FERC has issued its final rule paving the way for incentive-based rate treatment for electric utilities that make certain voluntary cybersecurity investments. As we first noted in 2020 when describing the proposed rule, the final rule provides a new mechanism for promoting cybersecurity of the bulk-power system by rewarding utilities for proactively enhancing their cybersecurity programs beyond the mandatory requirements of the North American Electric Reliability Corporation (NERC) Critical Infrastructure Protection (CIP) reliability standards.
Power & Pipes
FERC, CFTC, and State Energy Law Developments
Hydrogen fuel cell vehicles will be a key component in the nationwide effort to achieve net-zero emissions by 2050. The Biden administration’s US National Blueprint for Transportation Decarbonization, which highlighted specific decarbonization opportunities and challenges for various modes of transportation, identified hydrogen as the option with the greatest long-term opportunity for decarbonizing long-haul heavy trucks. However, adoption of hydrogen fuel cell technologies for long-haul heavy trucks is highly dependent on advancing hydrogen fuel cell technologies and expanding the hydrogen refueling infrastructure, as well as the availability of hydrogen supply, the cost of alternative types of transportation, and regulatory drivers.
The US Department of Treasury issued its long-awaited proposed guidance on March 31, 2023 to implement the critical mineral and battery component watershed requirements of the Inflation Reduction Act (IRA), which significantly revised the tax credit incentive mechanism of the Internal Revenue Code (Code) that relates to electric vehicles (EVs). Since the IRA’s enactment, the critical mineral and battery component requirements have generated tremendous interest and comment from virtually all segments of the automotive, mining, and component manufacturing industries.
A change of control provision gives a party certain rights under a contract, such as the right to receive payment, require consent, or terminate the contract, in the event of a specified trigger. Triggers can relate to a change in ownership or control of a counterparty, changes in policies or key personnel, etc. Change of control provisions help to ensure that an agreement does not devolve into a disadvantageous relationship between parties. Because of the significant impact a change of control provision can have on both parties, it is important that these provisions be strategically negotiated and that appropriate diligence is taken to understand any existing provisions before they are triggered.
On March 16, FERC approved North American Electric Reliability Corporation (NERC) Reliability Standard CIP-003-9, Cyber Security – Security Management Controls, which introduces two new requirements to the suite of cybersecurity protections for low-impact bulk electric system (BES) cyber systems. The requirements focus on mitigating a supply chain risk that continues to challenge the electric industry: vendor remote access to critical electronic systems. The new rule will ensure these vendor risk mitigation requirements apply across every BES facility in the continental United States.
The Hydrogen and Fuel Cell Technologies Office issued a funding opportunity announcement (FOA) on March 15, 2023 that makes available up to $750 million to support the development of electrolyzer technology, domestic supply chains, and high-throughput manufacturing of electrolyzers and fuel cells. The funding is intended to improve the efficiency, durability, and cost of producing clean hydrogen using electrolyzers; to advance new manufacturing technologies for both electrolyzer and fuel cell technologies; and to create innovative approaches to increase reuse and recycling of clean hydrogen and fuel cell technologies.
In recent remarks, Commodity Futures Trading Commission (CFTC) Commissioner Christy Goldsmith Romero proposed that the CFTC promote market resilience to climate-related risk by adopting an approach for environmental/climate-related products, such as carbon offsets, similar to the CFTC’s regulatory response to virtual currencies.
Care and diligence must be used when crafting disclosure schedules in merger and acquisition documents. Unclear or incomplete disclosure schedules can have drastic implications for future litigation. Poorly crafted disclosure schedules can lead not only to indemnity litigation, but often lead to fraud and breach of warranty claims.
On March 2, the White House issued the National Cybersecurity Strategy (the Strategy), a broad vision to reinvigorate the federal government’s approach to cybersecurity and address a wide spectrum of long-term challenges. The Strategy reflects the latest significant cybersecurity-focused activity from the Biden administration and contains an ambitious set of goals and initiatives.
In energy contracts, there is a need for specificity in arbitration provisions, particularly in the delegation of arbitrability questions to the arbitrator. Because of the high stakes involved in contracts for energy production, transportation, refining, fractionation, mergers and acquisitions, and so on, parties are frequently willing to devote substantial resources to determine how a potential dispute should be resolved.