HomeMy WebLinkAboutF-4. Federal Legilsative Update by Morgan Meguire LLC •
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at.JSA
INFORMATION ITEM
TO: HONORABLE CHAIRPERSON AND MEMBERS OF THE AZUSA UTILITY
BOARD
FROM: GEORGE F. MORROW,DIRECTOR OF UTILITIES
DATE: OCTOBER 27, 2014
SUBJECT: FEDERAL LEGISLATIVE UPDATE BY MORGAN MEGUIRE LLC
Attached is Morgan Meguire LLC's federal legislative update sent to Southern California Public
Power Authority(SCPPA)members.The October report addresses the following topics:
1. Congressional Overview
— Adjourned September 19; will return November 12 for a lame duck session
— Passed $1.102 trillion Continuing Resolution(CR) to keep government
funded until December 11
2. Dodd-Frank
— Commodity Futures Trading Commission finalized rule on utility-operations
related swaps
3. Federal Energy Regulatory Commission
— FERC clarifies role for public power utilities in Order No. 1000
Transmission Planning
— Large Public Power Council(LPPC)petitions court to Order 1000's ruling
— DC Circuit rejects FERC demand response challenge
— FERC finalizes rules on small hydro bill
4. Energy and Environment
— Environmental Protection Agency(EPA)Clean Power Plan
— Mixed views of the Clean Power Plan rule
— "Waters of the U.S."definition
5. Nuclear
— Senate confirmed Jeff Burns and Jeff Baran as Commissioners of the
Nuclear Regulatory Commission(NRC)
6. Grid Security
— Grid was resilient during polar vortex per North American Electric
Reliability Corporation(NERC)
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Morgan Meguire Federal Legislative Update
October 27,2014
Page 2
7. Finance
— Reforming energy taxes
8. Other Information
— Evaluation of wind energy development potential and resource conflicts
review on public lands on 11 western states by the Bureau of Land
Management(BLM)
— Department of Energy(DOE)Quadrennial Energy Review
— DOE proposal for new standards for commercial rooftop air conditioners
Prepared by: Liza Cawte, Senior Administrative Technician
Attachment: Morgan Meguire LLC Report
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Morgan Meguire LLC
Memorandum
TO: Bill Carnahan,Executive Director
FROM: Lori Pickford,Executive Vice President
DATE: October 7,2014
RE: October Legislative Report
I. Congress
Congress adjourned on Sept. 19,after passing a$1.012 trillion Continuing Resolution(CR)to
keep the government funded through Dec. 11,before hitting the campaign trail in the run-up to
the November mid-term elections.
Members are expected to return on Nov. 12 for a lame duck session.
Meanwhile,President Obama's nominee to join the Federal Energy Regulatory Commission
(FERC),Arkansas Public Service Commission Chair Colette Honorable,is on hold because of
the sudden death of her husband. Senate Energy and Natural Resources Committee Chair Mary
Landrieu(D-LA)told reporters Sept. 10 that the death was unexpected,and that her hearing and
vote could occur in the post-election work period.
II. Dodd-Frank
On Sept. 17,the Commodity Futures Trading Commission(CFTC)finalized a rule that would
provide parity to municipal utilities in the swaps market by removing the"sub-threshold"for
operations-related hedges. This is a positive outcome in a long fought effort by public power,
including SCPPA member utilities.
The rule effectively grants a petition,from APPA and others,to allow utility operations-related
swaps to be counted as normal trades,instead of counting toward a"special entity"threshold of
$25 million,after which counterparties would have to register as a heavily-regulated swap
dealer.
The rule also relaxes a provision that would have required counterparties to notify the National
Futures Association that they were relying on the rule to avoid swap dealer registration. Instead,
the CFTC is"asking staff to find alternate ways to monitor use of the rule including through
existing swaps reporting requirements,"according to early reports.
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The meeting marks the CFTC's first public votes since Chairman Tim Massad and
Commissioners Christopher Giancarlo and Sharon Bowen were empanelled
III. Federal Energy Regulatory Commission
FERC Clarifies Role for Public Power Utilities in Order No. 1000 Transmission Planning
The Federal Energy Regulatory Commission(FERC) Sept 18 action clarified Order 1000's
regional transmission planning and cost allocation requirements as they apply to public power
utilities in the ColumbiaGrid and WestConnect planning groups. They said non jurisdictional,
public power transmission providers in those planning organizations are not required to enroll in
a regional planning process;however,if they choose to enroll they are subject to the regional
cost allocation method.
