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Smart Grid Primer: Legal Issues
Derek A. DysonDuncan, Weinberg, Genzer & Pembroke, P.C.
Energy Bar Association
December 4, 2009
2
Agenda
I. IntroductionII. Grant Agreement
Negotiate Terms Key Provisions
III. ReportingIV. Regulatory RequirementsV. Other IssuesVI. Conclusions
3
I. Introduction: What Are Smart Grids?
Source: Electric Power Research Institute
4
II. Grant Agreement
Notification of Grant Award: Awardees were notified on October 24, 2009
Notification triggers the start of negotiation with DOE to finalize grant agreement
Finalize terms of any Cost Share commitments with Sub-Recipients Identify any modifications to the project plan, e.g.,
new project partners, revised cost share amount
5
Negotiate Terms Negotiate Terms Applicable to Client DOE’s schedule for SGIG is to have contracts in
place by 12/30/2009 Prime Recipients, Sub-recipients, and Vendors
Prime Recipient Agreements with Sub-recipients and Vendors
Recipients should apply their standard procurement policies
Flow-through provisions Buy American (ARRA § 1605) Wage Rate/Davis-Bacon Act (ARRA § 1606) Whistleblower Protection (ARRA § 1553) GAO/IG Access (ARRA §§ 902, 1514, 1515) Reporting Requirements (ARRA § 1512)
Technical questions from DOE will need to be addressed
Budget modifications/clarifications
6
Key Provisions - Issues
Applicability – prime recipients/sub-recipients
Cost Accounting Access to Records Requirements may impose substantial
burdens Project Execution Plan Risk Management Plan Cyber Security Plan
Intellectual Property Closeout
7
Key Provisions, Cont’d.
DOE & client must finalize cost benefit analysis methodology
Vendor and sub-recipient agreements entered into prior to DOE acceptance may need to be modified to comply with DOE terms & conditions
Client may seek clarification from DOE regarding award requirements E.g., equipment purchased within the Smart Grid
grant will be encumbered with an ownership interest held by the Federal Government, how will that impact utility mortgages. (10 CFR §§ 600.132 or 600.321)
8
Applicability
Grant recipients (primary applicant) First-tier recipients Agreement is with the primary Recipient
Sub-recipients (2 CFR § 176.30) A non-Federal entity that expends Federal money
received through a pass-through entity to carry out a Federal program, but does not include an individual that is a beneficiary of such a program
i.e., if a utility cooperative applies for funding on behalf of its members, the members may be Sub-recipients
Vendors (limited information required)
9
Applicability, Cont’d.
Flow Down Requirements in
Agreements with Sub-Recipients All Recipients must flow down the requirements of
applicable Federal, State and local laws, regulations, DOE policy and guidance, and instructions in the Grant Agreement to flow down recipients at any tier to the extent necessary to ensure the Recipient’s compliance with the Grant Agreement.
10
III. Reporting
Finalize terms of reporting relationship with Sub-recipients once reporting requirements are negotiated with DOE Supervisory role over Sub-recipients:
Recipients can delegate but are ultimately responsible for the data reported
Reporting requirements for Recovery Act (ARRA) and Department of Energy
11
Flow of Reimbursement and Data Reporting Example:
Department of
Energy
Department of
Energy
CooperativeMembers
CooperativeMembers
Contractor,Supplier,
Etc.
Contractor,Supplier,
Etc.
Sub-Recipient Vendor
Contractor,Supplier,
Etc.
Contractor,Supplier,
Etc.
$ $
ElectricCooperative
ElectricCooperative
Recipient*Grantor
*Recipient maintains duty of reporting
(can delegate to Sub-Recipient, but ultimately responsible for ALL data reported)
$
$
Report Jobs and Cost Dataat FederalReporting.gov
Report on VIPERS
12
Reporting Requirements
Data quality Goal is to avoid:
Material omissions Significant reporting errors Double-counting
Additional Recovery Act goals: Transparency Accountability
Additional Department of Energy goals: Learn from the grants program Share data through Smart Grid Clearinghouse
for industry benefits Prime Recipient is responsible for creating
processes to ensure data integrity
13
IV. Regulatory Requirements
Recovery Act DOE Financial Assistance Rules (10
CFR Part 600) Accounting and Audit Requirements
14
Recovery Act Requirements
Buy American (§ 1605) Include in all Recovery Act-funded construction
contracts if governmental entity constructing “public works” or “public buildings”
48 CFR § 52.225-21 - 24 Davis-Bacon Act (§ 1606) Whistleblower Protection (§ 1553)
Include in all Recovery Act funded contracts 48 CFR § 52.203-15
15
Recovery Act Requirements, Cont’d.
GAO/IG Access (§§ 902, 1514, 1515) Include in all Recovery Act funded solicitations,
contracts & orders, as applicable 48 CFR §§ 52.212-5, 52.214-26, 52.215-2
Reporting Requirements (§ 1512) Include in all Recovery Act funded solicitation,
contracts & orders 48 CFR § 52.204-11
16
Buy American Provision
Prohibits use of Recovery Act funds for: A project for construction, alteration,
maintenance or repair of a public building or public work unless all of the iron, steel, and manufactured goods used in the project are produced in the United States.
