April 2008
From the editors of Wolters Kluwer Law & Business, this update describes
important developments from CCH energy publications.
If you have any comments or suggestions concerning the information provided or the format used, we'd like to hear from you. Please send your comments to pamela.maloney@wolterskluwer
Nuclear Power
Stronger Drug-Testing/Worker Fatigue
Safeguards Approved
Improvements to the Nuclear
Regulatory Commission’s fitness-for-duty requirements for workers
who have unescorted access to a nuclear power plant’s protected
areas have been approved by the agency. The new rule will apply to all
currently operating plants, as well as to any future plants licensed by
the NRC. The drug- and alcohol- testing provisions will also apply to
facilities that transport or handle strategic special nuclear material,
including the Department of Energy’s proposed mixed-oxide fuel facility.
The detailed fitness-for-duty requirements include: requiring validity
tests for urine samples to determine if a specimen has been adulterated;
adding a substance abuse expert and specifying the role that person would
play in the fitness-for-duty and return-to-duty processes; and requiring
some groups of workers to average a maximum of 48 hours per week while
the plant is operating. (CCH Nuclear Regulation Reporter ¶6650—6671(b))
Additional Procedures to Respond to
Aircraft Threats Proposed
Additional provisions governing
licensee procedures for responding to notification of potential threats
from aircraft and mitigating the loss of large areas of their facilities
due to fires or explosions caused by a plane crash have been proposed
by the NRC. The proposal would require licensees to develop procedures
for verifying the authenticity of airline threat notifications to avoid
taking actions in response to hoaxes that could harm the licensees themselves
or the health and safety of the public. Licensees would also be required
to maintain continuous communication with the threat notification sources
because this would enable licensees to receive timely and accurate threat
information upon which to base informed decisions. The proposal would
further require licensees to develop procedures for notifying all onsite
personnel and appropriate offsite personnel, such as fire departments,
in a timely manner after a threat is received to allow them as much time
as possible to respond. (CCH Nuclear Regulation Reporter
¶4206)
Electric Utilities
Simplification of Transmission Provider
Conduct Standards Proposed
The Federal Energy Regulatory
Commission (FERC) has proposed a series of reforms to simplify and strengthen
the standards of conduct for transmission providers and to refocus them
on the areas where there is the greatest potential for affiliate abuse.
FERC is also proposing these reforms to comply with the U.S. Court of
Appeals for the D.C. Circuit decision in National Fuel Gas Supply Corp.
v. U.S. [CCH Utilities Law Reports ¶14,620]. The Commission would
like to revamp the standards to make enforcement easier and compliance
less difficult, provide clarity by rewording and reorganizing the standards,
avoid interference with business operations due to overly broad coverage
and eliminate the concept of “energy affiliates” for both
electric and gas companies.The proposal has three components: the “independent
functioning rule” that requires transmission providers to operate
independently of their marketing employees or marketing affiliates; the
“no-conduit rule” that prohibits both passing and receipt
of transmission function information; and the “transparency rule”
that improves transparency to detect, correct and sanction any undue discrimination.
(CCH Federal Energy Regulatory Commission Reports, Statutes and
Regulations Edition ¶32,630
(ip
users))
Approval of Nuclear Plant Interface
Reliability Standard Proposed
The Federal Energy Regulatory
Commission proposes to approve the Nuclear Plant Interface Coordination
Reliability Standard developed by the North American Electric Reliability
Corporation (NERC). The proposed standard would require a nuclear power
plant operator and its suppliers of back-up power and related transmission
and distribution services to coordinate their operations to meet nuclear
licensing requirements for safe plant operation, shutdown and system operating
limits. The proposal would make the operation of the bulk-power system
more reliable by more readily providing off-site power. The proposal would
require plant operators and transmission entities to inform one another
of limits on their systems and enter into agreements to coordinate and
operate their systems in accordance with nuclear plant licensing requirements
and related system limits. The nuclear plant licensing requirements addressed
in the proposed reliability standard include requirements for off-site
power to enable safe operation and shutdown during an electric system
or plant problem and requirements for avoiding nuclear safety issues that
could result from changes in electric system conditions during a disturbance.
