November 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
Availability of Disposal Contracts
for New Reactors Announced
The U.S. Department of Energy
(DOE) is prepared to execute the Standard Contract for the Disposal of
Spent Nuclear Fuel and/or High-Level Radioactive Waste (Standard Contract)
set forth in its regulations, together with a new reactor amendment, with
those companies desiring to construct new nuclear power reactors. The
Department is making the Standard Contract and the new reactor amendment
(collectively, the disposal contract) available to those companies that
have notified the Nuclear Regulatory Commission (NRC) of their intent
to build nuclear power reactors. Under the Nuclear Waste Policy Act of
1982, a company must have a contract with DOE for disposal services in
order to receive a license from the NRC to construct and operate a new
nuclear power reactor. (CCH Nuclear Regulation Reporter,
No. 1404 November 11, 2008)
Repository Hearing/Intervention Procedures
Established
A hearing on the DOE’s
application to construct a high-level nuclear waste repository at Yucca
Mountain, Nevada will be held at a time and place to be set by the NRC
or an Atomic Safety and Licensing Board. The Commission has also determined
that it is practicable to adopt with further supplementation on groundwater
issues, the Environmental Impact Statement and supplements prepared by
DOE. Anyone whose interests may be affected by the hearing and who desires
to participate as a party must file a written petition for leave to intervene
in accordance with agency regulations and include contentions that satisfy
admissibility standards. NRC will permit intervention by state and local
government bodies in which the repository operations area is located and
by any affected federally recognized Indian tribe that meets the contention
requirement.(U.S. Department of Energy, NRC, CCH Nuclear Regulation
Reporter ¶31,576)
Electric Utilities
Seller-Specific Remedies Appropriate
for Violations
The Commission declined to implement
market-wide refunds as a remedy for market-wide unjust and unreasonable
rates and, instead, maintained seller-specific disgorgement of unjust
profits. The Commission granted rehearing of its order (122 FERC ¶61,260)
regarding refunds for violations of the Commission's market-based rate
quarterly reporting requirements during the 2000-2001 period. The order
was issued in response to a remand from the United States Court of Appeals
for the Ninth Circuit. The Commission found that to require refunds by
a seller that obeyed the orders, rules, and regulations and had no notice
that sales would be subject to potential refunds ran counter to fundamental
notice provisions. (State of California, ex rel. Bill Lockyer, Attorney
General of the State of California v. British Columbia Power Exchange
Corp., et al., 125
FERC ¶61,016 (ip
access users))
Commission Enforcement Policy Released
The Commission's annual report
on 2008 Office of Enforcement activities showed a rise in the number and
quality of self-reports and an increase in referrals from regional market
monitors, and provided information on settlements. The purpose of the
report is to provide information on how the Office conducted its enforcement
program over the preceding fiscal year. Enforcement Staff entered into
seven settlement agreements that the Commission approved for a total of
$19.95 million in total civil penalties. In two of those agreements, Staff
required that the companies establish stronger, more effective compliance
programs. The report, 2008 Report on Enforcement, is available on the
FERC website, www.ferc.gov.
Natural Gas
Transparency Provisions for Natural
Gas Reporting Affirmed
The Commission’s transparency
provisions for natural gas reporting, which require certain natural gas
market participants to report annually specific information regarding
their physical natural gas transactions for the previous calendar year
[Order No. 704, CCH FERC Statutes and Regulations ¶31,260
(ip
access users)], have largely been affirmed by the agency. Although
the Commission has clarified that market participants engaged in a de
minimis volume of transactions will not be required to report this information,
the information that is reported will make it possible to assess the formation
of index prices and the use of index pricing in natural gas markets. These
regulations facilitate price transparency in markets for the wholesale
sale of physical natural gas in interstate commerce as contemplated by
the market transparency rules of the Natural Gas Act (NGA). In the Commission’s
order on rehearing (Order No. 704-A), the Commission affirmed the de minimis
reporting threshold of 2.2 million MMBtu. In response to a question regarding
how this volume should be calculated, however, the Commission clarified
that an entity that has 2.2 million MMBTu of reportable sales or purchases
meets the reporting threshold and must file Form No. 552. Reportable sales
include off-system, balancing, and some end-user transactions. With regard
to end-user transactions, the Commission believes it is appropriate to
exempt from reporting those volumes of gas associated with bundled retail
transactions made at state-approved tariff rates but to report volumes
associated with direct pipeline-to-end-user transactions.
