additions and 18 retirements; wind power had 538 proposed additions and no retirements; biomass had 53 proposed additions and 27 retirements; geothermal steam had 18 proposed additions; and solar power had 2,394 proposed additions and five retirements.

For electric transmission highlights, “American Electric Power announced plans to increase their four year forward transmission capital expenditure plans by $1.7 billion.” FERC also noted there were no transmission projects completed in January, compared to 30 in January 2018.

FERC’s Energy Infrastructure Update for December 2018

FERC’s Energy Infrastructure Update for December 2018

On February 4, the Federal Energy Regulatory Commission (FERC) released its Energy Infrastructure Update for December 2018, which gives the highlights of changes and expansions in the industry.

For natural gas pipelines, five were placed in service, two were certified, and six more were proposed; there were no updates in December for storage facilities or liquified natural gas (LNG) imports of exports. The total number of pipeline projects placed into service in 2018 was 26, which is lower than the 32 in 2017. There were 48 certified in both 2017 and 2018. No storage facilities were placed into service in 2018, and only one was in 2017. There were four storage facilities certified in 2018, compared to only two in 2017. One LNG export was placed into service, compared to three in 2017. There was one import/export facility certified in 2018, and there were none in 2017.

For hydropower, one capacity amendment was filed in December, and another hydropower facility was licensed. In 2018, two facilities files for 10-MW Exemption and three filed for capacity amendments. Only one license was issued last year, and one capacity amendment was issued. Two licenses were placed in service in 2018.

In December, no new coal facilities were put into service, and only four were put in service in 2018; three were put in service in 2017. Seven new natural gas facilities were put in service, and 103 were opened in 2018; this is compared to the 106 put in service in 2017. No nuclear facilities opened in December, but five opened last year; only one opened in 2017. No oil facilities opened in December either, but 14 opened in 2018, compared to the 37 opened in 2017. No hydropower facilities opened either, but 10 opened in 2018; 14 opened in 2017. Twelve wind power facilities opened in December, 55 opened in 2018; 83 opened in 2017. No biomass facilities opened in December, but 13 opened last year; 27 opened in 2017. Two geothermal steam facilities opened, half of the four that opened last year; only two opened in 2017. There were 15 solar facilities opened in December, and 429 total in 2018; in 2017 750 opened.

There were a number of suggestions for additions and retirements to take place by January 2022. One coal addition was suggested, and 57 retirements. For natural gas, 276 additions were suggested and only 94 retirements. There were 11 additions suggested for nuclear power, and nine retirements. Seventeen oil additions and 24 retirements were suggested. For hydropower, 237 additions and 20 retirements were suggested. There were 530 wind additions and no retirements suggested. There were 53 biomass additions and 29 retirements recommended. For geothermal steam, 19 additions and no retirements were suggested. Solar power saw the largest recommended additions with 2,278 and only five retirements.

In December, 20.2 miles of electric transmission projects of less than 230 volts were completed, compared to 54 miles of in December 2017. That same voltage has 327.3 miles in all of 2018, compared to 329.3 in 2017. For voltages of 345, there were 161.8 miles completed in December, compared to 32.5 miles in December 2017. In all of 2018, 714.5 miles were completed, compared to 363.1 miles in 2017. For 500 voltage, there was none in December, only 69.4 miles in 2018; there were no miles completed in 2018. In total, 182 miles were completed in December, compared to 86.5 miles in December 2017. In all of 2018, a total of 1,111.2 miles completed; 692.4 miles were completed in 2017.

FERC Energy Infrastructure Updates for September 2018

FERC Energy Infrastructure Updates for September 2018

On November 5, the Federal Energy Regulatory Commission (FERC) issued an update on the Energy Infrastructure in the country, related to natural gas and hydropower, and covering the highlight for electric generation and transmissions.

One pipeline project was placed in service in September, while another three were certified, and one other pipeline project was proposed.

A total of 10 pipeline projects have been placed into service between January and September of 2018, whereas the same timeframe in 2017, a total of 18 were put in service. Forty-two pipeline projects have been certified in the first nine months of the year, while last year only 27 were certified.

No storage facilities were put into service in those months, and only a single one was put into service in 2017. Four storage facilities were certified, as opposed to only one in 2017.

One liquefied natural gas (LNG) project was put in service for exports, and none were certified for either imports or exports. Last year there were two LNG projects put in service in that timeframe, but none were certified.

As for electric generation, six different projects were put online in September. Three wind plants went online in September, whereas 32 have been brought online in the first nine months. Nine solar power facilities also went online, part of the 310 that have been put in action since January

Four coal plants have gone online this year, along with 68 natural gas facilities, one nuclear facility, 11 oil facilities, ten water, 11 biomass, two geothermal steam, and two waste heat facilities; none of these went online in September. This is compared to the same time period last year, where no coal plants, 79 natural gas, one nuclear, 18 oil, 12 water, 55 wind, 25 biomass, one geothermal steam, and 433 solar facilities were brought online.

