May 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
Plane Crash Assessments May Be Added
to New Plant Design Rules
The addition of plane crash
security assessments to new reactor design certification requirements
has been proposed by the Nuclear Regulatory Commission to enhance the
post-September 11, 2001 security of nuclear power plants. The proposal
would require each applicant for a new reactor design to assess how the
design could achieve greater built-in protections to avoid or mitigate
the effects of a large commercial aircraft impact, with the result that
the plant would become even more resistant to a terrorist attack. Assessing
a new reactor design from the early stages can allow time for modifications
or additional features to reduce the need for human intervention in the
event of an airplane crash. The proposed rule will be available for comment
later this year. [CCH Nuclear Regulation Reports, No.
1368, May 8, 2007]
Additional Security Ordered for Research
and Test Reactors
In accordance with the provisions
of the Energy Policy Act of 2005, additional fingerprinting and criminal
history check requirements for certain categories of individuals have
been imposed by the Nuclear Regulatory Commission, effective immediately,
on the nation’s research and test reactors. As a result, research
and test reactors must ensure that people currently allowed unescorted
access to their facilities, or requesting such access, are fingerprinted
and undergo a criminal history check by the Federal Bureau of Investigation.
NRC already requires these facilities to perform these checks on employees
with access to sensitive security information. [CCH Nuclear Regulation
Reports, No. 1368, May 8, 2007]
New NRC Analysis Tool to Predict Plant
Accident Consequences
A State-of-the-Art Reactor Consequence
Analysis (SOARCA) tool is being developed by the Nuclear Regulatory Commission
to predict realistically the consequences of potential accidents at commercial
U.S. reactors. This research is being undertaken to replace analysis that
is nearly 25 years old, studies so conservative that their predictions
are not useful for characterizing results. Current analytical tools can
evaluate potential accidents more realistically. While nuclear plant accidents
are extremely unlikely, it is important to understand their possible consequences.
The project will analyze U.S. reactors, incorporating more than 20 years
of research to develop realistic estimates of possible consequences of
an accident. The analyses will then use site-specific weather and population
data to determine the effect on public health and safety. [CCH
Nuclear Regulation Reports, No. 1369, May 22, 2007]
NRC’s Definition of Byproduct
Material Expanded
Implementing provisions of the
Energy Policy Act of 2005, NRC has expanded the definition of radioactive
materials subject to its regulatory authority. The final rule will be
published in the Federal Register later this year. The Energy Policy Act
of 2005 expanded the definition of byproduct material subject to NRC’s
authority to include discrete sources of radium-226, material made radioactive
in a particle accelerator, and other radioactive material that the Commission
determines could pose a threat to public health or safety or the common
defense. Previously, these materials were regulated by the states. [CCH
Nuclear Regulation Reports, No. 1369, May 22, 2007]
Electric Utilities
U.S. Supreme Court Lets Stand FERC
Order Requiring Monthly Netting
The U.S. Supreme Court declined
to review a decision by the U.S. Court of Appeals for the District of
Columbia Circuit holding that Federal Energy Regulatory Commission (FERC)
orders approving and enforcing a tariff that was filed by the New York
Independent System Operator (NYISO) and that allowed electricity generators
that provide power to the transmission grid to avoid transmission and
local distribution charges for the power those electricity generators
take from the grid for the purpose of powering the station (``station
power''), so long as the power the generators produced in any month exceeded
the power taken, was lawful and reasonable (Dkt No. 06-1010, sub nom.
Niagara Mohawk Power, et al. v. FERC, and Dkt No. 06-1-11, sub nom. New
York, et al. v. FERC [see CCH Utilities Law Reporter ¶14,601]). New
York electric power utilities argued that this monthly ``netting'' violated
the Federal Power Act (FPA) because it encroached upon state jurisdiction
over local distribution services and retail sales, and it allowed generators
to avoid transmission and local distribution charges altogether. The utilities
had requested that monthly netting be replaced by a one-hour netting period.
However, the court of appeals ruled that while jurisdiction over the sale
and delivery of electricity is split between the federal government and
the states, under the FPA, FERC has jurisdiction over both the interstate
transmission of electricity and the sale of electricity at wholesale in
interstate commerce. (CCH Utilities Law Reports, No.