The Commission did grant rehearing, however, on the need to distinguish between transactions based on location. Order No. 704 provided that a market participant must categorize transaction volumes by whether each transaction was made at a reportable location, i.e., locations where index developers currently collect fixed-price information for transactions with next-day or next-month delivery obligations and produce index prices. Order No 704 therefore tied the meaning of fixed-price reported volumes to volumes that may be reported to index developers at specific points. The Commission has now determined that respondents need not categorize volumes based on whether such volumes relate to transactions made at specific price-index locations. The Commission arrived at this conclusion because (1) it would be substantially less burdensome for market participants to provide aggregate data regarding their transactions; (2) defining workable ``reportable locations’’ would be difficult; and (3) specific reportable locations would change on a yearly basis, limiting the value of data collected by location. (CCH FERC Statutes and Regulations ¶31,275 (ip access users)
Business Standards for Interstate NG
Pipelines Proposed
The Commission is proposing
to incorporate by reference into its regulations the latest version of
certain business practice standards for interstate natural gas pipelines
adopted by the Wholesale Electric Quadrant (WEQ) of the North American
Energy Standards Board (NAESB). The standards, which would govern pipeline
operations and communications, include a new set of rules for internet
electronic transport that is applicable to the retail gas and electric
markets as well as to the natural gas market, changes to the electronic
delivery mechanism related standards, and an additional standard related
to reporting on gas quality. Adoption of the new version of the standards
will continue the process of updating and improving NAESB’s business
practice standards for the wholesale gas markets. The new internet electronic
transport standards would help create a more seamless electronic marketplace
by providing consistent electronic protocols across the wholesale gas
market. Also included is a new standard for gas quality reporting that
would provide the industry with important information about how pipelines
determine gas quality. It requires that pipelines post on their web sites
specific information, including the industry standard that the pipeline
uses for the following: procedures used to obtain natural gas samples,
analytical test methods, and calculation methods used in conjunction with
any physical constants and underlying assumptions. (CCH FERC Statutes
and Regulations ¶32,636
(ip
access users))
Fines Approved for Gas Shipping Violations
Integrys Energy Services, Inc.
(Integrys ESI) will pay a civil penalty of $800,000 and disgorge over
$190,000 in unjust profits, the Commission determined. An investigation
by the Office of Enforcement (Enforcement) found that Intergrys ESI engaged
in "flipping" natural gas and violated shipper-must-have-title
requirements. The penalties are lower than previous settlements because
Intergrys ESI self-reported the violations and Enforcement found no harm
to market participants stemming from those violations, said the Commission.
Integrys ESI also voluntarily initiated improvements to its compliance
training programs, training protocols, and transaction monitoring systems.
Finally, Integrys ESI must submit semi-annual reports to Enforcement for
one year. (In re Integrys Energy Services, Inc., 125
FERC ¶61,089 (ip
access users))
Hydroelectric Projects
Commission Affirms Jurisdiction over
Continental Shelf
Despite the U.S. Department
of the Interior's challenge, the Commission retained its authority over
energy projects in the coastal areas of the United States. The Commission
found that the Federal Power Act (FPA) grants it specific authority to
issue any permits or licenses for construction of hydroelectric projects
on the outer Continental Shelf (OCS). Pacific Gas & Electric Company
(PG&E) applied to the Commission for two permits for possible wave
power projects that would be located off the coast of California. (122
FERC ¶62,228; ¶62,229
(ip
access users). The U.S. Department of the Interior challenged the
Commission's authority to issue permits for proposed projects located
on the Outer Continental Shelf, arguing that the Commission's jurisdiction
over "navigable waters" did not include any water three miles
or more from the shore. The FPA authorizes the Commission to issue permits
and licenses for hydropower projects in any body of water that Congress
has jurisdiction over, including any public lands or reservations on U.S.
soil. (Pacific Gas & Electric C. 125
FERC ¶61,045 (ip
access users)