On March 9, 2018, a divided FERC approved the Competitive Auctions with Sponsored Policy Resources (“CASPR”) proposal submitted by the ISO New England Inc. (“ISO-NE”). Developed through an extensive stakeholder process that began in 2016, CASPR was promoted by ISO-NE as a mechanism to integrate out-of-market state resource policies that might otherwise suppress capacity market prices in ISO-NE’s capacity market. A divided FERC approved the proposal as a just and reasonable accommodation of state policies, with Commissioner Powelson dissenting, arguing that the proposal dilutes market signals and “threatens the viability” of ISO-NE’s capacity market. Commissioners LaFleur and Glick concurred with the outcome, but criticized the order’s guidance on adapting markets to state energy policies, and reliance on minimum offer pricing rules (“MOPRs”) as the “standard solution” to achieve that end. Continue Reading A Divided FERC Approves ISO-NE’s Capacity Market Changes to Accommodate State Subsidized Resources
On March 13 and March 15, 2018, FERC took actions to address tax law changes resulting from the Tax Cuts and Jobs Act of 2017 for electricity, natural gas, and oil companies. In addition, on March 15, 2018, in response to a federal court remand, FERC stated that master limited partnership (“MLP”) interstate natural gas and oil pipelines will no longer be allowed to receive an income tax allowance in cost of service rates.
The Tax Cuts and Jobs Act of 2017, among other things, lowered the federal corporate income tax rate from 35 percent to 21 percent, effective January 1, 2018. FERC addressed this tax rate change by issuing separate orders for electricity, natural gas, and oil companies. First, the Commission issued two show-cause orders, pursuant to section 206 of the Federal Power Act, for 48 electricity companies whose current transmission tariffs include fixed rates that may have been based on the outdated tax rate. Both orders direct the electric companies to propose tariff revisions to adjust their transmission rates in accordance with the new tax rate or otherwise, show why they should not be required to do so. Continue Reading FERC Addresses Impact of Tax Cuts on Rates for Energy Companies and Eliminates Income Tax Allowance for Master Limited Partnerships
Originally posted on Troutman Sanders’ Washington Energy Report
On March 8, 2018, President Donald Trump signed an order that enacts tariffs on steel and aluminum imports from all overseas countries, while exempting Canada and Mexico from such tariffs for now. The proclamations signed by the President will institute a tariff of 25% on steel and 10% on aluminum imports. The tariffs are expected to become effective March 23, 2018.
The Trump administration’s efforts to levy tariffs on steel and aluminum imports came after a nine month investigation under Section 232 of the Trade Expansion Act of 1962, led by the Secretary of Commerce Wilbur Ross (see March 5, 2018 edition of the WER). The investigations were initiated in April 2017 and designed to determine whether such imports “threaten or impair the national security.” When the Section 232 reports were finalized on March 1, 2018, the Commerce Department determined that import competition harms the domestic production of aluminum and steel, and tariffs would strengthen the economic footing of steel and aluminum corporations. Continue Reading Trump Orders Steel and Aluminum Tariffs
As part of the Bipartisan Budget Act of 2018 (the “Act”), Congress extended and increased the 45Q tax credits for carbon capture and storage (“CCS”) projects. The Act increased credits for enhanced oil recovery from $10 per ton to $35 per ton and increased the credits for geological carbon storage from $20 per ton to $50 per ton. Raising capital for CCS projects has long been an issue, and developers of CCS projects often do not have the tax appetite to take full advantage of the tax credits available. The extension of the 45Q credits would allow large CCS projects to generate hundreds of millions of dollars a year, incentivizing tax equity investors to step in and provide funding for projects in order to reap the considerable tax benefits, similar to the tax equity deal structures seen in the renewable energy sector. While the 45Q credits makes CCS projects more viable, CCS technology is still very expensive and cost-cutting advances will likely need to be developed before a CCS project market is able to thrive.
Hayden Baker has joined Troutman Sanders LLP as a partner in the firm’s Capital Projects and Infrastructure Practice. Baker, who is based in the firm’s New York office, previously practiced at Sullivan & Worcester LLP. Baker assists clients in mergers and acquisitions, energy and infrastructure projects, real estate deals and financing transactions. He has represented companies, private equity investors and financial institutions in hundreds of transactions totaling more than $100 billion in investment and regularly advises clients in the energy, chemicals, technology and infrastructure sectors.
