Update Regarding D.C. Circuit’s Demand Response Ruling

By Kenneth Irvin, Gregory Lawrence, Sohair Aguirre and Natalie Mitchell

There have been several notable developments in the Electric Power Supply Ass’n v. FERC proceeding, and in other, related proceedings since the firm’s last memo regarding the D.C. Circuit’s demand response ruling. On June 11, 2014, FERC announced that it will seek en banc review of the D.C. Circuit’s May 23, 2014 decision striking down Order No. 745, FERC’s Demand Response regulation.  In making this decision, Chairman LaFleur sought the input of other FERC Commissioners, including Commissioner Clark.  In conjunction with FERC’s announcement that it would seek en banc review, Commissioner Clark released a statement concurring with the D.C. Circuit’s decision with regards to both jurisdiction and the merits. In addition, on June 11, 2014, FERC issued a notice in the FirstEnergy Service Co. v. PJM Interconnection, L.L.C. matter, extending the time for answers, interventions, and protests “to, on, or before 30 days after the submission of an amended complaint” from FirstEnergy. Also, a federal district court judge in Massachusetts refused to stay two proceedings (FERC v. Lincoln Paper & Tissue, LLC and FERC v. Silkman) involving demand response providers.  read more

Posted in FERC, Oil & Gas, Power, Regulation

EPA Proposes First Carbon Emissions Limits for Power Plants

By Athena Eastwood, Kenneth Irvin, Gregory Lawrence, Douglas Fischer and Neal Kumar

On June 2, 2014, the U.S. Environmental Protection Agency announced its Clean Power Plan, which would impose the first federal limits on carbon-dioxide (CO2) emissions from power plants in the United States.  The proposed rules, which the EPA published pursuant to Section 111(d) of the Clean Air Act, aim to cut CO2 emissions from power plants by approximately 30% by 2030, using 2005 emissions levels as a baseline.  The Clean Power Plan is a central component of President Obama’s Climate Action Plan, which he announced in June 2013.  read more

Posted in Emissions, EPA, Power, Regulation, Renewables

D.C. Circuit Vacates FERC’s Wholesale Demand Response Compensation Rule Because It “Goes Too Far”

By Kenneth Irvin, Gregory Lawrence, Sohair Aguirre and Natalie Mitchell

On May 23, 2014, the U.S. Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”), in a 2-1 decision, vacated in its entirety and remanded Order No. 745 of the Federal Energy Regulatory Commission (“FERC” or the “Commission”).  FERC Order No. 745 requires independent system operators and regional transmission organizations (“ISOs/RTOs”) to compensate, in certain circumstances, demand response providers at market prices, i.e., locational marginal price (“LMP”).  read more

Posted in FERC, Oil & Gas, Power, Regulation

FERC Orders Evidentiary Hearing for Alleged Market Manipulation by BP

By Christopher Polito and Paul Pantano

On May 15, 2014, the Federal Energy Regulatory Commission (FERC) issued an order setting an evidentiary hearing before an administrative law judge (ALJ) to determine whether BP America Inc., BP Corporation North America Inc., BP America Production Company, and BP Energy Company (collectively, BP) violated FERC’s prohibition on market manipulation in section 1c.1 of FERC’s regulations and section 4A of the Natural Gas Act.  In an August 2013 report, FERC’s Office of Enforcement (OE) alleged that BP manipulated the next-day, fixed-price natural gas market at the Houston Ship Channel (HSC) between September and November 2008.  BP denied these allegations and requested that FERC dismiss the proceeding.  In the May 15, 2014 order, FERC rejected BP’s threshold legal objections regarding the FERC’s authority to proceed and set the matter for an evidentiary hearing.  read more

Posted in Commodity Trading, Enforcement and Investigations, FERC, Oil & Gas, Regulation

SAVE THE DATE: 2014 Energy & Commodities Regulation, Compliance and Enforcement Conference

Cadwalader, Wickersham & Taft LLP will be hosting its annual Energy & Commodities Conference in Houston, Texas. The program will feature informative presentations and panel discussions on the evolving regulatory and enforcement issues affecting the U.S. and international energy and commodities markets.

As the industry continues to face sweeping changes, Cadwalader attorneys, distinguished government and self-regulatory organization officials, and notable industry leaders will offer timely insights on pressing regulatory, compliance and enforcement issues and trends.

Wednesday, October 8, 2014

The Houstonian Hotel, Club & Spa
111 North Post Oak Lane
Houston, Texas

New York CLE credit will be offered. Additional accreditation is pending.
Please note this event is closed to members of the press. Additional information to follow.
If you have any questions, please contact Christine Judge at christine.judge@cwt.com.

Posted in CFTC, Commodity Trading, CSAPR, Dodd-Frank, DOJ, EMIR, Emissions, Enforcement and Investigations, EPA, ERCOT, Events, FERC, FTC, MiFID, MiFIR, Mining/Metals, Oil & Gas, Power, PUCT, Regulation, Renewables, SEC

Significant Upwind Impact: The Supreme Court Upholds Cross-State Air Pollution Rule

By Athena Eastwood, Kenneth Irvin, Gregory Lawrence, David Williams, Sohair Aguirre, and Sarah Tucker.

