Federal Energy Regulatory Commission

Electricity Sales and Markets

The Federal Power Act authorizes the Federal Energy Regulatory Commission (FERC) to regulate “the sale of [electric] energy at wholesale in interstate commerce.” (16 U.S.C. § 824) FERC is charged with ensuring that rates and charges, and rules and regulations affecting rates and charges, for electric energy are “just and reasonable” and not unduly discriminatory or preferential.  (See 16 U.S.C. § 824e). Pursuant to this authority, FERC regulates the operation of several wholesale electricity markets, which are operated by Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs).

Minimum Offer Price Rule (MOPR): In July 2021, PJM proposed to narrow its MOPR to focus on net buyers that would profit from price suppression. Under the ‘focused’ MOPR, generators are allowed to make capacity offers that reflect their actual costs, including any subsidies. But utilities that attempt price suppression are still subject to the MOPR. On September 29, 2021, as FERC was deadlocked on the issue, FERC issued a notice stating that due to “the absence of Commission action on or before September 28, 2021, PJM’s proposal became effective by operation of law.”. 

In January 2022, NYISO proposed to exempt most clean energy resources from its MOPR. ISO New England proposed in March 2022 to eliminate its MOPR in 2025. FERC approved both the NYISO proposal and the ISO New England proposal in May 2022.

Litigation: The U.S. Court of Appeals for the Third Circuit on 1 December, 2023 held that FERC’s 2021 tacit acceptance of PJM’s tariff was not arbitrary or capricious and was supported by “substantial evidence in the record.” See PJM Power Providers Grp. v. FERC, 88 F.4th 250, 257 (3d Cir. 2023).

Biden Administration (2017-2021)

Minimum Offer Price Rule

In July 2021, PJM proposed to narrow its MOPR to focus on net buyers that would profit from price suppression. Under the ‘focused’ MOPR, generators are allowed to make capacity offers that reflect their actual costs, including any subsidies. But utilities that attempt price suppression are still subject to the MOPR. On September 29, 2021, as FERC was deadlocked on the issue, FERC issued a notice stating that due to “the absence of Commission action on or before September 28, 2021, PJM’s proposal became effective by operation of law.”. 

In January 2022, NYISO proposed to exempt most clean energy resources from its MOPR. ISO New England proposed in March 2022 to eliminate its MOPR in 2025. FERC approved both the NYISO proposal and the ISO New England proposal in May 2022.

Litigation: The U.S. Court of Appeals for the Third Circuit on 1 December, 2023 held that FERC’s 2021 tacit acceptance of PJM’s tariff was not arbitrary or capricious and was supported by “substantial evidence in the record.” See PJM Power Providers Grp. v. FERC, 88 F.4th 250, 257 (3d Cir. 2023).

First Trump Administration (2017-2021)

FERC Order 2222

On September 17, 2020, FERC issued Order 2222, which aimed to eliminate barriers to the participation of distributed energy resources (DERs) in organized wholesale electricity markets. The order defines DERs to include "any resource located on the distribution system, any subsystem thereof, or behind a customer meter." The order requires each RTO and ISO to revise its tariff to establish DER aggregations as a category of market participant and allow them to register under one or more participation model(s) that accommodate their physical and operational characteristics.

On March 18, 2021, under the Biden Administration, FERC issued Order 2222-A addressing arguments raised on rehearing, set aside in part, and clarified in part FERC’s determinations in Order No. 2222. FERC clarified the application of the opt-out and opt-in requirements of Order Nos. 719 and 719-A, and clarified restrictions to avoid double counting of services. 

On June 17, 2021, FERC issued Order 2222-B setting aside the decision in Order No. 2222-A to decline to extend the opt-out and opt-in requirements of Order Nos. 719 and 719-A to demand response resources participating in heterogeneous distributed energy resource aggregations.

FERC Order 872

On July 16, 2020, FERC issued Order 872 to revise the regulations implementing sections 201 and 210 of the Public Utility Regulatory Policies Act (PURPA). Among other things, PURPA requires utilities to purchase energy and capacity from qualifying small power production facilities and cogeneration facilities at avoided cost rates, determined by the states. FERC is required to adopt regulations to encourage the development of QFs. Order 872 makes several revisions to FERC's regulations. Under the revised regulations, utilities participating in organized wholesale electricity markets are no longer required to purchase energy from qualifying small power production facilities exceeding five megawatts in size (down from twenty megawatts under the previous regulations). FERC's revised regulations also give states more flexibility in establishing avoided cost rates for qualifying facility sales. Under the new regulations, states now have discretion to allow utilities to offer qualifying facilities contracts with variable energy rates (i.e., which vary with market rates). This provision was clarified in FERC Order 872-A, which provides that a state may only allow the use of variable rates if the utility has published avoided cost data in accordance with 18 C.F.R. 292.302.  

