Originally posted on Troutman Sanders’ Washington Energy Report
On October 4, 2017, FERC issued two separate orders clarifying its jurisdiction under sections 203 and 205 of the Federal Power Act (“FPA”) related to certain project development activities. In Ad Hoc Renewable Energy Financing Group, FERC granted a petition for declaratory order and confirmed that certain tax equity interests in public utilities do not constitute “voting securities” for purposes of FPA section 203 and therefore do not require prior FERC approval. Separately, in ALLETE, Inc., FERC disclaimed jurisdiction under FPA section 205 over certain pre-construction activities and thereby found that ALLETE, Inc. did not need to file three pre-construction agreements with the agency.
In Ad Hoc Renewable Energy Financing Group, Petitioners filed a petition for a declaratory order requesting that FERC find that: (1) tax equity interests are not voting securities, but rather passive interests in accordance with FERC’s AES Creative Resources precedent; (2) assuming such interests are passive interests, the issuance or transfer of such interests does not require prior authorization under section 203 of the FPA; and (3) the acquisition of such interests by a holding company, therefore, qualifies for a blanket authorization under FERC’s regulations. In the AES Creative Resources case, FERC held that certain tax equity interests in public utilities do not constitute “voting securities” for purposes of FERC’s market-based rate regulations under FPA section 205. In granting the petition for declaratory order filed by Petitioners, FERC noted that its finding that tax equity interests were passive and did not require prior-approval under section 203 of the FPA was limited to the types of securities addressed in the AES Creative Resource proceeding.
In the ALLETE, Inc. proceeding, FERC found that three agreements governing pre-construction activities were not jurisdictional. On March 10, 2017, ALLETE filed, pursuant to FPA section 205, three agreements entered into with Manitoba Hydro and its subsidiary, Manitoba Limited, for the design, construction, and operation of the Great Northern Transmission Line. Specifically, the three agreements addressed the rights and obligations of the parties during the early stages of the project prior to energization of the transmission line. ALLETE contended that the agreements did not need to be filed with FERC because they concerned “preliminary scoping, study, pre-construction activities, and cost-sharing and, therefore, do not significantly affect rates and services” under FERC’s “rule of reason,” which allows FERC to exercise its discretion to allow utilities to forgo specific filings which deal with “practically insignificant” matters. FERC agreed with ALLETE and disclaimed jurisdiction over three agreements. FERC concluded that the matters within the agreements were only tangentially related to FERC’s jurisdiction under FPA section 205(c) and therefore, under FERC’s rule of reason, the agreements need not be filed.