On Tuesday, April 29, 2014, the U.S. Supreme Court upheld the U.S. Environmental Protection Agency’s (“EPA”) Cross-State Air Pollution Rule (“CSAPR”).  EPA v. EME Homer City Generation, L.P., No. 12-1182.  In a 6-2 decision, the majority held that: (1) the Clean Air Act (“CAA”) does not require that states be given a second opportunity to file a state implementation plan (“SIP”) after EPA has quantified the state’s interstate pollution obligations under the Good Neighbor Provision of the CAA, and (2) that EPA’s cost-effective allocation of emissions reductions among upwind states is a permissible, workable, and equitable interpretation of the Good Neighbor Provision.i The decision will have a significant impact on utilities, electrical generators, coal companies, and other industries in upwind states, who will be subject to the emissions limitations imposed by the EPA.  And there is more to come.  read more

Posted in Cases, CSAPR, Emissions, Energy Infrastructure, EPA, Power, Regulation, Renewables

EMIR Clearing and Margin Consultation Paper Proposes Rules Which Will Impose Substantial Trading Costs on Market Participants

By Doron Ezickson, Nick Shiren, Assia Damianova, and Adam Topping

The European Market Infrastructure Regulation (“EMIR”) imposes a number of risk mitigation techniques on counterparties to uncleared swaps.  Some of those involve much tighter operational procedures (such as the rules for timely confirmations, portfolio reconciliation and dispute resolution).  However, the most significant increase in the costs of trading over-the-counter (“OTC”) derivatives will arise as a result of the rules on margin and eligible collateral for such trades.  New legal and risk issues will need to be addressed in the running of what will become multiple collateral posting flows: for initial margin (“IM”), for variation margin (“VM”), possibly with silos for different currencies and different jurisdictions and separately, for legacy trades pre-dating the new rules (each separate from cleared trades).  read more

Posted in Commodity Trading, EMIR, Oil & Gas, Power, Regulation

New Jersey Appeals Court Interprets Force Majeure Clause in NAESB

By Kenneth Irvin, Daryl Rice and Sohair Aguirre

In a ruling of significant importance for those confronting force majeure (“FM”) issues in natural gas trades, and a win for Hess Corporation (“Hess” or “Plaintiff”), the Superior Court of New Jersey, Appellate Division ruled that Eni Petroleum US, LLC (“Eni” or “Defendant”) cannot rely on a force majeure provision in its North American Energy Standards Board (“NAESB”) base contract to excuse its obligation to deliver a certain quantity of natural gas at a specified delivery point where the:

  • transaction confirmation did not specify a particular source for the gas that Defendant would provide;
  • transaction confirmation did not specify a particular transporter to be utilized for each delivery; and
  • delivery point specified in the transaction confirmation, which was fed by a number of different sources, remained open and unaffected by the events that caused the alleged force majeure.

This decision articulates a bright-line as it concerns pool gas versus well-specific production in force majeure situations.  Whether this decision finally lays to rest disputes over FM remains to be seen.  We are optimistic that this decision brings useful clarity here.  read more

Posted in Cases, Oil & Gas, Power

Going Public: Powhatan Energy Fund’s “Insurance Policy” Regarding FERC Enforcement’s Non-Public Manipulation Investigation into the Fund’s “High-Frequency” PJM Trading Activity

By Gregory Lawrence and Lynna Cobrall

On February 28, 2014, Powhatan Energy Fund (“Powhatan”) launched a public website disclosing that for more than three years, the Federal Energy Regulatory Commission (“FERC”) Office of Enforcement (“OE”) has been investigating Powhatan for alleged manipulation of the PJM Interconnection (“PJM”) energy market.

According to FERC OE’s preliminary findings, Dr. Houlian Chen (“Chen”), trading on behalf of Powhatan, himself and other clients, manipulated PJM’s energy market by taking advantage of an alleged market loophole that permitted payments despite unprofitable Up To Congestion (“UTC”) transactions.  Powhatan has countered that FERC’s investigation violates due process because prior to FERC OE’s investigation, there was no FERC order or express regulation to put Powhatan on notice that the trades were unlawful.  Furthermore, Powhatan maintains that it entered into the UTC transactions in an open, transparent manner without concealment or misrepresentation, and that it is not manipulative to take advantage of market flaws.  Only much later did FERC change the complicated rules to close the supposed loophole.  read more

Posted in Enforcement and Investigations, FERC, PJM, Power, Regulation

Proposed FERC Rule Marks Significant Shift in Approach Toward Inter-Affiliate Service Agreements

By Ken Irvin, Anna Biegelsen, Ryan Norfolk, Katrina Olsen and Katherine Vorhis

In a March 20, 2014, Notice of Proposed Rulemaking (Proposed Rule), the Federal Energy Regulatory Commission (FERC) proposed, among other things, a requirement that all interstate pipelines offer multiparty firm transportation contracts, whereby multiple shippers can share interstate gas pipeline capacity through a single service agreement.  FERC noted that, under its proposal, “[P]ermitting such entities to enter into a single contract with the pipeline gives those entities the flexibility to choose contracting partners with complementary needs for pipeline capacity and to enter into an ongoing contractual relationship concerning how they will share the capacity.”  FERC also suggested that the new requirement could make the purchase of firm pipeline capacity more affordable.  Currently, the Proposed Rule applies only to firm capacity, but FERC is also seeking comments on whether it should require companies to offer multiparty interruptible service agreements. Continue reading

Posted in FERC, Oil & Gas, Power, Regulation