December 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
DOE Cites Need for Second SNF Repository
The President and Congress have
been informed of the need for a second geologic repository for spent nuclear
fuel (SNF) and high-level radioactive waste (HLW) by the Secretary of
Energy. ``Unless Congress raises or eliminates the current statutory capacity
limit of 70,000 metric tons of heavy metal [MTHM], a second repository
will be needed,’’ Secretary Bodman said. ``The statutory limit
is not based on any technical considerations, and the repository layout
at Yucca Mountain can be expanded to accommodate three times the amount
of fuel allowed under the current arbitrary cap.’’ Currently,
the inventories of commercial and federal government SNF and HLW in the
United States are projected to exceed 70,000 MTHM by 2010. Assuming all
existing operating commercial nuclear reactors in the United States request
license extensions from the Nuclear Regulatory Commission to operate for
60 years, the projected amount from these reactors requiring disposal
is estimated to be approximately 130,000 MTHM. (CCH Nuclear Regulation
Reports, No. 1407 December 23, 2008)
Security Requirements for Nuclear Power
Plants Expanded
Security requirements for nuclear
power reactors have been enhanced by the Nuclear Regulatory Commission.
Significant features in the new rule include a safety/security interface
section that requires plants to manage plant activities to avoid potential
adverse interactions between security activities and other plant activities.
Additionally, there are new sections requiring a comprehensive cyber security
program at nuclear power plants, and a requirement that plants develop
strategies and response procedures to address an aircraft threat or loss
of large areas of the facility due to explosions and fire. New training
and qualification requirements for security personnel are also included.
The new rule will go into effect 30 days after its publication in the
Federal Register. (CCH Nuclear Regulation Reports, No.
1407 December 23, 2008)
Electric Utilities
Revenue Sufficiency Guarantee Unjust
and Unreasonable
In the paper hearing ordered
by the Commission (125
FERC ¶ 61,126 (ip
access users)), the Commission found that the real-time Revenue Sufficiency
Guarantee charge contained in the Midwest Independent Transmission System
Operator, Inc.’s (Midwest ISO) Transmission and Energy Markets Tariff
(tariff) was unjust and unreasonable, that proposed alternative cost allocations
were just and reasonable, and required refunds. The Revenue Sufficiency
Guarantee charge allows generators to recover start-up, no-load and incremental
costs that generators did not recover in the locational marginal price
in the real-time market. The Commission found that the tariff, which only
allocated Revenue Sufficiency Guarantee costs to market participants that
withdrew energy, was not based on cost causation because virtual supply
offers could cause unit commitment and Revenue Sufficiency Guarantee costs,
whether the virtual supply offers were made by financial trader market
participants (who did not withdraw energy) or other participants with
physical load and generation (who did withdraw energy). The Commission
required a new tariff deleting the “actually withdraws energy”
language and inserting “cleared” before virtual offers. Also,
the Commission found that refunds were appropriate because the current
tariff had been unduly discriminatory. The Midwest ISO was required to
resettle Revenue Sufficiency Guarantee costs among market participants
reflecting the revised cost allocation approved by the Commission. (Ameren
Services Co., et al. v. Midwest Independent Transmission System Operator,
Inc., 125
FERC ¶61,161 (ip
access users))
Natural Gas
Market-Based Pricing for Short Term
Capacity Releases Affirmed
The market-based pricing provisions
for short term capacity releases and other changes affecting short term
transportation services on interstate natural gas pipelines established
in Order No. 712 (CCH FERC Statutes and Regulations Edition ¶31,271
(ip
access users)) have been affirmed by the Commission. In its review
of Order No. 712 (Order No. 712-A, effective December 31, 2008), the Commission
denied rehearing on a number of specific issues, but did grant clarification
of certain questions, particularly in the area of asset management arrangements
(AMAs). With regard to price ceilings applicable to pipeline capacity,
the Commission denied rehearing requests and continues to find that the
maintenance of the maximum rate ceilings for pipeline short term transactions
is necessary to protect against the potential exercise of market power.
