PJM Proposes Capacity Performance Rules That Will Present New Opportunities and Risks For Clean Energy Resources

By Michael Gergen and Eli Hopson 

In response to poor performance by many generation resources in the PJM region during the 2104 “Polar Vortex” and concerns over the increasing reliance on natural gas-fired generation resources in the PJM region, PJM filed under Section 205 of the Federal Power Act (“FPA”) proposed “Capacity Performance” rules to revise its capacity market, known as the “Reliability Pricing Model” or “RPM”, with the Federal Energy Regulatory Commission (“FERC” or “Commission”) on December 12, 2014.  In connection with its filing of proposed tariff revisions, PJM also filed under both Sections 205 and 206 of the FPA proposed revisions to its Operating Agreement which would narrow force majeure for non-performance.  PJM’s proposed revisions to its capacity market construct, if implemented, would present clean energy resources with new opportunities and risks regarding their participation in PJM’s capacity market, by, among other things, allowing participation by energy storage resources.

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Air & Climate Forecast: December 2014

Latham & Watkins is pleased to present a complimentary 45-minute webcast on Thursday, December 11 at 9:00 am pacific/12:00 pm eastern. The webcast is presented by the Air Quality and Climate Change Practice and will address the following current air quality and climate change regulatory and policy updates:

  • Implications of EPA’s Newly Proposed Ozone Standard
  • EPA’s Aggressive Enforcement of GHG Requirements: the Settlement With Kia and Hyundai
  • EPA’s Clean Power Plan: Comments on the Proposal and Implications of the Recent US-China Climate Agreement

Click here to register. A confirmation will be sent via email upon completing your registration.

CARB Invalidates Offsets for Facility's Alleged RCRA Noncompliance

By Claudia O'Brien and Bart Kempf

On November 14, 2014, the California Air Resources Board (CARB) released a final determination invalidating almost 89,000 previously-issued offset credits due to CARB’s conclusion that the facility at issue failed to comply with a permit issued under the Resource Conservation and Recovery Act (RCRA).[1]  CARB reached this conclusion even though it determined that “the [GHG] emission reductions represented by the offsets at issue here are real, quantified, and verified reductions.”[2]  CARB’s decision comes following a months-long investigation, and leaves open a number of questions about how California will exercise its discretion to investigate and invalidate offsets in the future.

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Climate Action Plan for San Diego County Struck Down Under CEQA by Court of Appeal for Failure to Comply with Requirements for Plan Level Documents and Failure to Adequately Mitigate Associated GHG Impacts

By Chris Garrett, Daniel Brunton, Taiga Takahashi, Andrew Yancey, and Natalie Rogers

On October 29, 2014, the Fourth District Court of Appeal of California upheld the Sierra Club’s challenges to the County of San Diego’s (“County”) approval of a climate action plan (“CAP”) and related significance thresholds under the California Environmental Quality Act (“CEQA”).  In Sierra Club v. County of San Diego, No. D064243, 2014 WL 5465857 (Cal. Ct. App. Oct. 29, 2014), the Court held that the County’s CAP did not ensure the necessary greenhouse gas (“GHG”) emissions reductions and that the County failed to meaningfully analyze the environmental impacts of the CAP.  This opinion was certified for publication on November 24, 2014.

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California Low Carbon Fuel Standard Overhaul Continues

By Joshua Bledsoe, Michael Dreibelbis, Michele Leonelli, and Aron Potash

I. LCFS Readoption

The California Air Resources Board (“ARB”) is on the cusp of readopting the Low Carbon Fuel Standard (“LCFS”) regulation to remedy legal defects in the initial adoption process found by the California Court of Appeal on July 15, 2013.  In conjunction with the LCFS readoption, ARB is expected to propose significant changes to the program.  ARB staff has been vetting potential revisions via a series of workshops this year, and ARB plans to float a draft revised LCFS regulation next month.  The readoption process gained momentum this summer when the Supreme Court denied certiorari regarding the constitutionality of the program.  A new cost containment mechanism, an updated carbon intensity model, and a reanalysis of fuel availability are among the significant changes that could materially impact program participants, both obligated entities and opt-in fuel producers. 