“Hayden’s broad transactional background and environmental expertise as well as his private equity relationships make him an ideal fit for the firm and our clients,” said Amie Colby, chair of the firm’s Energy and Regulatory Department.
“Hayden’s sophisticated yet practical approach to transactions will benefit our clients in New York and beyond,” said Craig Kline, New York managing partner. “He has significant experience in mergers and acquisitions within energy markets and is a welcome addition to our growing team.”
Troutman Sanders’ New York office now boasts nearly 100 attorneys and spans diverse practices. The firm’s Capital Projects and Infrastructure group represents investors, lenders, utilities, independent power producers and developers in energy and other infrastructure projects throughout the United States and around the world. The practice specializes in designing unique financing structures for the clean energy markets and is continually involved in some of the largest utility-scale solar projects in the nation.
“Troutman Sanders’ broad capabilities within the energy and infrastructure industries align well with my practice,” Baker said. “I look forward to working with the team to continue to deliver on behalf of my clients.”
Baker received his bachelor’s degree from Middlebury College and his J.D. from American University.
The Southern Alliance for Clean Energy (“SACE”) released its Solar in the Southeast 2017 Annual Report (the “2017 Report”) which projects the Southeast region of the United States (including Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina and Tennessee) to continue its exponential solar growth, reaching 15,000 MW of solar by 2021. In 2017, the Southeast had just under 6,000 MW of solar power. Currently, North Carolina leads the way with 2,699 MW of solar, followed by Georgia with 1,222 MW and Florida with 839 MW. According to the 2017 Report, Florida utilities are expected to invest heavily in solar power over the coming years, and Florida’s solar generation is expected to surpass Georgia’s generation by the end of 2018. While the rapid growth of solar in the Southeast is impressive, even if the Southeast reaches the projected 15,000 MW in 2021, solar generation would constitute less than 3% of retail sales. The 2017 Report explains that solar growth in the Southeast is dominated by utility-scale projects, and smaller residential and commercial solar projects are expected to comparatively lag due to the monopoly utility structure in place in most Southeastern states. SACE stresses that the region has immense solar potential, second only to the desert Southwest, and even more solar growth should be encouraged. For more information, see the 2017 Report here.
An ambitious bill introduced in the Massachusetts’ Senate proposes to accelerate expansion to the state’s renewable energy sector. Along with implementing a market-based system to reduce emissions, the bill also aims to increase the required growth rate of the state’s renewable portfolio from 1% to 3% per year. Specific goals and proposals for solar, wind and energy storage are included in the bill. Continue Reading Massachusetts Bill Aims to Accelerate Renewable Energy Transition
On February 15, 2018, FERC issued a notice that staff will hold a technical conference on April 10-11, 2018 to discuss the participation of distributed energy resources (“DER”) in markets operated by Regional Transmission Organizations and Independent System Operators. As FERC stated in the notice, the two-day conference will host several panels on two broad DER-related agendas: first, to continue considering the DER-related reforms initially proposed in the rulemaking culminating in the concurrently-issued Order No. 841 on electric storage participation in organized markets; and second, to broadly explore issues related to the potential effects of DERs on the bulk power system. Continue Reading FERC Establishes Technical Conference on Participation of Distributed Energy Resources in Organized Markets
In response to concerns regarding the changing nature of the nation’s energy supply portfolio and the emergence of promising energy storage technologies, the Commission in recent years issued several notices of inquiry, notice of proposed rulemaking, and policy statements regarding various energy storage and ancillary service supply issues. Additionally, the Commission considered but ultimately declined to pursue the Department of Energy-initiated rulemaking on grid resiliency and reliability. On February 15, 2018, however, the Commission took concrete action by issuing a pair of Final Rules, addressing (i) storage participation in regional markets; and (ii) the provision of primary frequency response, a critical grid support service. Continue Reading FERC Issues Final Rules on Electric Storage Participation in RTOs/ISOs and Primary Frequency Response for New Generators
The Bipartisan Budget Act of 2018 signed by President Trump on February 11th, included a package of tax credits that may be a boost for renewable energy development and storage projects. The deal extends tax credits for the so-called “orphan” renewable energy technologies along with nuclear power production. Continue Reading “Orphaned” Energy Tax Credits Included in Budget Deal