1447, May 16, 2007)
NERC’s Delegation Agreements Accepted by Commission
A compliance filing submitted by NERC Corporation (NERC) in response to the Commission’s order certifying NERC as the Electric Reliability Organization (ERO) for the continental United States [116 FERC ¶61,062] was accepted by the Commission. The compliance filing consisted of a uniform compliance monitoring and enforcement program (Uniform Compliance Program) and a revised pro forma delegation agreement providing for the delegation of certain ERO functions and duties to regional entities.
The Commission explained that the current order was the “third in a series of landmark orders designed to establish a new regime to ensure reliability for the nation’ bulk electric power system, laying the foundation for mandatory, enforceable power-system reliability standards to be in place in time for this summer’ peak electricity demand season.” (North American Electric Reliability Corp., 119 FERC ¶61,059)
CAISO Financing Mechanism Receives
Approval
In approving a financing mechanism
for the construction of interconnection facilities to connect location-constrained
resources to the California Independent System Operator Corporation’s
(CAISO) grid, the Commission found the proposed rate treatment to be not
unduly preferential or discriminatory and to be just and reasonable. The
CAISO had sought a determination that, upon the approval of criteria proposed
by the CAISO or other criteria that the Commission might adopt, the proposed
rate treatment of the costs of the interconnection facilities would constitute
an appropriate variation from Order No. 2003’s [CCH FERC Statutes
and Regulations Edition ¶31,146] default generator interconnection
policies (California Independent System Operator Corp, 119 FERC ¶61,061).
Transmission Cost Allocation Plan for
PJM Adopted
An initial decision by an administrative
law judge (ALJ) was reversed with regard to the allocation of costs for
existing facilities when the Commission determined that there was insufficient
evidence to find that PJM Interconnection, L.L.C.’s (PJM) existing
license plate rate design was unjust and unreasonable. The initial decision
addressed the issue of how the costs of providing transmission service
in the PJM region should be allocated among the region’s utilities
(PJM Interconnection, L.L.C., Opinion No. 494, 119 FERC ¶61,063).
Nonoperating Utilities Must Continue
Financial Reporting
Public utilities and licensees
who are no longer selling electricity or providing transmission service,
yet who continue to collect payments pursuant to a Commission-accepted
tariff or rate schedule, or a Commission order, will be required to continue
using FERC’s Uniform System of Accounts and filing annual and quarterly
financial reports. Specifically, the change addresses a situation, for
example, in which a nuclear generating plant shuts down its operations
but continues to collect costs pursuant to a FERC order. The amounts collected
by such companies can be substantial and may span a decade or longer.
Without Commission oversight, customers and ratepayers could not be assured
that these costs are just and reasonable. [CCH FERC Statutes and
Regulations Edition ¶31,247]
Two Draft National Corridors Designated
by DOE
Two geographic areas, one in
the Mid-Atlantic region and the other in the Southwest, have been designated
draft national corridors by the Department of Energy. In these corridors,
the Federal Energy Regulatory Commission could potentially override state
concerns and authorize construction of electric transmission facilities.
Energy Secretary Samuel Bodman said that the areas were chosen because
of existing transmission capacity restraints or congestion. The corridor
areas are large enough to facilitate access to a range of potential sources
that could serve the congested area, while preserving the options of state
authorities and private companies to determine which generation sources
are of principal interest. These corridors are necessary, according to
the Secretary, because unless imbalances are corrected, by 2011 certain
parts of the country, including Washington, D.C. and New York, will be
at significant risk of involuntary service curtailments and rolling blackouts.
