An Overview of FERC and Why it Matters
FERC is the federal agency that regulates the transmission and wholesale sale of electricity in interstate commerce, all natural gas companies engaged in the transportation of natural gas in interstate commerce, and the transportation of oil by pipeline in interstate commerce. The Commission also licenses private, unlicensed power projects, oversees environmental matters for approved hydropower projects, and regulates the transmission of electric transmission service subject to mandatory reliability standards . FERC’s mission is to ensure abundant, reliable, efficient, and economical energy for consumers.
FERC’s work touches the lives of virtually all Americans, as power plants, transmissions lines, and pipelines cross the U.S. from coast to coast. FERC is an independent agency composed of five members appointed by the President with the advice and consent of Senate. One of the Commissioner’s serves as Chairman of the Commission, and FERC’s operating headquarters are in Washington, D.C., although the agency also has field offices across the country.
How the FERC Rules of Practice and Procedure are Structured
The Federal Energy Regulatory Commission (FERC or Commission) Rules of Practice and Procedure at 18 CFR Chapter I, Subchapter B govern the procedures that FERC follows in conducting its various activities. For example, the Rules of Practice and Procedure dictate the procedures and processes the Commission must follow to ensure the outcome of its regulatory activities are fair and untainted by ex parte communication, governing everything from how pleadings are filed with the Commission, how many copies need to be filed, whether the parties are required to serve printed copies on one another, whether the parties must include a specific statement at the end of each pleading, whether the Board can make telephone calls to the parties if they have questions, instructions for how to interact with FERC staff, and when a notice of the FERC’s final decision is to be published. The Rules of Practice and Procedure also cover the procedures parties must follow when they wish to challenge FERC’s decisions in court. Because so many parties become embroiled in FERC ratemaking proceedings each year, these Rules of Practice and Procedure essentially govern the procedures the Commission follows to make orders that affect practically all consumers and electric, gas, oil businesses. The rules are important because parties to a proceeding should pay as much attention to these procedural rules as to the substantive legal merits the Commission makes.
The Key Practices Described in the FERC Rulebook
The filing process is initiated whenever a party seeks resolution on a matter by the Commission. All filings are subject to the requirements set forth in FERC’s rulebook. Chapter I of FERC’s rulebook contains the rules for filing and all other substantive rules, which are basically regulations. Filings under Chapter I rules are generally processed at the staff level, although there is some appeal to the Commissioners. The typical filament initiates proceedings, under cases initiated by filings, hearings are often held to develop a factual record. The hearing process varies depending on the issues in the proceeding. As indicated in its proposal, the Commission expects hearings to be timely, procedurally efficient, and conducted to maximize information provided to the Commission. This requires using all relevant procedural options, including the use of pre-hearing conferences and notices of preliminary determination. Although hearings are generally formal, the Commission expects to examine informative procedures that can better streamline the process—especially for complex issues—without losing the public nature of the process. Evidence submitted during hearings usually consists of documents, witness testimony, and other information, and hearing participants use only written evidence unless oral testimony is permitted in certain circumstances, such as settlement hearings, evidentiary hearings, hearing on proposed changes to a tariff or rate schedule. Decisions at FERC also entails several steps. First, FERC’s staff, an Administrative Law Judge, or a hearing commissioner will issue a recommended decision, order or report, which will then be submitted to the Commission. The second step involves the Commission taking action on the recommendation. Rather than adopting a recommended decision entirely, the Commission may modify it, reverse it, or affirm it in part. Finally, the Commission will issue an order resolving the dispute. Its order will be published and made available to the public. FERC’s rules for filing, hearings, and decisions are designed for efficiency and transparency. They provide clear procedures for resolving issues, promote a thorough understanding of the Commission’s actions, allow for public input and commentary, and provide for a reasoned process for resolving contested issues.
Recent Changes and Amendments to FERC Policies
The FERC Rules of Practice and Procedure are periodically updated to reflect changes in Commission procedures and developments in case law. Most notably, Federal Energy Regulatory Commission ("FERC" or the "Commission") Order 741-A, "Revised Regulations Governing Petitions for Rate Approval," issued on May 21, 2012, revised Part 35 of the Rules of Practice and Procedure to include Subpart B handling transmission rate filings and annual informational filings of transmission rates. This Final Rule became effective June 26, 2012.