Litigation: On September 5, 2023, the Ninth Circuit issued an order in Solar Energy Industry Association v. Federal Energy Regulation Commission, remanding, without vacatur, the Federal Energy Regulatory Commission's (FERC) revised PURPA regulations implemented through Order No. 872. The court held that FERC's action was not "arbitrary and capricious." The court, however, found that FERC had failed to comply with the National Environmental Policy Act's (NEPA) which required, at a minimum, preparation of an environmental assessment (EA).Although finding that FERC’s failure to conduct an EA was a "serious, the court also determined that there would be significant disruptive consequences if FERC’s order were vacated. The court indicated that it was not unlikely that FERC would adopt the same rule on remand.

FERC Order 841

On February 15, 2018, FERC issued Order 841 to remove barriers to the participation of energy storage resources in wholesale electricity markets. The order requires Regional Transmission Organizations and Independent System Operators to revise their tariffs to establish a market participation model specifically tailored to energy storage resources. The participation model must, among other things, ensure that energy storage resources are eligible to provide all capacity, energy, and ancillary services that they are technically capable of providing in the market. 

Litigation: Order 841 was upheld by the U.S. Court of Appeals for the District of Columbia Circuit in National Association of Regulatory Utility Commissioners v. FERC (2020).

Minimum Offer Price Rule

Background: PJM Interconnection is an RTO that is part of the Eastern interconnection grid. FERC regulates PJM and approves its open access transmission tariff for the wholesale electricity market. Each year, PJM operates a capacity auction to obtain enough capacity to meet the region’s projected energy demand, plus a reserve margin, for a one-year delivery period three years in the future. As part of its capacity auction, PJM establishes a Minimum Offer Price Rule (MOPR), which sets a price floor for energy resources entering the capacity market to prevent price suppression.  

Traditional generators (generally natural gas/coal generators) in PJM’s network claimed that capacity market prices were being suppressed by the participation of resources that receive revenues under state policy programs, and sought an expansion of the MOPR to apply it to more capacity resources (such as renewables) receiving revenues under state policy programs. PJM proposed market rule changes to address the concerns of price suppression while still allowing capacity resources developed under state programs to participate in the capacity market.

Regulatory Action: On June 29, 2018, FERC issued an order finding that out-of-market payments provided, or required to be provided, by states to support the entry or continued operation of preferred generation resources threaten the competitiveness of the capacity market administered by PJM. FERC rejected PJM’s proposed market rule changes, granted the generators’ complaint, and found that the PJM capacity market design is unjust and unreasonable. FERC preliminarily directed PJM to expand the MOPR to all resources with “few or no exceptions”.

On December 19, 2019, FERC issued an order requiring PJM to expand the application of the MOPR to all new and existing capacity resources that receive or are eligible to receive state subsidies, including renewable energy credits. 

Proposed Rule on Grid Reliability and Resilience Pricing

On September 29, 2017, the Department of Energy issued a notice of proposed rulemaking directing FERC to mandate certain RTOs and ISOs establish a tariff mechanism providing for (1) the purchase of energy from an eligible “reliability and resilience resource”; and (2) the recovery of costs and a return on equity for such resources (i.e., a “resilience rate”). The Proposed Rule stated that eligible reliability and resilience resources must: (1) be located in an RTO/ISO with an energy and capacity market; (2) be able to provide essential reliability services; and (3) have a 90-day fuel supply on site.

On January 8, 2018, FERC issued an order terminating the notice of proposed rulemaking proceedings, because it concluded that the record was insufficient to meet the requirements of Section 206 of the Federal Power Act (FPA). Section 206 requires that there must first be a showing that the existing RTO/ISO tariffs are unjust, unreasonable, unduly discriminatory or preferential, which was not demonstrated. 

On February 18, 2021, FERC issued an order addressing arguments raised on rehearing the notice of proposed rulemaking, choosing to uphold the 2018 order.

Obama Administration (2009-2017)

FERC Order 784:

On July 18, 2013, FERC issued Order 784 to foster competition and increase transparency in ancillary service markets by, among other things, removing barriers to market participation by third-party providers. The order lifts restrictions on third-party sales of ancillary services to public utility transmission providers. It also requires public utility transmission providers to take into account the speed and accuracy of regulation resources when determining whether a customer choosing to self-supply frequency and regulation services has met its obligation to make "alternative comparable arrangements" to satisfy its regulation and frequency response service obligation. That could facilitate greater use of energy storage resources to provide ancillary services. On February 20, 2014, FERC issued Order 784-A to respond to requested clarifications of Order 784. Among other things, Order 784-A clarified the application of Order 784 to non-public utility providers. 