Similarly, rehearing was denied with regard to the exercise of market
power by withholding capacity because the Commission has a sound basis
for not removing from pipeline services the recourse rate, which acts
as a check against both the market power of the releasing shippers and
the pipelines themselves in situations in which insufficient competition
exists. Order No. 712’s posting requirements were also affirmed—the
specific days or months during which an AMA manager’s delivery/purchase
obligation is in effect need to be posted. (CCH FERC Statutes
and Regulations Edition, No. 502, December 22, 2008)
Incremental Rates Discriminate Against
Successor Customers
Transcontinental Gas Pipe Line
Corporation (Transco) could not charge new customers higher rates for
base gas than former customers, according to the Commission. Although
the Commission found that Transco’s tariff requiring new customers
to pay incremental rates based on the full cost of the replenishment base
gas was not unjust or unreasonable, it nonetheless ordered that the costs
of base gas purchases be rolled-in equally to the rates of all Transco
customers. Transco proposed a new rate system that would pass along the
increased cost of gas to its customers who purchased base gas. Transco
proposed to charge successor customers higher incremental tariff rates
than it had charged former customers because of the increased cost of
injecting new base gas to replenish the tanks. The Commission held that
Transco did not prove that its incremental tariff rates were just and
reasonable because the rates did not reflect actual costs caused by successor
customers. Although the successor customers did not prove that Transco’s
base gas purchase option provisions were unjust and unreasonable, the
Commission found the provisions outdated and ordered the parties to re-negotiate
in light of the changed financial times. (Transcontinental Gas Pipe
Line Corp., 125
FERC ¶ 63,020 (ip
access users))
Hydroelectric Power
Reconstruction of Hydro Project Not
Subject to NEPA Regulations
A Federal Energy Regulatory
Commission (FERC) order granting a company the right to rebuild a hydroelectric
generating plant did not violate the National Environmental Policy Act
(NEPA), the U.S. Court of Appeals for the Eighth Circuit has determined.
Two citizens groups who argued that relicensing the Project was a “reasonably
foreseeable future action” challenged FERC’s decision stating
that NEPA required FERC to consider the cumulative impact to the environment
from reconstruction and operation. FERC concluded that reconstruction
would not influence its relicensing determination and held that the compliance
regulations governing reconstruction under the existing license were separate
and distinct from the more stringent regulation governing relicensing;
thus, FERC’s decision not to include the impacts of relicense operation
in its environmental assessment of reconstruction was not arbitrary or
capricious. (Missouri Coalition for the Environment, et al. v. FERC,
et al., (8th Cir. 2008) CCH Utilities Law Reporter
¶14,719).
Oil Pipelines
MMS Failed To Take ``Hard Look'' at
Proposed Exploration Plan
Environmental and citizen group's
Outer Continental Shelf Lands Act (OCSLA) claims against the Mineral Management
Service (MMS) alleging that it failed to take a ``hard look'' at an oil
company's proposed test well drilling plan were not barred by the OCSLA's
time limitation, the U.S. Court of Appeals for the Ninth Circuit held.
The OCSLA required that a petition for review be filed with the court
within 60 days of any contested action. The groups first filed an administrative
appeal with the Interior Board of Land Appeals (IBLA). However, the court
found that the groups did not relinquish their opportunity for judicial
review by opting to file an administrative appeal first. The court went
on to find that, MMS failed to properly determine if the effects of the
oil company's project were ``significant,'' as determined under the National
Environmental Policy Act. To determine if a project's effect was significant,
the MMS had to consider both the context and intensity of the proposed
action. MMS's environmental assessment (EA) failed to take a hard look
at whether the company's exploratory drilling program would have a ``significant''
effect on bowhead whales, an endangered species. The court also found
that MMS acted in contravention of the regulations by approving the three-year
plan without determining the locations of the wells that the company would
drill during that period. MMS must prepare a revised EA or, as necessary,
an EIS the court concluded. (CCH Energy Management, Alaska
Wilderness League, et al. v. Dirk Kempthorne, at al., 9th Cir., CCH
Energy Management ¶9604).