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Air & Climate Forecast: November 2014

Latham & Watkins is pleased to present a complimentary 45-minute webcast on Thursday, November 13 at 9:00 am pacific/12:00 pm eastern.The webcast is presented by the Air Quality and Climate Change Practice and will address the following current air quality and climate change regulatory and policy updates:

  • Vapor Intrusion – or EPA’s Foray into the Regulation of Indoor Air
  • CARB’s Post Hoc Invalidation of Offsets for Alleged Noncompliance with Other Environmental Laws
  • Market Design Issues With AB32 – and What Can Be Done

Click here to register. A confirmation will be sent via email upon completing your registration.

FERC Accepts Almost All of the CAISO's Proposed Flexible Resource Adequacy Capacity and Must-Offer Obligation Requirements

By Michael J. Gergen and Marc T. Campopiano

On October 16, 2014, the Federal Energy Regulatory Commission (“FERC”) issued an Order on Tariff Revisions, FERC Docket No. ER14-2574, conditionally accepting, with two substantive modifications, tariff changes proposed by the California Independent System Operator (“CAISO”) to establish new flexible resource adequacy capacity (“FRAC”) and must-offer obligation (“MOO”) requirements intended to ensure that adequate flexible capacity is available to address the added variability and net load volatility associated with ongoing and expected future changes on the CAISO-controlled grid.  The FRAC-MOO requirements will be effective, subject to a compliance filing by the CAISO (due within 30 days of the date of the order), effective November 1, 2014, to allow load serving entities (“LSEs”) subject to the requirements time to make their first FRAC showings to the CAISO by November 15, 2014.

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CARB Proposes Invalidating Offset Credits for Facility's Alleged RCRA Noncompliance

By Claudia O'Brien and Bart Kempf

For the first time since California established its cap-and-trade market for greenhouse gas (GHG) emissions, the California Air Resources Board (CARB) has proposed canceling over 230,000 tons of offset credits due to a facility’s alleged potential failure to comply with unrelated environmental laws.[1]  CARB is proposing the invalidation even though it has concluded that “the [GHG] emission reductions represented by the offsets at issue here are real, quantified, and verified reductions.”[2]  CARB issued its preliminary determination on October 8, 2014, opening a 10-day comment period.  Following the comment period, CARB has 30 days to make a final determination.

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Desert Renewable Energy Conservation Plan to Streamline Permitting for 20,000 Megawatts of Renewable Energy

By Jennifer Roy, Marc Campopiano and Joshua T. Bledsoe

On September 23, 2014, the California Energy Commission (“CEC”), California Department of Fish and Wildlife (“CDFW”), US Bureau of Land Management (“BLM”), and US Fish and Wildlife Service (“FWS”) released the Draft Environmental Impact Report (“EIR”)/Environmental Impact Statement (EIS”) for the Desert Renewable Energy Conservation Plan (“DRECP”).  The DRECP would create a framework to streamline permitting for up to 20,000 megawatts of renewable energy projects on more than 22 million acres in the California Mojave and Colorado/Sonoran desert region.

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SDG&E 2014 Energy Storage Systems Request for Offers Among the Largest to Date

By Michael J. Gergen, Marc T. Campopiano and Andrew H. Meyer

On September 5, 2014, San Diego Gas & Electric (“SDG&E”) issued a 2014 Energy Storage System (“ESS”) Request for Offers (“RFO”) soliciting at least 25 MW—and up to 800 MW—of energy storage (the “2014 ES RFO”).  SDG&E’s 2014 ES RFO is among the largest solicitations to date in the U.S. for grid-scale energy storage resources.

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The purpose of this communication is to foster an open dialogue and not to establish firm policies or best practices. Needless to say, this is not a substitute for legal advice or reading the rules and regulations we have summarized. In any particular case, you should consult with lawyers at the firm with the most experience on the topic. Depending on your specific situation, answers other than those outlined in this blog may be appropriate.