FERC Order 745

On March 15, 2011, FERC issued Order 745 as a result of the mandates of the Energy Policy Act of 2005 related to barriers to the demand response market. The order requires demand response resources participating in organized wholesale electricity markets to be compensated at the same market price as is received by conventional resources (including generators). The market price is set according to the cost of making electricity available at the location in question (locational marginal price).

Litigation: Order 745 was upheld by the U.S. Supreme Court in FERC v. Electric Power Supply Association (2016)

FERC Order 719

On October 17, 2009, FERC issued Order 719 to remove barriers to the participation of demand response resources in organized wholesale markets. Among other things, the order requires Regional Transmission Organizations and Independent System Operators to accept bids from demand response resources for certain ancillary services, and provides that all accepted bids must receive the market clearing price. These requirements were clarified in FERC Orders 719-A and 719-B. 

Order 719-B (Dec. 17, 2009)

Transmission Siting

The authority to site transmission facilities traditionally resides solely with the States. However, the enactment of the Energy Policy Act of 2005 (EPAct 2005) established a limited federal role in electric transmission siting by adding section 216 to the Federal Power Act. Section 216 provided FERC with limited authority to issue permits for siting transmission facilities when states did not have jurisdiction to approve the siting of facilities. The Infrastructure, Investments and Jobs Act (IIJA) amended Section 216 to expand FERC’s authority to issue permits for siting transmission facilities. As amended, section 216(b)(1)(C) provides that the Commission's permitting authority is triggered when a State commission or other entity with authority to approve the siting of the transmission facilities: (i) has not made a determination on an application by one year after the later of the date on which the application was filed or the date on which the relevant National Corridor was designated; (ii) has conditioned its approval such that the proposed project will not significantly reduce transmission capacity constraints or congestion in interstate commerce or is not economically feasible; or (iii) has denied an application. Under Section 216 of the Federal Power Act, federal siting authority for electric transmission facilities is divided between the Department of Energy (DOE) and the Federal Energy Regulatory Commission (FERC). (See 16 U.S.C. § 824p)

FERC Order 1977: On May 13, 2024, FERC issued Order 1977 to clarify the procedures that will apply when FERC exercises its transmission siting authority under section 216 of the Federal Power Act. Among other things, Order No. 1977 clarifies when applications for transmission siting approval may be filed with FERC, codifies an Applicant Code of Conduct that applicants can use to demonstrate good-faith efforts to engage with landowners in the permitting process, and establishes requirements for applicants to develop and file Environmental Justice Public Engagement Plans. On October 17, 2024, FERC amended the rule to require applicants seeking rights of way on Tribal lands to include their proposals in their Tribal engagement plans. 

Biden Administration (2021-2025)

FERC Order 1977

On May 13, 2024, FERC issued Order 1977 to clarify the procedures that will apply when FERC exercises its transmission siting authority under section 216 of the Federal Power Act. Among other things, Order No. 1977 clarifies when applications for transmission siting approval may be filed with FERC, codifies an Applicant Code of Conduct that applicants can use to demonstrate good-faith efforts to engage with landowners in the permitting process, and establishes requirements for applicants to develop and file Environmental Justice Public Engagement Plans. On October 17, 2024, FERC amended the rule to require applicants seeking rights of way on Tribal lands to include their proposals in their Tribal engagement plans. 

Transmission Regulation

The FPA authorizes FERC to regulate “the transmission of electric energy in interstate commerce.” (16 U.S.C.§ 824). FERC is charged with, among other things, ensuring that transmission rates, charges, and other terms are “just and reasonable” and not unduly discriminatory or preferential. (See 16 U.S.C. § 824e).

FERC Order 1920: On May 13, 2024, FERC issued Order 1920 on regional transmission planning and cost allocation. FERC amended Order 1920 on November 21, 2024.

Building upon FERC Order 1000 and prior actions, Order 1920 adopts specific requirements for transmission providers to conduct long-term planning for regional transmission facilities. Major elements of the rule include: a requirement to conduct and periodically update long-term transmission planning to anticipate future needs; a requirement to consider a broad set of benefits when planning new facilities; a requirement to identify opportunities to modify in-kind replacement of existing transmission facilities to increase their transfer capability, known as “right-sizing”; allowing customers to pay only for projects from which they benefit; expanding states’ pivotal role throughout the process of planning, selecting, and determining how to pay for transmission facilities. The order was amended on November 21, 2024 to bolster the ability of state regulators to participate in the long-term regional transmission planning process. 