The agreements are necessary, according to NERC, because one of the general
design criteria for nuclear plants requires plant operators to obtain
off-site electric power that will provide sufficient capacity to permit
safety systems to function, assure that reactor coolant designs are not
exceeded, prevent core cooling, and maintain containment and other vital
functions. (CCH Federal Energy Regulatory Commission Reports Statutes
and Regulations Edition ¶32,629
(ip
users))
Midwest ISO’s Resource Adequacy
Proposal Accepted
The proposed second phase of
the Midwest Independent Transmission System Operator, Inc.’s (Midwest
ISO) permanent resource adequacy program has been conditionally accepted
by the Federal Energy Regulatory Commission (FERC). The proposal contains
mandatory requirements for any market participant serving load in the
Midwest ISO region to have and maintain access to sufficient planning
resources. These planning resources include all resources used to meet
a resource adequacy requirement, including generation capacity and demand
response. Under the proposal, the Midwest ISO establishes a planning reserve
margin for each load-serving entity (LSE) on an LSE-by- LSE basis. The
Midwest ISO proposes to manage resource adequacy through financial settlement/enforcement
provisions. These provisions are still under development. The most recent
drafts of these documents would require LSEs to either obtain sufficient
resources themselves or pay for resources. (Midwest Independent Transmission
System Operator, Inc. 122
FERC ¶61,283 (ip
user))
RTOs/ISOs Directed To File Interconnection
Queues Reports
Regional Transmission Organizations
(RTOs) and Independent System Operators (ISOs) have been directed by the
Commission to file a report within 30 days on the status of their efforts
to improve the processing of their interconnection queues. The order results
from a December 2007 technical conference called to address the problem
of queue delays. The Commission said that while the improved planning
required by Order 890 will address some of these issues over the long
run, the queue problem needed to be addressed sooner. Instead of imposing
a solution, the Commission asked each region to propose its own solution,
with RTOs and ISOs working with their stakeholders to develop a consensus.
The Commission suggested that RTOs and ISOs first consider whether they
have taken all effective steps under their tariffs, such as increasing
staff available to work on interconnection studies and adopting more efficient
modeling for feasibility studies and system impact studies, as well as
the streamlining options authorized by Order No. 2003. It also offered
guidance as to possible variations from Order No. 2003, such as increasing
the requirements for getting and keeping a queue position, eliminating
the feasibility study as a separate step, and using other approaches to
prioritizing queue processing besides first-come, first-served. (Interconnection
Queueing Practices, 122
FERC ¶61,252 (ip
users)).
FERC Upholds New Dominion's Rate Plan
An initial decision by an administrative
law judge (ALJ) [118
FERC ¶63,024 (ip
users)] relating to the rates that New Dominion Energy Cooperative
(New Dominion) will charge Northern Virginia Electric Cooperative (NOVEC)
was generally affirmed by the Federal Energy Regulatory Commission (FERC).