The revisions reflect changes the Commission has made to its regulations governing electric transmission cost recovery pursuant to its authority under sections 205 and 206 if the Federal Power Act ("FPA"). A summary of the revisions follows:
- Remove outdated references to the Commission’s "Accounting and Finance Officer."
- Reorganize the provisions that are still in Parts 35.11 through 35.23 to make those provisions easier to find.
- Add new §§ 35.10-35.16, which set out a new title and new content related to regional transmission planning, cost allocation, and Order 1000. Part 35 is currently titled "FERC Form No. 1 Annual Report of Major Electricity Utilities" and the Rules of Practice established therein handle FERC Form No. 1. The Rules of Practice will be moved to Part 385.
- Transfer existing §§ 35.3 and 35.4, relating to filing requirements, to the new §§ 35.17 and 35.18, respectively, because they are no longer specific to power plant licensees.
- Revise existing §§ 35.15 and 35.16, transferring them to new §§ 35.19 and 35.20, respectively, so as to set out what efficiency and load forecast information must accompany certain rate filings.
- Transfer existing § 35.19, relating to filing procedures, to revised Form No. 18-B, Adjusted Statement for Class I Power Plants, and revise accordingly.
The Commission said that the changes instituted by Order 741-A were necessary to reflect its broaden mandates under new statutes and new regulatory reforms that it had initiated.
How Parties Engage with FERC Procedures
A wide range of interested stakeholders engage with the Commission in proceedings governed by the Rules of Practices and Procedure, including energy companies, non-governmental organizations, and sometimes consumers themselves. In most circumstances, affected companies and intervenors participate in FERC proceedings through the FMCS or rehearing processes, which allow them to pursue their interests in a neutral forum. When parties seek an affirmative grant of relief from the Commission, they submit filings with the Commission for action — so-called "initial filings." On rare occasions, alleged violations of FERC orders and enforcement activity may also factor into engagement with the Commission under the Rules, although these situations are not the focus of this post.
Throughout FERC proceedings, the Commission relies on its Rules of Practice and Procedure to manage its processes. The procedures set out for filing applications and protests, the timeline for processing those filings, and the opportunities for stakeholders to participate and make their views known are critical for practical and resource reasons, as well as in terms of following due process and fair treatment. In many instances, parties may file jointly with the Commission (e.g., joint foreign utility applications), with the approval of the Commission.
Energy Companies and Intervenors
The most common form of intervention by an entity is for it to intervene in the Commission proceeding, allowing it to participate as a party before the Commission. In general, parties must file a motion to intervene or a protest or comment with the Commission between 21 and 60 days after the issuance of a Federal Register notice of the action at issue (this timeframe varies in some cases, such as for license or preliminary permit applications).
Once a party has been allowed to intervene, there are a number of additional procedural steps it may take to continue to pursue its interest in a proceeding. Stakeholders can file comments or protests, file or answer an application for rehearing, or make motions. Many proceedings also involve hearings or targeted technical conferences and settlement conferences convened by the Commission to explore the issues further. In most cases, the Commission does not issue a final order on the proceeding (sometimes called a Certificate Order) before it has given all interested parties a chance to be heard. To facilitate this , the Commission permits filing of responsive pleadings after an application has been made. After the record is closed, parties may also submit reply briefs, and the Commission compiles all of the filings and may issue a single order modifying, granting, or denying the relief sought by the applicant or intervenors.
Public Participation
Where an application or complaint could have a significant impact on the public interest, the Commission will frequently extend the usual scheduling deadlines to allow the public to participate in the process. Public participation may also occur before state or federal agencies, or in court proceedings, where a FERC action is in dispute but another agency has the lead for purposes of initiating formal proceedings.
The Commission publishes a notice of each public meeting and hearing of a proposed rulemaking, with information on the time, place, and manner of holding the meeting or hearing. State Governors and other affected members of the public also have the right to intervene in FERC proceedings.
Law Firms
The use of outside law firms for FERC matters is neither unusual nor discouraged. Many companies and organizations handle private utilities matters through in-house attorneys, but when intervening in a FERC action, there are no restrictions on the use of outside counsel; recognizable firms in many regions have built reputations for FERC practice, but any attorney with a bar license can seek to assist an entity that has an interest in a proceeding.
