February 2007
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
Nuclear Plant Security Requirements
Strengthened
The Nuclear Regulatory Commission’s
security regulations governing the design basis threat (DBT) to nuclear
reactors have been strengthened by the Commission. The rule imposes generic
security requirements and describes the DBT to a nuclear plant. The new
rule provides a general description of the capabilities of potential adversaries
who might attempt to commit radiological sabotage or theft against which
licensees’ physical protection systems must defend with a high level
of assurance. Although specific information related to this rule is protected
from public disclosure for security reasons, the final rule provides a
general description of the modes of attack, weaponry, and intentions of
the adversary. For example, it contains provisions related to multiple,
coordinated groups of attackers, suicide attacks and cyber threats. (CCH
Nuclear Regulation Reports, No. 1362, February 13, 2007).
Higher NRC Inspection and Licensing
Fee Proposed for 2007
A higher combined licensing
and inspection fee for applicants and licensees has been proposed by the
Nuclear Regulatory Commission for 2007.With regard to annual fees, however,
the agency is proposing reductions for the majority of its classes of
licenses. The total amount to be recovered for fiscal year 2007--$664.9
million—is approximately $40 million more than last year. The two
professional hourly rates previously charged by the agency for licensing
and inspection services would be replaced with one hourly rate of $256
for activities both in the nuclear reactor safety program and the nuclear
materials and waste safety program. This represents an increase from the
2006 hourly rates of $217 for the reactor program and $214 for the materials
program. With regard to annual fees, most power reactor licensees would
have to pay $4,088,000 for 2007, up from last year’s $3,655,000.
High-enriched uranium fuel facility licensees, however, would be assessed
$4,451,000 instead of last year’s total of $5,579,000. (CCH Nuclear
Regulation Reporter ¶4217)
$917 Million NRC Budget Proposed for
2008
The Bush administration has
proposed a Nuclear Regulatory Commission budget of $916.6 million for
fiscal year 2008. Approximately $140 million more than the 2007 agency
allocation, the budget would continue to be funded in large part through
user fees. The additional funds would be used primarily for the Nuclear
Reactor Safety Program, specifically in the NRC office that oversees new
reactor licensing. The agency allocation for nuclear reactor safety would
be increased by more than $182 million over the 2007 appropriation to
over $709 million, including approximately $217 million for new reactor
activities. $199,406,000 has also been requested by the Commission for
the nuclear materials and waste safety program, an increase of $4 million
over the previous year. (Nuclear Regulation Reporter, No. 1362, February
13, 2007).
Electric Utilities
Midwest ISO Shortage/Emergency Plans
Approved
Midwest Independent Transmission
System Operator, Inc.’s (Midwest ISO) plan to allow the temporary
use of a portion of spinning reserves to avoid system emergency conditions
until other actions could be taken to solve the problem permanently was
approved by the Commission, as amended in the order. The portion of reserves
that could be used was limited to 50 percent or less of the reserve and
could not exceed 60 minutes of use. Midwest ISO also was required to file
a report addressing how demand response protocols could be designed to
help provide for the short-term, quick response resources contemplated
by the new shortage and emergency program. The report was due within one
year of implementation of these changes (Midwest Independent Transmission
System Operator, Inc., 118 FERC ¶61,009).
Utility's Bid to Renew Transmission
Service Contract Rejected
The U.S. Court of Appeals for the District
of Columbia Circuit rejected arguments by the Sacramento Municipal Utility
District (SMUD) relating to SMUD's request for review of a Federal Energy
Regulatory Commission (FERC) order denying the utility the opportunity
to continue purchasing transmission services from Pacific Gas & Electric
Co. (PG&E) through a 1967 contract that expired at the end of 2004.
FERC essentially used the proper ``just and reasonable'' standard in assessing
PG&E's request to terminate service, sufficiently satisfying its responsibilities
under the FPA. Also, SMUD's claim that the termination of transmission
service under the contract was not in the public interest because service
termination would subject SMUD to greater risks of price fluctuation under
the California Independent System Operator Corporation's (CAISO) tariff
was a collateral attack on the adequacy of service provided under the
tariff and was not a challenge to the termination of PG&E's service
under the contract. Moreover, the CAISO's tariff did not deny transmission
service to SMUD, which could always access the power it purchased through
long-term supply contracts, even though it might have to pay congestion
pricing to do so. The fact that the CAISO's tariff might be imperfect
for SMUD's needs did not give the court authority to overturn FERC's rational
decision that SMUD must operate under the same tariff and incur the same
risks as other utilities, according to the court. Finally, FERC's orders
were not discriminatory even though a successor agreement had been successfully
negotiated by PG&E and CAISO with Western Area Power Administration
(Western). SMUD did not demonstrate that it was similarly situated to
Western, which it needed to do for the refusal of PG&E to negotiate
a successor agreement with SMUD to constitute undue discrimination, and
FERC adequately explained the differences. (Williams Gas Processing-Gulf
Coast Co., L.P., et al. v. FERC (DCCir) CCH Utilities Law Reporter ¶14,627)
Natural Gas
Permanent Conduct Standards for Natural
Gas Providers Proposed
Permanent standards of conduct
regulations that would govern the relationship between natural gas transmission
providers and their marketing affiliates have been proposed by the Federal
Energy Regulatory Commission. The proposal follows the Commission’s
issuance of an interim rule in which the Commission made the standards
of conduct applicable only to the relationship between natural gas pipeline
transmission providers and their marketing affiliates, consistent with
a U.S. appellate court decision. That decision rejected the Commission’s
attempt to extend the standards of conduct to pipelines’ relationships
with their energy affiliates, such as producers, gatherers, and local
distribution companies. (CCH Federal Energy Regulatory Commission Statutes
and Regulations ¶32,611).
Comments Sought on Capacity Release
Program
In response to petitions requesting
changes in, or clarifications of, the Commission’s regulations relating
to the release of capacity on interstate natural gas pipelines, the Commission
has issued a notice seeking comments on the current operation of its capacity
release program and whether changes in any of its capacity release policies
would improve the efficiency of the natural gas market (Pacific Gas and
Electric Co., et al. 118 FERC ¶61,005).
Failure to Explain Pipeline Reclassification
Leads to Remand
The Federal Energy Regulatory
Commission's (FERC) reclassification of a pipeline company's pipeline
from a ``gathering'' facility to a ``transportation'' facility was not
supported by reasoned explanation by FERC, and, therefore, the agency's
orders were arbitrary and capricious, the U.S. Court of Appeals for the
District of Columbia Circuit ruled. FERC never explained why, under existing
precedent, the classification of the an upstream facility was relevant
to the jurisdictional status of a lateral pipeline that FERC had classified
as ``gathering,’’ but then later reversed that determination
to find the facility served a transportation function. FERC also did not
attempt to square its new policy statement—i.e., that ``the presence
of upstream transmission facilities determines the classification of downstream
facilities, not the opposite''—with its directly contradictory position
in another of its orders. Not only was FERC's rationale inconsistent with
precedent, the court said, FERC did not attempt to distinguish its precedent.
While the court of appeals vacated FERC's orders and remanded to the agency
for further proceedings consistent with its opinion, it offered no judgment
on the merits of FERC's choice to reverse the pipeline's jurisdictional
determination. (Williams Gas Processing-Gulf Coast Co., L.P., et al. v.
FERC (DCCir) CCH Utilities Law Reporter ¶14,627)