The Commission also said that public power transmission providers can be planned for under an
Order 1000 regional transmission planning process without enrolling in the region,if the
enrolled,FERC jurisdictional transmission providers in the region elect to do so. In that
instance,if a public power transmission provider is allocated costs under the regional cost
allocation method,its governing authority can determine whether it will accept such costs or not.
Given the role of the Bonneville Power Administration and other public power systems in the
Northwest,it is not clear what this order could mean for public power transmission providers in
other regions.
LPPC Petitions Court on Order 1000 Transmission Ruling
On Sept. 29,the Large Public Power Council(LPPC)petitioned the U.S. Court of Appeals for
the DC Circuit to reconsider its recent decision to uphold FERC Order 1000, which mandates
changes in the way regions and utilities plan and pay for new transmission projects.
LPPC was one of the 45 petitioners that initially challenged the Commission's Order 1000 in
South Carolina Public Service Authority vs. Federal Energy Regulatory Commission. The new
petition requests an en banc rehearing by the full Court,focused on the portions of the decision
that address the allocation of costs for new transmission facilities.
LPPC argues that Order 1000 will require its members' customers to pay for the costs of new
transmission projects from which they receive no service. This will likely raise power prices for
millions of Americans,LPPC said in an accompanying press release.
LPPC argues that FERC does not have the authority under the Federal Power Act to"mandate a
broad assessment of charges by a transmission provider—in essence a tax—to entities that are
not in a contractual or customer relationship with,or taking transmission service from,that
provider."
This"expansion of FERC's authority under FPA Section 206,contradicts foundational Supreme
Court precedent holding that a utility's right to collect costs in connection with the provision of
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transmission service in interstate commerce is established by contracts and voluntary commercial
arrangements, not by FERC under the FPA," LPPC stated.
DC Circuit Rejects FERC Demand Response Challenge
On Sept 17,the D.C.Circuit Court of Appeals denied FERC's request for rehearing of the case
that struck down its Demand Response rule, Order 745. The rule,a policy advanced by former
FERC Chairman Jon Wellinghoff,was designed to compensate, at the wholesale level,retail
electric consumers for"demand response"during certain periods.
The issue hinged on the fact that retail sales of electricity are an activity exclusively within the
authority of states,not FERC. "FERC had maintained that it was only regulating `practices'
affecting wholesale energy markets,something within its authority," said Harvey Reiter,a
partner at the Stinson Leonard Street law firm.
FERC requested an en bane rehearing of the 2-1 ruling by the full court,which was denied.
Following the decision,FERC Chair Cheryl LaFleur would not rule out a FERC appeal to the
Supreme Court,according to trade press. "We are really,now, looking at next steps along two
dimensions,"she said."One is what we do next in the litigation.The second is what we do next
in the markets and the regions to respond to the order."
FERC Commissioner Tony Clark issued a statement in support of the Court's May decision to
vacate the rule,and said he saw the D.C.Circuit rejection as"an opportunity for us to move
forward and to reassess the regime that we have with regard to demand response." Clark urged
more collaboration with the states on demand response,and said"losing jurisdiction over
demand response does not mean that we have to ignore demand response."
FERC Commissioner Phil Moeller said,"It's not the end of the world.Personally, I was sad to
see[the rehearing request] denied because I did not want our commission to lose jurisdiction,"he
said. Instead,Moeller said he was convinced that the states will embrace demand response
programs,which can improve electric reliability and lower costs during peak power usage.
FERC Finalizes Rules on Small Hydro Bill
On Sept. 18 FERC issued a final rule to implement a small hydropower bill advanced by Rep.
Cathy McMorris-Rodgers(R-WA)and Sen. Lisa Murkowski(R-AK)and signed into law in
2013. The rule will become effective Feb. 23,2015.
Specifically,FERC clarified its compliance procedures for preliminary permits,small conduit
hydroelectric facilities, and small hydroelectric power projects, and also new qualifying conduit
hydropower facilities.