Some exceptions
17
Davis-Bacon:
All persons employed by recipients & sub-recipients on Recovery Act funded construction, alteration or repair projects shall be paid wages at rates not less than prevailing rates on projects of similar character in locality
Contractors & subcontractors on prime contracts >$100k must pay 1.5 x basic rate for all hours > 40hrs/wk
DOL compliance guide at: http://www.dol.gov/compliance/guide/dbra.htm
18
Davis-Bacon Act: cont’d
Grant recipients & sub-recipients who directly hire persons to perform construction work funded by Recovery Act must comply
May be applicable to cooperative employee who is being paid with Recovery Act funds, e.g., Grant Administrator
Reporting requirements 29 CFR § 5.5: Weekly copy of payroll Statement of compliance
19
Financial Assistance Rules
10 CFR Part 600 Subpart A: general requirements applicable to all Subpart B: requirements applicable to non-profits Subpart D: requirements applicable to for-profits
Financial Assistance Rules revised effective 9/28/09
Financial Assistance Rules available at: http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&tpl=/ecfrbrowse/Title10/10cfr600_main_02.tpl
20
Provisions Required By Financial Assistance Rules
All contracts awarded by recipient including small purchases (<$100k) must include the following, as applicable: Equal Employment Opportunity Copeland Anti-Kickback Act (>$2000 construction or
repair contract) Davis-Bacon Act (>$2000 construction contract) Contract Work Hours & Safety Standards Act
(>$2000 construction contract; >$2500 others)
21
Provisions Required By Financial Assistance Rules, Cont’d.
All contracts awarded by recipient including small purchases (<$100k) must include the following, as applicable: Rights to inventions made under contract (37
CFR Part 401) Clean Air Act and Federal Water Pollution
Control Act (>$100,000 contracts & subgrants) Byrd Anti-Lobbying Amendment Certification
(bid ≥$100k) Debarment & Suspension (>$100k small
purchase threshold and certain other contracts) www.epls.gov
22
Accounting & Audit Requirements
Recipients must maintain records identifying source & application of Recovery Act funds
FERC develops accounting guidance for DOE
Neither FERC nor RUS Uniform System of Accounts has issued Smart Grid accounting guidance
Until guidance is issued segregate Smart Grid assets in appropriate sub-accounts
23
V. Major Outstanding Issues
Does the project have external intellectual property issues: e.g., SIPCO
Utility mortgages on equipment versus DOE’s ownership interest in equipment (10 CFR §§ 600.132 or 600.321)
DOE Reporting requirements are still in flux
Cyber-Security training available from DOE within 4-6 weeks
24
VI. Conclusions
Prior and after award, requirements may change Requirements may vary between applicants Reporting requirements are extensive DOE Financial Assistance Rules are extensive (10
CFR Part 600) Accounting guidelines are incomplete, but keep
accounts separate DOE intends to have hands off on project
management, but hands on regarding reporting and data collection
25
Supplemental Slides
26
Recovery Act Smart Grid Awards
100 Awards of Smart Grid Investment Grants DOE issued Notice of Awards on October 27,
2009 32 Awards of Smart Grid Demonstration
Grants DOE issued Notice of Awards on November 24,
2009 Awards are geographically dispersed
across the United States
27
Negotiate Terms, Cont’d. DOE may request additional information:
Indirect cost information Other budget information Name & phone of Designated Responsible
Employee for complying with anti-discrimination policies
Representation of Limited Rights Data & Restricted Software, if applicable
Commitment Letter from Third Parties Contributing to Cost Sharing, if applicable
Certification as to USA status of prime awardee or national status of any subawardee
EPAct Representation (EPAct 1992 has a requirement that grantee must state that its participation in the grant program is in the economic interest of the U.S.)
28
AL Southern Company Services
AR Woodruff Electric
AZ Salt River Project
Southwest Transmission Coop
Navajo Tribal Utility Association
CA Sacramento Municipal Utility District
Burbank Water and Power
San Diego Gas and Electric
City of Glendale
City of Anaheim
Modesto Irrigation District
CO City of Fort Collins
Black Hills/Colorado Electric
CT Connecticut Municipal Electric Energy Coop
DC PEPCO
FL Florida Power & Light
Lakeland Electric
JEA
City of Leesburg, FL
City of Tallahassee
Talquin Electric Cooperative
Intellon Corporation
City of Quincy, FL
GA Cobb Electric Membership
Municipal Electric Authority of GA
Georgia System Operations Corp.
Tri State Electric Membership Corp.
GU Guam Power Authority
HI Hawaii Electric Co.
IA Iowa Ass’n of Municipal Utilities
ID Idaho Power Company
M2M Communications
IL City of Naperville, IL
IN Indianapolis Power and Light Company
City of Auburn, IN
KS Westar Energy, Inc.
Midwest Energy, Inc.
