New FERC Leadership May End COVID-19 Flexibility For Cos.

By Stephen Bright
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Law360 (November 18, 2020, 5:38 PM EST) --
Stephen Bright
Stephen Bright
On Nov. 5, President Donald Trump named James Danly, a commissioner at the Federal Energy Regulatory Commission, to be its new chairman, replacing the previous chairman, Neil Chatterjee. This move capped a tumultuous period at FERC, created in large part by the COVID-19 pandemic.

Chatterjee's actions and written opinions in recent months had established clearer signals to the energy industry than those issued earlier in his tenure. Specifically, the commission signaled to stakeholders that it would be willing to provide regulatory flexibility with respect to tariff deadlines and associated regulatory responsibilities. However, Danly's written rulings as a commissioner suggest that his ascension to the chairmanship may lead the commission to reverse course.

On May 21, the Federal Energy Regulatory Commission issued a proposed policy statement regarding the waiver of tariff requirements and petitions or complaints for remedial relief. The commission docketed the matter as Docket No. PL20-7-000, and sought comments on its proposal.

In its policy statement, FERC noted its need to revisit its policy regarding requests for waiver of tariff provisions. The commission characterized its own waiver orders as drifting beyond the limits imposed by the file rate doctrine and the rule against retroactive ratemaking.

The policy statement outlined the commission's proposed approach to ensure compliance with these doctrines, specifically as they related to inadvertent failures to comply with ministerial tariff requirements. The commission proposed the following:

  • First, when deadlines are involved, a tariff may be modified to expressly state that failure to comply with a certain deadline may be waived by order of the commission. Advance notice that a specific tariff provision may be waived by a future commission order accomplishes the core purpose of the filed rate doctrine, and provides an opportunity to seek relief for past errors without running afoul of the rule against retroactive ratemaking

  • Second, tariffs may be modified to allow various kinds of errors to be cured by the relevant entities themselves within a reasonable period of time after a default has occurred or an error has been discovered. Such two-stage deadlines — one initial deadline that allows errors or omissions to be corrected, the other a final deadline after the opportunity to take corrective action has passed — should reduce or avoid the need for entities to seek remedial action from the commission in most instances.

Earlier, on April 2, FERC had issued a series of releases to guide regulated energy companies in managing their regulatory responsibilities during the COVID-19 emergency. The timing of the policy statement indicated that, despite issuing the April 2 orders regarding the impacts of COVID-19, the commission would presumably be less likely to grant requests for waiver or remedial relief regarding tariff deadlines.

However, the opposite appears to be true. As FERC's then-chairman Neil Chatterjee[1] noted in his Sept. 30 concurrence granting a waiver request of an administrative tariff deadline in Docket No. ER20-966, "[R]ecent challenges posed by the COVID-19 pandemic have underscored the value of ‎regulatory flexibility when circumstances warrant‎." In multiple proceedings since the issuance of the policy statement, the commission has granted waivers of tariff deadlines in which COVID-19 contributed to the error or omission.

For example, in Docket No. RP20-777, Southern Star Central Gas Pipeline Inc. filed a petition for waiver of a relevant posting and bidding timeline pertaining to the right of first refusal process to permit the pregranted abandonment of services. Southern Star cited the confusion resulting from employees working remotely in response to the COVID-19 pandemic as a reason for its five-day delay in meeting a tariff deadline.

In Docket No. ER20-2806, Lightsource Renewable Energy Development LLC filed a petition for a limited waiver of a procedural deadline in Section 204.3 of the PJM Interconnection Open Access Transmission Tariff‎ to allow its proposed 130-megawatt ‎solar generation to remain in the interconnection queue with its currently assigned queue ‎position number. Lightsource cited the COVID-19 pandemic as a contributing factor, noting that the exponential increase in email traffic contributed to Lightsource missing the tariff deadline.

FERC revealed that it was receptive to the complications caused by the COVID-19 pandemic, and granted the requested waivers.[2] The commission analyzed each petition pursuant to its long-standing criteria, requiring that any waivers of tariff provisions are limited to situations where: (1) the underlying error was made in good faith; (2) the waiver is of limited scope; (3) a concrete problem must be remedied; and (4) the waiver does not have undesirable consequences, such as harming third parties. The commission did not reference the policy statement in its decisions.

Interestingly, even when using the increased scrutiny of the policy statement, FERC was still willing to grant waiver requests in which COVID-19 contributed to the missed deadline. In Docket No. ER20-2720, Crossover Wind LLC and Crossover Wind 2 LLC filed a request for waiver of certain provisions of the Midcontinent Independent System Operator Inc.'s generator interconnection procedures.

Crossover Wind referenced the work-at-home, social distancing and other public health measures enacted in response to the COVID-19 pandemic, and explained how the restrictions prevented them from establishing site control for their facilities by the deadline. Crossover Wind noted that its requested waiver was prospective, as its request was submitted to FERC before the deadline expired, and therefore was in compliance with the policy statement. The commission agreed with this reasoning, and, on Sept. 11, it granted the waiver request.

FERC did not provide much analysis on Crossover Wind's assertion that the waiver request was prospective — merely stating that it agreed with Crossover Wind on the waiver's prospective nature. However, one commissioner has consistently and vociferously questioned the commission's application of the policy statement to waiver requests: Danly. 

Danly dissented in each of the proceedings above, along with many others, criticizing the commission for exceeding its legal authority in granting the waiver requests. He asserted that the filed rate doctrine and the rule against retroactive ratemaking emphasized in the policy statement bar FERC from granting retroactive waiver requests without an explanation of the legal authority for doing so. Danly's dissents argued for strict adherence to the policy statement, and emphasized the commission's limited authority to grant retroactive waiver requests.

Danly's elevation to FERC chairman may foreshadow the commission's future actions in response to waiver requests or requests for remedial relief, even those noting the impacts of the COVID-19 pandemic. The need for regulatory flexibility in response to COVID-19 emphasized by Chatterjee may no longer exist. Therefore, future waiver requests or requests for remedial relief should strictly adhere to the criteria established in the policy statement, and provide a thorough explanation of the commission's legal authority to grant the request.

Stephen Bright is an associate at Locke Lord LLP.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] Danly replaced Chatterjee as FERC chairman on Nov. 5. Chatterjee was chairman at the time this opinion was written.

[2] FERC granted the waiver in Docket No. RP20-777 on Oct. 16. On Sept. 30, the commission granted the waiver in Docket ER20-2806.

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