There were a large number of proposed additions and retirements of facilities with the goal of being finished by October 2021. For coal there was one addition and 74 retirements; 291 additions and 112 retirements for natural gas; eight additions and retirements for nuclear power; 18 additions and 22 retirements for oil; 252 additions and 19 retirements for water; 57 additions and 24 retirements for biomass; 22 additions and no retirements for geothermal steam; 2,020 additions and five retirements for solar power; six additions and no retirements for waste heat; and 88 additions labeled under the “other” category, which encompasses  “purchased steam, tires, and miscellaneous technology such as batteries, fuel cells, energy storage, and fly wheel.”

The only update FERC had for hydropower was: “NorthWestern Corporation was issued an order raising the capacity of its Missouri-Madison Project No. 2188 from 303.500 MW to 305.240 MW. The project is located on the Missouri and Madison Rivers in Gallatin, Madison, Lewis and Clark and Cascade Counties, MT.”

There were no transmission activities in September that needed to be highlighted in the report, no projects were completed in that month.

FERC’s Annual Report on Enforcement

FERC’s Annual Report on Enforcement

On November 15, the Federal Energy Regulatory Commission’s (FERC) Office of Enforcement issued their 12th annual report on enforcement. As in previous years, the Office of Enforcement will maintain its focus on the threats “posed by fraud and market manipulation in wholesale energy markets” in order to ensure that this kind of conduct does “not undermine FERC’s goal of ensuring efficient energy services at reasonable cost or erode confidence in those markets to the detriment of consumers and competitors.”

The report highlights FERC’s focus on fraud and market manipulation, conduct that threatens the regulated markets transparency, serious violations of mandatory Reliability Standards, and anticompetitive conduct. The Report follows the trend from previous years, of providing the public with information about “the nature of non-public enforcement activities,” like surveillance inquiries, self-reported violations, and investigations that had been closed without enforcement action in the public.

During the presentation about the Report, FERC was informed that “the Report summarizes audits, market reports, litigation filings, and settlements which were approved by the Commission.” The Office of Enforcement said that the summaries are available to help any companies that are seeking to comply with FERC’s orders and regulations. The individuals and companies whose conduct was reviewed in this report were not identified in order to maintain confidentiality.

During the 2018 Fiscal Year, FERC approved six different settlements between Enforcement and subjects in order to resolve different matters. These settlements totaled about $83 million in civil penalties and $66 million in disgorgement. More information on this was included in the Report.

Some of the highlights of Enforcement Report include:

  • “Investigations staff opened 24 new investigations and closed 23 pending investigations with no action. Additionally, staff negotiated six settlements that resulted in more than $83 million in civil penalties and disgorgement of more than $66 million in unjust profits. These Commission-approved settlements included provisions requiring the subjects to enhance their compliance programs and periodically report back to Enforcement regarding the results of those enhancements.
  • Audits and Accounting staff completed 14 audits of oil pipelines, electric utilities and natural gas companies, resulting in 209 recommendations for corrective action and directing refunds and recoveries totaling more than $185 million. Additionally, DAA advised and acted on 435 proceedings at the Commission covering various accounting matters with cost-of-service rate implications.
  • Market Oversight staff continued its analysis of market fundamentals, and enhanced its capabilities for identifying anticompetitive market outcomes and anomalies that may indicate an exercise of market power. Market Oversight published its 2017 State of the Markets Report and Seasonal Assessment reports. It also held two Electric Quarterly Report user group meetings to discuss potential system improvements and enhancements.
  • Analytics and Surveillance staff reviewed numerous instances of potential misconduct and provided analytical expertise to Investigations staff in approximately 50 investigations. Natural gas surveillance screens produced approximately 7,719 alerts. Each month Analytics and Surveillance staff ran and reviewed 84 electric surveillance screens, hourly and intra-hour sub-screens, and reports for more than 36,000 hubs and pricing nodes within six regional transmission owner and independent system operator regions.”
FERC and the America’s Water Infrastructure Act of 2018

FERC and the America’s Water Infrastructure Act of 2018

On November 14, Federal Energy Regulatory Commission (FERC) announced that it has begun implementing the America’s Water Infrastructure Act of 2018, which was signed into law by President Donald Trump on October 23. According to sections 3003 and 3004 of the Act, FERC must issue new rules to establish an expedited process for issuing and amending licenses for already existing non-powered dams and closed-loop pumped storage projects. FERC says the processes have to seek a final decision from them within two years of the receipt of a completed application.

The Act will help speed up the process of licensing and re-licensing for different hydropower projects. The bill can also expand some hydropower projects from a limit of five megawatts to 40 megawatts.

“There are a lot of hydropower projects coming up on relicensing — about a third of the fleet — so as these projects come up to be relicensed, it’s really important that we reduce the amount of regulatory burden to accelerate a timely relicensing process,” said Justin Ong, a policy associate with Clearpath, a Washington-based organization dedicated to advancing conservative-based clean energy policies.

“Giving our utilities the flexibility to better plan ahead will keep our energy sources safe and save taxpayers money,” Sen. Maria Cantwell of Washington said in a statement about the hydropower provisions.