The new procedures include:
1. Preliminary Permits: Extending preliminary permits for two additional years,giving
permittees more time to complete studies and avoid possible competition from others.
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2. Conduit Exemptions: Increasing the small conduit exemptions on federal lands to 40
MW.
3. Oualifving Conduit Hydropower Facilities: Creating a subset of small conduit
exemptions for projects under 5 MW,which will not be required to be licensed under Part
I of the Federal Power Act.
4. Small Hydro Exemptions: Increasing the small hydro exemption from 5 to 10 MWs.
The FERC modifications do not make changes to Section 6 of underlying law,which directs the
agency to look into the feasibility of a two-year licensing process for projects on non-powered
dams and for closed-loop pumped storage projects. FERC is implementing the two-year
licensing provision within existing regulations.
IV. Energy and Environment
EPA's Clean Power Plan—111(d)
The Environmental Protection Agency(EPA)announced Sept. 16 that it will push back the
deadline for comments on the Clean Power Plan,its proposed rule limiting greenhouse gas
emissions from existing power plants,by 45 days,to Dec. 1. The extension will not impact the
agency's deadline for finalizing the rule by June,2015.
Fifty-three Senators(including 10 Democrats)had written Administrator Gina McCarthy asking
for 1 60-day extension. APPA,NRECA and others had supported the Senate letter, and had
asked for an extended comment period in their initial filings with the agency, before the rule was
proposed. The original proposal had granted those requests and offered a 120-day comment
period that would have ended Oct. 16.
Mixed Views of the Rule
On Sept. 16,the Government Accountability Office(GAO)released a r requested by
of
Senate Energy Committee Ranking Member Lisa Murkowski(R-AK),on EPA regulations
impacting coal-fired generation and the reliability of the grid. The report concluded that coal
retirements will exceed the levels previously anticipated. The agency now projects 13 percent of
coal-fired generating capacity will be shuttered between 2012 and 2025.GAO credited a bulk of
the retirements to EPA's Mercury and Air Toxics Standards(MATS)—compliance will start as
early as next year.The report called for additional assessments and interagency coordination
between FERC, DOE and EPA to consider the effects of EPA's proposals.
"GAO's findings should renew and reinforce our concerns about the impacts that new federal
rules could have on electric reliability,"said Murkowski,the top Republican on the Senate
Energy and Natural Resources Committee. Murkowski,who on Sept. 18 released a white paper
on the potential impacts of rising costs of electricity on Americans,may be developing
legislation on this issue, according to trade press.
Separately,eighteen state utility commissioners sent a letter to EPA expressing concerns about
electric reliability under the rule. On the pro-EPA rule side, 13 states and two cities have filed to
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intervene in a lawsuit challenging a 2010 settlement agreement in which EPA promised to
promulgate the rules, including all New England states but New Hampshire.
Lastly,the Midcontinent Independent System Operator(MISO)released a new presentation
showing that states would recognize cost savings by banding together and adopting a mass-based
approach to comply with the rule.MISO said compliance costs across the 15 states in its
jurisdiction could be reduced by approximately$3 billion annually by taking a regional
approach. Both the Southwest Power Pool(SPP) and Western Electric Coordinating Council
(WECC)have released reports(here and here,respectively)analyzing the impact of the EPA rule
on reliability in their regions.
"Waters of the U.S. "Definition
On Sept. 16, attorneys general(AGs)from seven states and Washington, D.C. expressed support
for the controversial EPA/Army Corps of Engineers"Waters of the U.S." (WOTUS)rulemaking.
The proposed rule would expand the jurisdiction of federal agencies under the Clean Water Act,
and is opposed by the agricultural and utility industries and a coalition of others. The rule has
attracted significant attention in Congress and debate has become highly partisan.
In comments filed on the regulatory proposal,the AGs said the proposal is grounded in solid
science, sets a strong floor for protecting interconnected waters,and provides legal clarity.
"The degradation of waters in upstream states can increase flooding,add pollution,damage
hunting and fishing habitat,and foul the drinking water supplies of their downstream neighbors,"
New York AG Eric Schneiderman(D)said in a statement. "We applaud EPA and the Corps for
recognizing that the interconnectedness of our waters requires their comprehensive coverage
under the Clean Water Act." The other states represented on the letter include Connecticut,
Delaware,Illinois,Maryland,Rhode Island,Washington State,and Washington,D.C.
