Troutman Sanders’ client, Alterra Power Corp. (Alterra), won the Renewable Energy M&A Deal of the Year award for its $1.1 billion acquisition by Innergex Renewable Energy Inc. (Innergex). Alterra is a diversified renewable power generation company based in Canada, and Innergex develops, acquires, owns and operates run-of-river hydroelectric facilities, wind farms, solar photovoltaic farms and geothermal power generation plants.

Troutman Sanders LLP served as U.S. counsel to Alterra, with a team led by partners Tom Rose and Shona Smith (Corporate) that included Cliff Sikora and Dan Larcamp (FERC), Mitch Portnoy (HSR), Megan Rahman (GICE), and Mark Goldsmith (Tax).

Troutman Sanders LLP has authored the 2019 Alternative Energy & Power Guide for Chambers and Partners. The firm’s Energy and Capital Projects & Infrastructure practices were asked by Chambers to be the exclusive contributor for the section. Associates Jamond Perry and Meghan Mandel and partners Christopher JonesAmie ColbyAnne DaileyBill DerasmoCliff Sikora, and John Leonti wrote and edited the guide.

View the Alternative Energy & Power Guide here.

Troutman Sanders’ energy practice groups have counseled utilities and other energy clients about changing regulatory challenges since the 1920s. The team handles matters across the energy-related sector including renewable energy, nuclear, and natural gas, energy construction, electricity, and energy storage.

On September 27, 2018, the U.S. Court of Appeals for the Second Circuit (“Second Circuit”) dismissed challenges to the New York zero emission credit (“ZEC”) program, ruling that: (1) the ZEC program is not field preempted by the Federal Power Act (“FPA”) because the ZEC program is not expressly tied to wholesale market participation or prices; (2) the ZEC program is not conflict preempted because it does not intrude on federal goals; and (3) the ZEC challengers did not have standing to raise a dormant Commerce Clause claim because they did not own out-of-state nuclear generators that they alleged were discriminated against by the ZEC program.

In August 2016, the New York Public Service Commission (“NYPSC”) issued the Clean Energy Standard Order (“CES Order”) adopting the ZEC program as part of a larger effort to reduce greenhouse‐gas emissions.  The program allocates ZECs to qualifying in-state nuclear energy generators that are financially “at-risk” of closing.  New York utilities are then required to purchase ZECs from either New York State Energy Research and Development Authority or the nuclear generators based on the price set by the NYPSC.  The initial price of each ZEC is calculated using the Social Cost of Carbon; however, the price of a ZEC decreases if a market price index, the calculation of which includes the clearing prices of certain regional wholesale energy auctions, exceeds a certain amount.  Accordingly, nuclear generators receive a fixed amount under the ZEC program for each MWh generated in addition to what the generators receive in the NYISO wholesale auctions.

In October 2016, ZEC challengers filed a complaint in the U.S. District Court for the Southern District of New York (“District Court”) alleging that the ZEC program was unlawful on two grounds.  First, the complainants alleged that the ZEC program is both field and conflict preempted by the FPA because it alters prices in the wholesale NYISO auction.  Second, the complainants argued that the program violates the dormant Commerce Clause by distorting interstate wholesale markets in favor of in-state nuclear generators.  In July 2017, the District Court dismissed the complaint (see July 31, 2017 edition of the WER).  On August 24, 2017, the case was appealed to the Second Circuit.

In its opinion, the Second Circuit first found that the ZEC program is not field preempted because it is not impermissibly “tethered” to wholesale market participation under U.S. Supreme Court precedent in Hughes v. Talen Energy Marketing, LLC (“Hughes”).  While ZEC challengers argued that Hughespreempts state programs if they are tethered to “FERC-regulated wholesale electricity prices,” the Second Circuit disagreed and stated that under Hughes, the “tether” is to “wholesale market participation.”  Because the CES Order does not expressly require ZEC recipients to participate in wholesale markets, the Second Circuit reasoned that there is no impermissible “tether” under Hughes.  Moreover, the Second Circuit held that any incidental effect of the ZEC program on wholesale prices is insufficient to state a claim for field preemption.  The Second Circuit also rejected the plaintiffs’ claims that the ZEC program conflicts with FERC’s goals of market competition, finding that FERC has previously approved state programs that incidentally affect wholesale market prices.  Finally, the Second Circuit found that ZEC challengers lacked standing to challenge the ZEC program under the dormant Commerce Clause because the plaintiffs’ asserted injuries arose from not owning nuclear generators, not from owning out-of-state nuclear generators that were being allegedly discriminated against.

The Second Circuit’s opinion can be viewed here.

NEW YORK – Con Edison Development, Inc., a subsidiary of Consolidated Edison, Inc. and one of America’s largest owners and operators of renewable energy infrastructure projects announced today its agreement to acquire a Sempra Energy subsidiary that owns 981 megawatts (MW) AC of operating renewable electric production projects, including its 379 MW AC share of projects that it owns jointly with Con Edison subsidiaries, and its development rights for solar production and battery storage projects. The purchase price for the acquisition is $1.54 billion (subject to closing adjustments, including working capital). The acquisition is expected to be completed near the end of 2018.

The Troutman Sanders team advising Con Edison was led by Capital Projects partner Craig Kline with support from Robert SchmickerVaughn Morrison and Felicia Xu. Additional support was provided by, among others, Daniel Anziska (Antitrust), Mason Bayler (Corporate), Carl Bivens and Michael L. Warwick (Real Estate), Jonathan Boyles (ERISA), Amie ColbyStuart Caplan and Jessica Lynch (FERC), Angela Levin and Morgan Gerard (Environmental), Roger Reigner (Tax) and James Schutz (IP).

Detailed information about the transaction can be found here.

Hydropower partner Chuck Sensiba is published in the April 2018 edition of The Environmental Law Reporter for a byline he coauthored titled, “Deep Decarbonization and Hydropower.” The article is excerpted from a soon-to-be-published book, Legal Pathways to Deep Decarbonization in the United States, by Michael B. Gerrard & John C. Dernbach.

In his article, Sensiba writes about hydropower’s role in reducing the United States’ dependence on carbon and examines challenges that can be addressed through specific legal and policy reforms. He writes, “Realizing the full potential of hydropower and maintaining the current hydropower fleet will likely depend on overcoming a number of impediments, including lengthy and complex regulatory requirements, failure of electricity markets to adequately compensate hydropower generators for the grid benefits they provide, environmental opposition to new hydropower, and interest in dam removal.” Read the full article here.

Originally posted on Troutman Sanders’ Washington Energy Report 

On April 2, 2018, FERC denied a complaint alleging that the interconnection process under Midcontinent Independent System Operator, Inc.’s (“MISO”) tariff was unjust and unreasonable because certain wind generators were experiencing delays in the process, such that those customers would not receive a Generator Interconnection Agreement (“GIA”) in time to receive Federal Production Tax Credit (“PTC”) benefits.  In doing so, FERC found that there was no evidence that MISO was not making reasonable efforts to meet interconnection deadlines, as required by its tariff.  FERC added that prior precedent does not require MISO to ensure wind generators receive their GIA in time to receive full PTC benefits. Continue Reading FERC Holds that MISO Interconnection Process Need Not Ensure that Interconnection Customers Receive PTC Benefits

Originally posted on Troutman Sanders’ Washington Energy Report

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

Originally posted on Troutman Sanders’ Washington Energy Report

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.