Parties who choose to ensure their representation by outside counsel typically engage in several preliminary steps. They must first review the company’s delegate: how much independence does the organization give to staff and legal counsels, and is the lawyer or firm prepared to fit within that structure? Second, they must assess the budget: many large law firms command significant billable rates, and can eventually run up a large tab. Third, the client and counsel must consider the tasks themselves: a law firm needs understanding not just of the goals of the application itself, but of the administrative process and FERC practices, so as to be able to adequately advise the client on the procedural steps that will need to be taken. Only then are the parties in a position to discuss the necessary retainer, scope and rate of services to be performed.
Common Challenges with FERC and Related Legal Issues
This section of the article aims to illuminate some of the more common challenges faced by stakeholders when they find themselves navigating FERC’s procedural rules. With FERC’s very specific rules (including its Rules of Practice and its Guidelines), there is always a way forward, but sometimes additional legal considerations must be taken into account for a stakeholder to be able to maneuver through FERC’s process successfully.
Take for example the requirement that any entity that is not incorporated or organized as a corporation (e.g., LLCs) filing something with FERC must acquire a Centralized Registration System ("CRS") identification code. FERC’s practice is to consider an entity request to abandon a long-standing file or an original filing for a brand-new company to be filed pursuant to the CRS. In other words, FERC will not allow filing in a related docket unless the agency determines that the docket is sufficiently related to the underlying filing. This could potentially be problematic for stakeholders that need an abandoned file open to validate their acquisition of transmission assets. In addition, CRS codes are reviewed at least quarterly and if a CRS code holder does not use it within 12 months of its commencement, FERC deactivates the code. After this occurs, the holder must reapply for another CRS code. Applicants for a CRS code notify FERC by filing a "Call In Request." It is important to list the exact name of the company in the request to set up the CRS code. If a CRS code is shared by affiliates, FERC will not link a new code to an existing code if there is a prior owner-change event in the last 12 months. If, for instance, an affiliate has a new owner, the owner of the existing code must relinquish the current code before the applicant can receive an original CRS. The point of all of this is that there are specific web-based applications that FERC uses to approve requests and that ultimately, there is a way to get FERC to do what you need, but you need to navigate your way carefully.
At FERC, a company needs to keep very clear lines of communication with all personnel, including General Counsel, administration and even IT. A recent case before the D.C. Court of Appeals demonstrates what can happen when companies do not communicate clearly with FERC or do not well understand their obligation to maintain their files and system to store documents in accordance with FERC’s requirements. In late 2011, FERC began a sua sponte review of more than twenty companies that had potentially failed to submit audit records to FERC when they or their affiliates were being audited by FERC Enforcement staff. In September 2012, cited the companies that had controlled documents (or their electronic storage systems) that were not consistent with FERC requirements. The Commission assessed penalties of $16.5 million, total, for all companies. Eversource Energy and its successor, Northeast Utilities Service Company, Inc., are two of the companies that appealed FERC’s decision, and ultimately the circuit court found that FERC’s inconsistence staff application of the rules and penalties was arbitrary and capricious. In the end, six of the companies who contested the penalties ended up with reduced penalties.
The moral of this story is to pay attention to what FERC is doing – and stay involved in the process. Do not let FERC forget about you, and do not drop the ball when you are involved in new proceedings.
Conclusion: The Path Ahead for FERC Guidelines
The FERC Rules of Practice and Procedure are not written in stone, even if the FERC’s Staff may have it engraved on a plaque on the wall of Headquarters. These Rules are a living instrument that change as the landscape of wholesale power marketing changes. While it is true that the FERC changed its Rules to reflect the move of Regional Transmission Operator (RTO) markets into real-time economic dispatch of resources and variable resources being integrated into RTO markets, it may have to move more quickly to adjust to contributions of demand response or behind-the-meter solar to balancing bulk power systems.
Over past years, as FERC Administrator for appeals, we also saw changes in how in the past the FERC allowed people to present a case . These may seem like a small change, but the change from paper filings to web-based filing ultimately updated who had access to filings, while updating the process to make it more efficient. And, again, that efficiency change may need to adapt as the role of the internet expanded to include more demand-side management and the move of large industrial loads to more efficient digital server operation.
Change is the only constant for those who work in this area. FERC will see more Rule changes in the 10- or 15-year future than it has in the last 20 years, as the FERC Rules of Practice and Procedure adjust to regional power system changes driven by economic decisions and institutional changes driven by the pressures of a climate challenged energy future.