On Sept. 9 the House voted 262-152 to pass the"Waters of the United States Regulatory
Overreach Protection Act" (H.R. 5078 . The bill would prevent the WORTS rule from being
finalized and block similar proposals in the future. As expected,the White House issued a veto
threat the same day.There is no plan for the Democratic Senate to take up the bill and it is
doubtful that"riders"to block the rule will survive the FY 15 appropriations process—so a
legislative remedy is unlikely this year.
If Republicans gain the majority in the Senate next year,some version of this legislation could
well make it to the President's desk.
V. Nuclear
On Sept. 16,the Senate confirmed Democrats Stephen Burns and Jeff Baran as Commissioners
of the Nuclear Regulatory Commission(NRC). Burns,who will hold a full five-year term,was
confirmed by a vote of 54-37,while Baran,who will serve the remaining year of outgoing
Commissioner Bill Magwood's term,faced more criticism over his lack of experience,but was
ultimately confirmed by a vote of 52-39.
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The pair's swift confirmation is credited to Senate Majority Leader Harry Reid(D-NV),who has
strongly opposed locating the permanent waste repository at Yucca Mountain in his home state.
Speculation is that Reid wanted to ensure that there would be two more votes on the Commission
opposed to the site."As long as I'm around,there's no Yucca Mountain," read Reid's Twitter
account shortly after the confirmation.
Senate Republicans and officials close to the NRC have voiced concerns about the need to
maintain the Commission's independence from Congress,given the top Senate Democrat's
apparent influence. Reid is undaunted by these concerns,as he has been about similar concerns
with nominations to FERC.
VI. Grid Security
NERC: Grid was Resilient during Polar Vortex
According to a Sept. 30 report by the North American Electric Reliability Corporation (NERC),
the bulk power system showed its resiliency during the January 2014 polar vortex weather event.
NERC's Polar Vortex Review shows that bulk power system reliability was maintained despite
sustained record-low temperatures occurring over a large area in North America. Many areas
experienced day-time high and overnight-low temperatures that were 20 to 30 degrees below
normal,with 49 cities setting new record lows,NERC said in a release.
Generation and transmission operators in North America responded well to prevent major
impacts to the bulk power system," said James Merlo, NERC director of Reliability and Risk
Management. "We examine these types of events to ensure lessons learned and information
sharing occurs to prevent reoccurrences where possible and,most importantly, sustain successful
operation and maintenance practices."
Although grid operators maintained reliability, the report shows that nuclear plants were only
responsible for 3% of the polar vortex outages, coal plants accounted for 26%, and natural gas
represented over 55% of the total outages. While the report does not break down how much gas
generation was taken offline because of equipment or supply failures, it says "One of the largest
issues that impacted gas-fired generation was the curtailment or interruption of fuel supply."
In addition,the extreme cold weather had a major impact on generation equipment. Of the
approximately 19,500 MW of capacity lost due to cold weather,over 17,700 MW was due to
frozen equipment.
These challenges affected almost every dimension of the generation, from instrumentation,to
fuel quality,to air-fuel mix, etc. Moreover,newer generation units' cold weather preparations
were tested for potentially the first time for these temperature extremes,and many older units
experienced extremes beyond what they were designed to operate.The report includes a long list
of examples of challenges faced by utilities during this extreme period.Not all of these instances
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resulted in a forced outage;many just delayed the unit's ability to come on-line or resulted in the
unit's derating.
The report includes several recommendations,but does not suggest new reliability standards.
VII. Finance
On Sept. 17,the Senate Finance Committee held its first hearing on reforming energy taxes since
Sen.Ron Wyden(D-OR)became Chair of the panel. In his opening statement,Wyden said "Our
committee needs to be part of a conversation about how best to determine costs and benefits."
He continued,"It is past time to replace today's [system)with a modem,technology-neutral
approach"to encourage competition and fairness in the marketplace. If the Senate stays under
Democrats' control,Wyden will push for this type of energy tax policy modification when he
takes up tax reform in the next Congress.