FERC reversed the ALJ's decision on only one issue involving tariff language
giving New Dominion and Old Dominion Electric Cooperative (Old Dominion)
discretion concerning the implementation of a prior period adjustment
for demand revenues. FERC required that the discretionary language be
removed. NOVEC had objected to the calculation of its demand rate under
New Dominion’s rate schedule and a settlement agreement between
New Dominion and its member cooperatives. FERC concluded that the filed
rate doctrine did not provide a basis for rejecting New Dominion's proposal
to use one of the member cooperative’s customer’s 24 MW contract
demand under a Demand Side Management (DSM) Agreement to calculate NOVEC's
demand charge. Moreover, FERC affirmed the ALJ's holding that a proposal
to calculate the demand charges to NOVEC using the 24 MW contract demand
under the DSM Agreement was just and reasonable. FERC rejected NOVEC's
assertion that a proposed demand cost allocation method improperly departed
from cost causation principles and was unduly discriminatory. As such,
FERC concluded that New Dominion would use the same formula to determine
NOVEC's demand charge as it would use to determine the other member cooperatives’
demand charges under the settlement agreement. (New Dominion Energy Coop.,
FERC Opinion No. 499, CCH Utilities Law Reports ¶14,686;
122
FERC ¶61,174 (ip
users))
Natural Gas
FERC's Cost Allocation of Pipeline
Project Power Costs Upheld
The Federal Energy Regulatory
Commission (FERC) did not act arbitrarily and capriciously when it directed
that the electricity costs for a natural gas pipeline expansion project
be priced incrementally, the United States Court of Appeals for the District
of Columbia held. The project expanded the Transcontinental Gas Pipe Line
Corporation's (Transco) existing pipeline and installed new compressors
to push the added gas through the larger pipeline. Transco, in keeping
with its normal practice, sought to distribute the additional electricity
costs among all its customers. Instead, FERC, relying on its 1999 Policy
Statement expressing its goal of charging only those customers who benefit
from a project for the costs of that project, directed Transco to allocate
the costs only to the customers for whom the pipeline expansion was undertaken.
The court found that FERC's reliance on its Policy Statement was not error
as the statement broadly set forth FERC's general goal to eliminate the
subsidization of new customers by existing customers. FERC reasonably
concluded that the language in its Policy Statement covered the operational
costs of expansion projects as well as the capital costs of those projects,
the court said. (Transcontinental Gas Pipe Line Corp. v. FERC
(DCCir), CCH Utilities Law Reports ¶14,687)
Commission Approves First Floating
LNG Terminal
A proposal by Broadwater Energy
LLC to build the first floating terminal for the storage and delivery
of liquefied natural gas (LNG) in the United States was approved by the
Commission. The project will consist of a floating storage and regasification
unit (FSRU) consisting of a berth for unloading LNG carriers, LNG storage
tanks that can store 8 billion cubic feet (Bcf) of regasified LNG, a regasification
plant, a yoke mooring system to allow the facility to withstand storms,
a nitrogen plant, power generation, accommodations for crew housing and
storage, and a 21.7 mile long pipeline connecting the terminal to a subsea
connection with Iroquois Gas Transmission System. The project will be
located in Long Island Sound about 9 miles off the coast of Suffolk County.
Broadwater estimates that 118 LNG carriers per year will arrive at the
FSRU, and that the project will have a daily design capacity of 1 Bcf/day.
(Broadwater Energy LLC, 122
FERC ¶61,255 (ip
users)).
Reasoning for Conversion to Open-Access
Service Questioned
Flaws in the Federal Energy
Regulatory Commission's (FERC) reasoning rendered its orders modifying
a contract for transportation services between Williston Basin Interstate
Pipeline Company (Williston) and a shipper, Northern States Power Company
(NSP), arbitrary and capricious, the United States Court of Appeals for
the District of Columbia Circuit ruled. In the course of a rate proceeding
brought by Williston, FERC found that a certain transportation service
under one of the rate schedules, without capacity release rights, was
no longer just and reasonable, and accordingly granted NSP's request that
the service be converted to open-access service, pursuant to FERC Order
No. 636, Pipeline Service Obligations and Revisions to Regulations Governing
Self-Implementing Transportation; and Regulation of Natural Gas Pipelines
After Partial Wellhead Decontrol [CCH FERC Statutes and Regulations Edition,
Regulations Preambles, January 1991—June 1996, ¶30,939]. The
court said that under the Natural Gas Act's “just and reasonable”
standard, FERC bore the burden of demonstrating that the current rate
was unjust and unreasonable and that the replacement rate was just and
reasonable. However, FERC mischaracterized the issue in a number of places
in its orders and brief, and FERC's failure to identify the special characteristics
applicable to Williston, or to explicitly revise its policy, left a serious
gap in its reasoning, according to the court. The court stated that FERC
had not articulated a “rational connection between the facts found
and the choice made.” (Williston Basin Interstate Pipeline Co.
v. FERC (DCCir), CCH Utilities Law Reports ¶14,688)