States, clean energy groups and others filed 11 lawsuits challenging FERC Order 1920. The challenges were filed in nearly every one of the nation’s 12 federal appeals courts and have been consolidated in the 4th Circuit U.S. Court of Appeals in Richmond. (See State of Georgia v. FERC in "Litigation" below).

Biden Administration (2021-2025)

FERC Order 1920

On November 21, 2024, FERC amended its Order 1920 on May 13, 2024, FERC issued Order 1920 on regional transmission planning and cost allocation, which it had initially adopted on May 13, 2024. 

Building upon FERC Order 1000 and prior actions, Order 1920 adopts specific requirements for transmission providers to conduct long-term planning for regional transmission facilities. Major elements of the rule include: a requirement to conduct and periodically update long-term transmission planning to anticipate future needs; a requirement to consider a broad set of benefits when planning new facilities; a requirement to identify opportunities to modify in-kind replacement of existing transmission facilities to increase their transfer capability, known as “right-sizing”; allowing customers to pay only for projects from which they benefit; expanding states’ pivotal role throughout the process of planning, selecting, and determining how to pay for transmission facilities. The order was amended on November 21, 2024 to bolster the ability of state regulators to participate in the long-term regional transmission planning process. 

States, clean energy groups and others filed 11 lawsuits challenging FERC Order 1920. The challenges were filed in nearly every one of the nation’s 12 federal appeals courts and have been consolidated in the 4th Circuit U.S. Court of Appeals in Richmond. (See State of Georgia v. FERC in "Litigation" below).

Reliability Standards to Address Inverter-Based Resources (RM22-12-000)

On October 19, 2024, FERC adopted a rule directing the North American Electric Reliability Corporation (NERC) to adopt new reliability standards to protect the grid as the nation makes the transition to expanded use of clean energy technologies. The rule helps ensure reliability of the grid by accommodating the rapid integration of new power generation technologies, known as inverter-based resources (IBRs), that include solar photovoltaic, wind, fuel cell and battery storage resources and comprise a significant portion of new generating capacity projected to come online over the next decade. 

FERC Order 2023

On July 28, 2023, FERC issued Order 2023 to reform generator interconnection procedures and agreements, in terms of transmission planning and cost allocation requirements. The rule requires all public utilities to adopt revised pro forma generator interconnection procedures and agreements to ensure that interconnection customers can interconnect to the transmission system in a reliable, efficient, transparent, and timely manner, and to prevent undue discrimination. Transmission providers will be approved in a first-ready, first-served cluster process. The rule also speeds up interconnection queue processing through penalties and allows for co-location and other technological advancements. 

Transmission System Planning Performance Requirements for Extreme Weather (RM22-10-000/RM22-16-000)

On June 15, 2023, FERC adopted two rules designed to help improve the reliability and resilience of the bulk power system against extreme weather. The first rule directs the North American Electric Reliability Corporation (NERC) to develop a new or modified reliability standard to require transmission system planning for extreme heat and cold weather conditions over wide geographical areas, including studying the impact of concurrent failures of bulk power system generation and transmission equipment and implementing corrective actions as needed (E-1: RM22-10). The second rule directs transmission providers to submit one-time reports describing their policies and processes for conducting extreme weather vulnerability assessments and developing mitigation strategies (E-2: RM22-16, AD21-13).

State Voluntary Agreements to Plan and Pay for Transmission Facilities

On June 17, 2021, FERC issued a notice of policy statement addressing state efforts to develop transmission facilities through voluntary agreements to plan and pay for those facilities. It clarifies that voluntary agreements are not precluded by the Federal Power Act, and encourages interested parties considering the use of such agreements to consult with Commission staff. 

First Trump Administration (2017-2021)

Electric Transmission Incentives Policy (RM20-10-000)

On March 20, 2020, FERC issued a Notice of Proposed Rulemaking to revise its existing transmission incentives policy and corresponding regulations. Among other things, the revised policy stated that FERC would grant incentives to public utilities based on the benefits to consumers of transmission infrastructure investment, rather than on risks. Further incentives are provided for reliable generation and technology improvements. The notice was supplemented on April 15, 2021.

Obama Administration (2012-2017)

FERC Order 792

On November 22, 2013, FERC issued Order 792 to revise the interconnection procedures for small generating facilities up to 20 megawatts in size. Among other things, the order provides that energy storage devices are eligible to participate in the "fast track" interconnection process, and revises that process to require transmission providers to offer developers an interconnection agreement within five business days after the provider determines that the facility can be safely interconnected.