[CCH FERC Statutes and Regulations Edition, No. 483, May 21, 2007]
Natural Gas
Price Transparency in Natural Gas Markets
Proposed
New regulations that would facilitate
price transparency in markets for the sale and transportation of physical
natural gas in interstate commerce have been proposed by the Federal Energy
Regulatory Commission. Specifically, the Commission is proposing (a) a
daily requirement for intrastate pipelines to post the capacities and
volumes of natural gas flowing through their major receipt and delivery
points and mainline segments and (b) an annual requirement for certain
buyers and sellers of natural gas to report the numbers and volumes of
relevant transactions for the previous calendar year. The Commission would
also require each holder of blanket marketing certificate authority or
blanket unbundled sales certificate authority to notify the Commission
as to whether it reports its transactions to publishers of electricity
or natural gas price indices and whether such reporting conforms to certain
standards. [FERC Statutes and Regulations ¶32,614]
Approval Given to REX-West Expansion
Project
An application filed by Rockies
Express Pipeline LLC (Rockies Express) requesting certificate authorization
to construct and operate an expansion project with a capacity of 1,500,000
Dth per day (Dth/d), designed to transport Rocky Mountain supplies to
major markets in the United States, was approved by the Commission. The
expansion project is known as REX-West. Two related applications requesting
authorizations to construct facilities that would interconnect with REX-West
were also addressed in this order (Rockies Express Pipeline LLC, et al.,
119 FERC ¶61,069).
Gas Interchangeability Policy Adopted
In a proceeding addressing issues
related to the determination of appropriate natural gas quality and interchangeability
standards to accommodate the introduction of re-gasified liquid natural
gas (LNG) into market areas of the Florida Gas Transmission Company, LLC
(Florida Gas) system, the Federal Energy Regulatory Commission (FERC)
generally upheld an administrative law judge’s (ALJ) decision to
accept as just and reasonable Florida Gas’s proposed interchangeability
standards. The Commission further affirmed the ALJ’s conclusion
that any mitigation costs downstream gas users may incur as a result of
the introduction of LNG into the Florida Gas system were speculative.
In doing so, FERC announced a new policy that it will not accept requests
from interstate natural gas pipelines to compensate customers or other
downstream entities for any costs they may incur in using gas supplies
that include revaporized LNG that meets approved standards for gas quality
and interchangeability (AES Ocean Express LLC v. Florida Gas Transmission
Co., et al., Opinion No. 495, 119 FERC ¶61,075).
Oil & Gas
New Geothermal Regulations Issued by
MMS
New regulations implementing
provisions of the Energy Policy Act of 2005 dealing with geothermal resources
have been issued by the Minerals Management Service. Relevant portions
of the MMS rule addressing the payment of royalties include credits against
royalties for lease rental payments, payment of advanced royalties by
lessees ceasing production, and credits against royalties for in-kind
deliveries of electricity to state or county governments. These changes
are intended to simplify royalty calculations and to share royalties with
counties where production occurs. The rule defines three classes of leases:
a Class I lease, which was issued or pending before the passage of the
Energy Policy Act on August 8, 2005; a Class II lease, which was issued
on or after that date; or a Class III lease, which was issued before that
date but which was converted by the lessee into one that follows the new
Energy Policy Act royalty terms. Each type of lease will use a different
royalty calculation method. (CCH Energy Management ¶9527)
MMS Requires Reporting Efforts to Protect
Endangered Species
A final rule requiring lessees
of federal oil and gas leases in the Outer Continental Shelf to report
on how their proposed activities will comply with the Endangered Species
Act (ESA) and the Marine Mammal Protection Act (MMPA) has been issued
by the Minerals Management Service. A lessee will be required to submit
impact-monitoring data when submitting plans for approval and while operating
on the OCS. Lessees will be required to inform MMS how they will mitigate
the potential for takes, monitor for potential takes, and report any actual
takes. Mitigation may be required, and is non-discretionary if operations
may result in an incidental take. (A ``take'' is defined in the ESA and
the MMPA to include such actions as harassing, harming, hunting, killing,
wounding, and other similar actions.) MMS notes that these requirements
will not substitute for a Letter of Authorization or an Incidental Harassment
Authorization because MMS does not have the authority to authorize the
taking of a marine mammal. MMS declined to apply the requirements of the
rule to species proposed to be included on the endangered list or to proposed
critical habitat. The changes implemented by the rule will affect the
contents of Exploration Plans (EP), Development and Production Plans (DPP),
and Development Operations Coordination Documents (DOCD). (CCH
Energy Management ¶9526)