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US Senate passes FERC rate challenge, merger review bills

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US Senate passes FERC rate challenge, merger review bills

The U.S. Senate on Sept. 4 passed by voice vote two bills directly impacting the Federal Energy Regulatory Commission.

One of those bills aims to ensure that stakeholders have a way to challenge rate changes that go into effect automatically due to FERC's failure to act, and the other seeks to reconcile the thresholds for determining when the agency is required to approve various kinds of transactions.

The first bill — S. 186, the Fair Ratepayer Accountability, Transparency, and Efficiency Standards Act, or Fair RATES Act — addresses situations in which members of the commission are divided two against two on the lawfulness of a proposed rate change and that change subsequently goes into effect by operation of law.

S. 186 was proposed on Jan. 23, 2017, by U.S. Sen. Edward Markey, D-Mass. That same day, the U.S. House of Representatives passed a companion bill, H.R. 587, that was introduced by Rep. Joe Kennedy III, D-Mass., in response to a controversial forward capacity auction held by the ISO New England for the 2017-2018 commitment period.

Some stakeholders challenged the results of that auction, claiming they were tainted by market manipulation, but a four-member FERC in September 2014 split on the issue, and the auction results became effective essentially 60 days after they were filed without the commission issuing an order.

FERC subsequently dismissed requests that it revisit the matter, noting that it never issued an order that would be subject to rehearing. A federal appeals court in October 2016 similarly refused to determine whether FERC inappropriately allowed the auction results to go into effect, rejecting assertions that notices the agency issued detailing the results of its inaction should be considered orders for purposes of court review.

But under S. 186, FERC's inaction essentially would be treated as an order that would be challengeable through rehearing requests and court appeals. In a news release issued Sept. 5, Markey said, "In sports, a tie isn't a loss, and the Fair RATES Act will ensure that a tie at FERC won't mean consumers lose with higher electricity rates."

The second bill passed by the Senate on Sept. 4 via voice vote, H.R. 1109, would ensure that, like other similar transactions, mergers or consolidations of FERC-jurisdictional facilities would only need to be approved by the commission if they are valued in excess of $10 million. For those valued at or below the $10 million threshold but above $1 million, parties would simply have to notify FERC within 30 days that the transaction has taken place.

When Congress crafted the Energy Policy Act of 2005, or EPAct 2005, it eliminated entirely the monetary threshold governing when FERC needs to review mergers and consolidations of commission-jurisdictional assets while simultaneously raising the threshold for agency review of other types of transactions from $50,000 to $10 million, and H.R. 1109 seeks to reconcile that inconsistency.

The House in June 2017 passed that bill, which was introduced the previous February by U.S. Rep. Tim Walberg, R-Mich. Walberg has said the legislation "unties FERC's hands" by reducing the commission's regulatory workload, since a literal reading of the Federal Power Act as amended by EPAct 2005 could obligate the agency to sign off on transactions valued at $1 or less.

A spokesman from Walberg's office confirmed that H.R. 1109 now must return to the House but said "we are encouraged that it will reach the president's desk." S. 186 similarly must be reconciled with H.R. 587, according to a spokeswoman from Markey's office.