According to the release in the Federal Register, “the Commission has established three dockets in order to implement the requirements of the Act: RM19-6-000 (Licensing Regulations under America’s Water Infrastructure Act of 2018); AD19-7-000 (Nonpowered Dams List); and AD19-8-000 (Closed-loop Pumped Storage Projects at Abandoned Mines Guidance).”

FERC released a schedule for the implementation of the Act, which plans for a Notice of Proposed Rulemaking for the expedited licensing process in early 2019 and for a final rule to be made in April 2019. They have also planned for a workshop on the closed-loop pump storage projects that are in abandoned mining sites, which is scheduled to be held in February 2019; FERC’s guidance on this should be issued in September 2019.

FERC will also be providing, in April 2019 a draft list of the already existing non-powered dams that have the greatest potential for non-federal development; they will have a finalized list in August 2019. According to the Energy Department, only three percent of the dams in the United States are currently electric; outfitting these already existing dams could help states meet the mandates for clean and renewable energy.

“In [Indiana’s] 8th Congressional District alone, there are six nonpowered dams that could be modernized to produce clean energy,” Rep. Larry Bucshon, R-Ind., said when the House passed the water projects bill in September.

The Act also requires FERC to convene an interagency task force in order to coordinate the different regulatory processes that require authorization for the new processes; the coordination session will be held on December 12. Some of the agencies that will be joining the task force session include the National Oceanic and Atmospheric Administration, the Department of the Interior, the Department of Energy, the U.S. Forest Service, five Indian tribes, and various state agencies.

“Without question, this water infrastructure package is a win for America,” said FERC committee leaders. “It… promotes hydropower development, which creates clean energy jobs here at home and provides consumers with low-cost, emissions-free electricity. We applaud the Senate for passing this vital legislation and urge President Trump to sign it into law soon.”

FERC Directs Guidance on Return on Equity

FERC Directs Guidance on Return on Equity

On November 15, the Federal Energy Regulatory Commission (FERC) issued guidance on how pending cases are going to be affected by a recent order that proposed using a “new approach for calculating the allowed Return on Equity (ROE) to have it be included in the rates of transmission owners” in New England. These new orders were voted on at FERC’s meeting on October 16.

The first order established a paper hearing to two parties involved in ongoing proceedings regarding the Midcontinent Independent System Operator, Inc. (MISO) transmission-owning members to submit briefs concerning FERC’s new approach to determining the base ROE. The order proposes to change the approach for determining ROE by giving four financial models equal weight, as opposed to relying on the discounted cash flow methodology that FERC had been using.

With these new policies, FERC is abandoning its old two-step discounted cash flow methodology that was issued in Opinion No.531, saying they need to stop using that methodology exclusively, and will instead be using the new, broader model to give everything equal weight.

FERC says that by using a wider range of evidence to determine base ROE, their decisions will now be more closely aligned with how investors make their decisions on investments. This order is similar to the Coakley Briefing Order in that it will not make any changes to the new methodology, it instead will help ensure that everyone in these proceedings gets an opportunity to present their arguments and evidence on determining base ROE.

FERC has also essentially raised the burden of proof for a Section 206 proceeding.

During this discussion, FERC Chairman Neil Chatterjee said they plan to consider if additional changes are needed for its transmission incentives and calculation of base ROE. Chatterjee said it was “high time” to see if FERC’s ROE and incentive policies are producing “the level and type of transmission investment the nation needs.”

“FERC needs to stay laser-focused on adopting and enforcing policies that ensure reasonable transmission rates. This especially applies to making sure equity returns included in transmission rates are not excessive,” said Delia Patterson, senior vice president and general counsel at the American Public Power Association.

The second order gave some additional guidance on the effects of the Coakley Briefing Order in regard to any pending proceedings about base ROE that are already set for hearing and settlement procedures. FERC said in this order that in these types of proceedings it expects the parties involved to address the new methodology that is proposed in the Coakley Briefing Order. This includes presenting evidence based on the new methodology how to apply the new methodology to the facts in these proceedings.

According to FERC’s presentation, “The Coakley Briefing Order addressed issues that the D.C. Circuit remanded to the Commission in Emera Maine v. FERC, related to the New England Transmission Owners’ base ROE as provided for in the ISO New England tariff, which the Commission approved in Opinion No. 531.”

FERC’s new policies are based on the hope that by raising transmission owners’ ROEs, they will encourage some desperately needed investments to respond to changes in the transmission business. They need transmissions to be expanded so they can connect new renewable energy and may affect “how particular resources provide services to the grid and the relative competitiveness of various types of generators.”

Climate activists and transmission owners alike can attest to the importance of bringing more green energy onto the power grid, and the new ROE methodology might help make this happened. During the October meeting where this was voted on, Commissioner Cheryl LaFleur suggested that FERC intends to apply this new policy fairly broadly.

“FERC had coordinated its approaches to determining transmission and pipeline ROEs under the one-stepDCF methodology in the past, it is entirely plausible that FERC will synchronize its ROE methodology for pipelines with the Coakley 2018 proposal soon.”