FERC Order 1000

On August 11, 2011, FERC issued Order 1000 which reforms electric transmission planning and cost allocation requirements for public utility providers. The order requires public utility providers to participate in a regional planning process. During the regional transmission planning process the parties must ensure that public policy requirements are satisfied and that infrastructure is developed in a manner that contributes to energy efficiency. In addition to regional planning, the order also introduces cost allocation measures controlling the distribution of the cost of new infrastructure that serves the region. The order has been amended twice (in Orders 1000-A and 1000-B). More information can be found here.

Litigation

Following the publication of FERC Order 1920 on May 13, 2024, states, clean energy groups and others filed 11 lawsuits challenging FERC Order 1920. The challenges were filed in nearly every one of the nation’s 12 federal appeals courts and have been consolidated in the 4th Circuit U.S. Court of Appeals in Richmond under the caption State of Georgia v. FERC, Docket No. 24-01760 (4th Cir. Aug 14, 2024).

 

 

Natural Gas Pipeline Certification

FERC reviews applications for construction and operation of interstate natural gas pipelines under Section 7 of the Natural Gas Act. (15 U.S.C. § 717f). A company seeking to build or operate a natural gas pipeline must obtain a certificate of public convenience and necessity from FERC to construct and operate the pipeline. FERC must weigh the public interest in deciding whether or not to issue the application. Under NEPA, all federal agencies, including FERC must evaluate the impact of natural gas infrastructure projects on climate change in its reviews.

On February 18, 2022, FERC published an interim policy statement titled “Consideration of Greenhouse Gas Emissions in Natural Gas Infrastructure Project Reviews.” The policy statement describes FERC’s procedures for evaluating climate impacts under NEPA and explains how FERC will integrate climate considerations into its public interest determinations under the Natural Gas Act. The statement outlines a rebuttable presumption that proposed projects that result in greenhouse gas gas emissions of 100,000 metric tons per year of carbon dioxide equivalent (CO2e) or more will be deemed to have a significant impact on climate change. The statement also explains how FERC will quantify greenhouse gas emissions and address the potential mitigation of climate impacts. More detail about the policy statement is provided in this blog post.  

On March 25, 2022, FERC announced that the statement was a draft statement on which it was seeking further comment.

Biden Administration (2021-2025)

Policy Statement on Considering Greenhouse Gas Emissions in Natural Gas Reviews

On February 18, 2022, FERC published an interim policy statement titled “Consideration of Greenhouse Gas Emissions in Natural Gas Infrastructure Project Reviews.” The policy statement describes FERC’s procedures for evaluating climate impacts under NEPA and explains how FERC will integrate climate considerations into its public interest determinations under the Natural Gas Act. The statement outlines a rebuttable presumption that proposed projects that result in greenhouse gas gas emissions of 100,000 metric tons per year of carbon dioxide equivalent (CO2e) or more will be deemed to have a significant impact on climate change. The statement also explains how FERC will quantify greenhouse gas emissions and address the potential mitigation of climate impacts. More detail about the policy statement is provided in this blog post.  On March 25, 2022, FERC announced that the statement was a draft statement on which it was seeking further comment. 

On March 18, 2021, FERC for the first time assessed the significance of a proposed natural gas pipeline project’s greenhouse gas emissions and their contribution to climate change, and committed to conducting the same assessment in similar orders going forward.

First Trump Administration (2017-2021)

Policy Statement on Considering Upstream and Downstream Greenhouse Gas Emissions in Natural Gas Reviews

On May 18, 2018 FERC clarified that it will not consider upstream and downstream greenhouse gas emissions when conducting environmental reviews of natural gas pipelines, except in limited circumstances. FERC reasoned that upstream emissions associated with natural gas production and downstream emissions association with natural gas combustion are too attenuated and uncertain to warrant consideration. FERC indicated that it will continue to analyze upstream and downstream effects when they are “sufficiently causally connected to and are reasonably foreseeable effects of the proposed action.” In particular, FERC will consider downstream emissions associated with natural gas combustion, where it has information about the intended use of the natural gas transported via the pipeline project.

Inquiry into Revising Natural Gas Pipeline Certification Process

On April 19, 2018, FERC issued a Notice of Inquiry requesting information on whether and how it should revise its policy for certifying natural gas pipelines under section 7 of the Natural Gas Act. Specifically, FERC requested information on whether and how it should adjust (1) its methodology for determining whether there is a need for a proposed pipeline, (2) its consideration of landowner interests relating to a proposed project, and (3) its evaluation of the environmental impacts of a proposed project. 

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