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FERC actions will not come to total standstill with just 2 commissioners, freeze

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FERC actions will not come to total standstill with just 2 commissioners, freeze

While the departure of former chairman Norman Bay from FERC could leave the agency unable to vote out major orders for some time, the work of FERC staff will continue, including the issuance of letters and delegated orders that can be signed by a FERC staff member. In addition, sources indicate that FERC is looking at ways it can expand the authority it has delegated to staff.

In a statement issued late Jan. 27, Acting Chairman Cheryl LaFleur said FERC "is working to get as many orders out as we can in the time we have left with a quorum." She also confirmed that the agency is evaluating "how best to do the business" after Bay's departure, and that "all existing staff delegations will continue." In addition, she said FERC will be posting a podcast on Jan. 30 offering more detail, "and I expect there will be still more to communicate on this in coming days."

LaFleur issued a separate statement addressing the regulatory freeze directive issued by President Donald Trump in a memo. She said FERC has reviewed the memo carefully, and to the extent that it applies to the commission, which is an independent agency, the triggering event described in the memo is the presence of an official designated by the new president.

"That happened this week with the designation of LaFleur as acting chairman, much as in 2009 when Jon Wellinghoff was named acting chairman," LaFleur stated. She added that she has completed a review of new or pending regulations described in the memo, and FERC will now "send to the Federal Register previously voted commission items that need to be published there. Previously set comment deadlines will remain unchanged."

Nevertheless, the departure of Bay could have major impacts on the power industry, including slowing down proposed mergers, as well as action on complaints and major policy issues. In addition, four major natural gas pipeline projects could be delayed at vulnerable points in their review for months. And if the delays are substantial, the projects could miss their targeted in-service dates, analysts told S&P Global Market Intelligence.

Bay on Jan. 26 announced he will leave the agency Feb. 3, leaving FERC with just two members: LaFleur and Commissioner Colette Honorable, both Democrats. The problem is that the independent agency needs to have at least three sitting commissioners to meet the quorum requirements for voting on major orders, including those involving rulemakings, rehearing requests, certificates for natural gas pipeline and LNG terminal projects.

However, the agency conducts a lot of business that does not require votes by commissioners. For instance, the agency's administrative law judges can continue conducting hearings, overseeing settlement negotiations and issuing initial decisions.

FERC staff can continue its market oversight work, including conducting investigations, environmental reviews of proposed new infrastructure, collecting and analyzing comments on proposed rulemakings, litigating cases in the courts, engaging in alternative dispute resolution and conducting safety reviews. The staff can also continue working on major new initiatives, including those aimed at improving competitive markets and ensuring reliability.

In addition, staff can continue issuing delegated orders, which can number several hundred in a given month. To get in an idea of what those orders involve, FERC prominently displays the delegated and notational orders it issues each week on the front page of its website. During the week through Jan. 27, for instance, those orders included FERC signing off on generator interconnection agreements, negotiated rate agreements, certain construction activities, uncontested tariff revisions, uncontested jurisdictional facility dispositions and a wide variety of other matters.

In short, FERC can continue all the activities that do not require a vote by the commissioners. And the number of those activities may grow if LaFleur can find a legal way to expand the authorities delegated to staff.

That said, the agency will not be able to act on certain major items and matters that are contested until it has at least three sitting commissioners. In addition to delaying major gas infrastructure projects, certain power items could also face major slowdowns.

For instance, FERC has several major pending rulemakings, including those aimed at tweaking the pricing rules of organized power markets. It also has pending an inquiry into whether it needs to change how it evaluates market power when considering requests for merger approvals or for the authority to sell power, capacity and ancillary services at market-based rates. Another pending inquiry involves whether critical infrastructure protection reliability standards should be modified in the wake of the 2015 cyberattack on Ukraine's power grid.

On the merger front, the lack of three commissioners could delay Dynegy Inc.'s proposed purchase of several thousand megawatts of mostly natural gas-fired generating plants in the U.S. from Engie. FERC had conditioned its approval of the sale on addressing market power concerns stemming from the transaction. Dayton Power and Light Co.'s plan to divest 2,510 MW of generating assets to corporate affiliate AES Ohio Generation LLC, both are subsidiaries of AES Corp., could also be pushed back given questions staff has raised about the transaction.

A quorum is also needed for the agency to address other contested mergers and petitions for declaratory orders, initial decisions issued by administrative law judges, proposed settlements and orders to show cause. It is also needed to act on complaints, such as one regarding whether a Maryland community solar aggregation program involve wholesale sales and therefore subject to FERC's jurisdiction, and another one calling on FERC to order the PJM Interconnection to begin applying its buyer-side market power mitigation measures to existing resources.

In an update issued by the law firm Baker Botts, partner Jay Ryan also noted that under the Federal Power Act, regulated companies are required to file changes to rates and tariffs 30 days and 60 days, respectively, before they become effective.

"If FERC fails to act within the time that those rates go into effect, the changes become effective automatically and if the FERC wishes to order further changes, it would have to do so under statutory provisions that place a heavier burden on the agency," Ryan noted. "Further, any requests for rehearing of the FERC's orders under those statutes that are not acted upon by the FERC within a prescribed period are automatically denied."