Author: Iulia Gheorghiu Published: 01/20/2020 Utility Dive
Clean energy advocates have issued numerous warnings that a controversial December decision by federal regulators to raise the floor price for state-subsidized resources bidding in the PJM Interconnection’s capacity market would harm the ability of new clean energy technologies to enter the market. But options to challenge the order from the Federal Energy Regulatory Commission in court are extremely limited.
Stakeholders from the grid operator to confectioner Hershey have filed requests with FERC for a rehearing of the Dec. 19 order, but language in the Federal Power Act shields regulators from litigation when they delay responses to such requests.
A direct example of this comes from a recent response by the 7th U.S. Circuit Court of Appeals on Thursday: The court dismissed a lawsuit from the Illinois Commerce Commission of a FERC Minimum Offer Price Rule (MOPR) order in June 2018, the predecessor of the December 2019 action.
The ICC, among other stakeholders, had formally asked FERC for a rehearing, and the regulators are required to respond to rehearing requests in 30 days. As that can involve going through hundreds of briefs with thousands of pages, regulators are able to delay their response, similar to other federal agencies.
However, it’s become a norm for FERC to delay, or toll, rehearing requests received on its orders, according to several attorneys.
“The law is pretty well settled on these tolling orders,” ICC Commissioner Brien Sheahan told Utility Dive. As FERC had not officially ruled on the rehearing request for its June 2018 order before issuing its December 2019 decision, the ICC suit was dismissed, as several legal experts anticipated.
“It’s generally been the policy of the [Illinois Commerce] Commission to pursue all avenues of relief with respect to matters before the FERC, and that’s included the federal court system,” he added.
“There’s been a lot of grumbling about FERC’s practices of sitting on these rehearing requests,” Ari Peskoe, director of Harvard University’s Electricity Law Initiative, told Utility Dive.
“The purgatory that cases go to is problematic,” Sheahan said. FERC is “trying to balance, on one hand, the need for these projects to move forward and, on the other, litigants’ right to due process,” but the interminable delays from tolling orders creates “no recourse” to disagree, he said.
Challenging the use of tolling orders
Opponents of the PJM MOPR are far from the first ones to complain about tolling. The law is nearly identical under the Federal Power Act and the National Gas Act, causing much consternation across the energy sector when it comes to regulatory rehearings or litigation, according to Avi Zevin, attorney at New York University’s Institute for Policy Integrity.
Natural gas pipeline orders can receive rehearing requests, but FERC delays can block litigation while projects are advancing.
“The way the law is written now, FERC should be … actually acting within 30 days and certainly not approving construction [of a pipeline] while it’s sitting on [rehearing] requests,” Mark Sabath, senior attorney with the Southern Environmental Law Center, told Utility Dive.
The Sourthern Environmental Law Center and Earthjustice compiled the rehearing requests for every FERC order in 2018-2019, showing FERC acted in the 30-day timeframe only 4% of the time, while some stretched on for years.
Commissioner Richard Glick said he believed Congress should take a look at FERC’s use of delays in rehearing requests, at FERC’s January open hearing on Thursday.
The commissioner said the 30-day window could be too small for particular proceedings, but acknowledged that delays lasting more than a year are not part of the original intent of tolling actions.
Rehearing requests happen often in FERC, according to Southern Environmental Law Center and Earthjustice.
If Congress does not change the law, FERC’s tolling practice could be questioned in court. Currently, the U.S. Court of Appeals for the District of Columbia Circuit is hearing a case en banc regarding FERC tolling under the National Gas Act.
The case is notable because the full panel of DC Circuit judges will be participating, as with en banc procedures.
“The DC Circuit rarely hears cases en banc. It suggests to me … that there’s a lot of judges who are interested in rethinking this issue” on tolling, Peskoe said.
The en banc proceeding, Allegheny Defense Project vs. FERC, “suggests maybe the DC Court is going to reconsider their approach,” Sheahan said.
Since the tolling language in the National Gas Act is similar to the Federal Power Act, many FERC stakeholders are following the case as an opportunity to restrict delays in FERC’s responses, which essentially block litigation of regulatory orders.
FERC is expected to file a response with the DC Circuit on the Allegheny Defense Project suit by Feb. 10. The expedited proceeding will have oral arguments take place at the end of March.
“These cases, they drag on for a very long time in large part because of this tolling issue, and sometimes they just become moot … by the time the court can actually [make] a decision,” Zevin said.
In one extreme case, FERC had approved a resource carve-out option for ISO-New England, which received rehearing requests from stakeholders. FERC eventually denied the rehearing and legal deliberations continued, but by the time a court ruled that FERC was within its right to order the carve-out, the federal regulators had already issued a different policy.
PJM’s anticipated capacity market response
While litigation of the December order is uncertain, PJM received 90 days from FERC to propose an implementation of the MOPR.
A tolling of the MOPR rehearing requests means PJM capacity auctions could proceed before an opportunity is created to litigate the order. In fact, it’s already happened in FERC’s jurisdiction.
Stakeholders are still waiting for a rehearing response on FERC’s order for ISO-NE’s two-part capacity market, and the grid operator already held its first forward capacity market auction applying the contested order in 2019.
Therefore, PJM’s response to FERC’s December MOPR ruling, due March 18, is critical to states that are considering other options based on an opposition to the MOPR.
The Illinois governor and the state legislature will have to decide how to react, Sheahan said. He has not discussed this with the governor, but anticipates the issue will gain traction in the upcoming spring session.
“We have a governor who has made some very ambitious claims on climate, which he will not be able to achieve without nuclear power” as a competitive resource, Sheahan said.
States don’t know yet how much time they have to figure out a potential exit from the RTO, Peskoe said.
The grid operator will propose to FERC the timing for its next two auctions, but more time would suit stakeholders like states, who have proposed holding off until mid-2021, he added.
However, generators in the PJM region want the capacity auction to happen as soon as possible. The 2019 auction still needs to occur and the delays will affect the schedules of the next five auctions, Paul Scheidecker, lead senior engineer for PJM’s capacity market operations, said in a Jan. 8 stakeholder session on MOPR implementation.
“We obviously don’t have a schedule yet and it is still difficult to say how much that will change. Much will depend on how quickly FERC approves our compliance filing,” Jeff Shields, PJM spokesperson, said in an email.