Wyden contrasted the permanent tax provisions benefiting the conventional energy sector with
the short-term extensions provided for renewables. Ranking Member Orin Hatch(R-UT)said
the country needs an"all of the above"approach to energy incentives,and criticized the Obama
Administration for demonizing coal and delaying approval of the Keystone XL pipeline. Both
leaders agreed a tax"extenders"package,which would renew several expired energy tax
provisions(including the Production Tax Credit for wind and other renewables),was urgently
needed.
The Committee's extenders package was pulled from consideration earlier this year after it
became clear that Republican Senators would force political votes on hot button issues,like
EPA's greenhouse gas rule,if the measure came to the floor. The House of Representatives took
a different approach and passed five permanent extensions of popular business tax credits,
costing a collective$520 billion over 10 years.
An extenders package may be considered in the lame duck session, if House Ways and Means
Chairman Dave Camp(D-MI)and Senate Finance Chair Ron Wyden(D-OR)can reach
agreement on the length of the extension and whether they will offset such a package by
eliminating other tax credits-so as not to increase the deficit.
VIII. Other Information
Comments Requested on BLM's West-wide Wind Mapping Project
The Bureau of Land Management(BLM)is evaluating wind energy development potential and
resource conflicts on public lands across 11 Western states,excluding Alaska.
The West-wide Wind Mapping Project is a collaborative effort between the BLM and the
Department of Energy's(DOE)Argonne National Laboratory and National Renewable Energy
Laboratory to generate maps and geospatial data reflecting wind energy resources on the public
lands and identify existing land use exclusions and other potential sensitive resources that may
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affect wind energy development opportunities. A stakeholder outreach meeting was held in
Denver on Sept. 16 to provide an opportunity for input on this effort.
Preliminary draft handouts and maps resulting from the meeting have been posted on the BLM's
Wind Energy Program website. The information is available for public comment.As the effort
progresses,there will be additional opportunities for stakeholder engagement,according to BLM.
DOE Quadrennial Energy Review
On Sept. 8,DOE held its 12th public meeting in connection with the Quadrennial Energy
Review(QER),to hear from stakeholders regarding transmission and distribution challenges at
the New Jersey Institute of Technology. At the event,DOE Secretary Ernest Moniz reiterated
that the QER effort"cannot be done at the federal level because every region is very different
and a large number of polices are developed at the state and regional levels." DOE function
should be to"collaborate and remove barriers,"Moniz said."We do not want to go into a closet
and come up with a report ...we want input,guidance and expertise,"he said.
Three panels of stakeholders spoke to transmission challenges,the impact of emerging
technologies on the transmission grid,challenges and opportunities associated with increased
penetration of distributed generation(DG), and ensuring a reliable transmission network.
On Oct 6,DOE held its second to last QER meeting on financing of transmission,distribution,
and storage in New York City. Dan Sullivan, President&CEO of the Grand River Dam
Authority(GRDA)testified on the importance of maintaining the current-law exclusion for
municipal bonds.
According to a APPA summary,"the public forum focused on how to make investments in
transmission,distribution,and storage `bankable.' Mr. Sullivan explained that municipal bonds
are the primary tool public power utilities use to finance their capital investments. As a result,he
said,imposing a tax or surtax on"municipal bond interest would increase the cost of financing
such investments."
"Otherwise,the focus on `financing'was almost entirely on private-sector finance-by equity
partners in,or private lenders for for-profit ventures, or by shareholders and bondholders of
investor-owned utilities. As a result, Mr. Sullivan's comments were really the only ones
providing the public power perspective,"APPA noted.
A final wrap-up meeting of the QER Task Force will be in Washington,D.C. possibly in
November,at which a draft report may be presented. Final recommendations are expected in
Jan.2015.
DOE Proposes New Standards for Commercial Rooftop Air Conditioners
On Sept.30,DOE published in the Federal Register a proposed rulemaking for energy efficiency
standards for commercial rooftop air conditioners.
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DOE's proposed rulemaking for "small, large,and very large air-cooled commercial package air
conditioning and heating equipment"would save about 29%or about 11.7 quadrillion BTU of
energy over 30 years, the agency said.
Under the proposed rule,consumers could save about$10 billion in energy costs and cut more
than 60 million metric tons of carbon pollution by 2030,according to DOE. DOE has moved
decisively to propose new efficiency standards for a number of appliances that use significant
amounts of energy,as part of the President's climate change agenda.
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