KY South Kentucky Rural Electric Cooperative
LA Cleco Power LLC
Lafayette Consolidated Government
Entergy New Orleans, Inc.
Entergy Services, Inc.
City of Ruston, LA
MA Honeywell Int’l
NSTAR Electric Co.
Town of Danvers, MA
ISO of New England
Marblehead Municipal Light Department
Vineyard Energy Project
MD BG&E
Smart Grid Investment Grant Awardees:
29
ME Central Maine Power Co.
MI Detroit Edison Company
Whirlpool Corp.
MO City of Fulton, Missouri
MS South Mississippi Electric Power Ass’n
NC Duke Energy (x2)
Progress Energy
NE Cuming County Public Power District
Stanton County Public Power District
NH New Hampshire Electric Cooperative
NJ Atlantic City Electric Co.
NV NV Energy
NY ConEd
NYISO
OH First Energy Service Company
City of Wadsworth, OH
City of Westerville, OH
OK Oklahoma Gas and Electric Co.
OR Pacific Northwest Generating Cooperative
Central Lincoln People’s Utility District
PA PECO
PPL
PJM
PA Wellsboro Electric
SD Black Hills Power, Inc.
Sioux Valley Energy
TN Electric Power Board of Chattanooga
Memphis Light, Gas and Water
Knoxville Utilities Board
TX CenterPoint Energy
TX Reliant Energy Retail Services
Golden Spread Electric Cooperative
Denton County Electric Cooperative
El Paso Electric
UT WECC
VA Rappahannock Electric Cooperative
Northern Virginia Electric Cooperative
VT Vermont Transco
WA Avista Utilities
Snohomish County Public Utilities District
WI American Transmission Company (x2)
Madison Gas and Electric
Wisconsin Power and Light
WY Cheyenne Light, Fuel and Power Company
Powder River Energy Corporation
Smart Grid Investment Grant Awardees, Cont’d.:
30
CA LADWP
SCE (x2)
Primus Power Corporation
Seeo, Inc.
Amber Kinetics, Inc.
PG&E
MA NSTAR Electric & Gas (x2)
Premium Power Corporation
Beacon Power Corporation
MI Detroit Edison Company
MO Kansas City Power & Light
Boeing Company
NC Duke Energy
NH SustainX, Inc.
NM Ktech Corporation
PSCo. Of New Mexico
NY ConEd
Long Island Power Authority
New York Power Authority
New York State Electric & Gas
OH AEP Ohio
City of Painesville
PA East Penn Manufacturing Co.
44 Tech Inc.
Smart Grid Demonstration Grant Awardees:
TX Center for the Commercialization of Electric Technologies
Pecan Street Project
Oncor Electric Delivery Company
VA Nat’l Rural Electric Cooperative Ass’n
WA Battelle Memorial Institute, Pacific Northwest Division
WI Waukesha Electric Systems
31
Cost Accounting
All Smart Grid grant funds received from DOE must be separated from all other funds in recipients’ books (this includes sub-recipients)
Smart Grid grant funds can only be used for costs allowable by the Grant Agreement and the Recovery Act
Be on the lookout for accounting guidance from FERC
32
Access to Records
Transparency is paramount Audits anticipated All of the Smart Grid grant-related records
of Grantee are subject to review by the Federal Government Inspector General Comptroller General
Any officer, employee, contractor, subcontractor, sub-recipient, etc is subject to be interviewed by the Federal Government – may visit facilities
33
Extensive Reporting
What will be reported will be negotiated Project Management/Execution Plan
Earned Value Approach (time vs. project value) – may be reported monthly
Risk Management Plan Cyber Security Plan Required Plans may be submitted
after execution of the Agreement
34
Intellectual Property
Intellectual property Patent rights: DOE waives its general
rule that title vests in the Federal government for all inventions under DOE awards
Rights in technical data: The Federal government generally has unlimited rights in technical data under the grant Agreement except when developed solely at private expense
35
Closeout
Inventory of government owned equipment
Release of ownership from DOE for government equipment
All final reports must be timely submitted within 90 days after final project period ends
All grant funds not spent will need to be returned to the DOE
36
Reporting
DOE Reporting Checklist Identifies reporting requirements Identifies frequency for reporting Identifies special instructions for
reporting Available at:
http://www.cio.energy.gov/documents/4600-2.pdf
37
Additional Smart Grid Related Reporting to DOE
o Management Reportingo Earned Value Progress Reporting
o Technical Reportingo Cost/Benefits Data Metrics
o Financial Reportingo Financial Status Report (Long or Short Form)
o Closeout Reportingo Patent Certificationo Property Certification
o Other Reportingo Annual Indirect Cost Proposalo Annual Inventory of Federally Owned Property, if any
38
Reporting Requirements: What?
Data elements include: The total amount of Recovery Act covered
funds received from DOE;
The amount of Recovery Act covered funds received that were expended or obligated to projects or activities;
Detailed information on subcontracts or sub-grants awarded by recipient
May be required to submit backup documentation for expenditures
39
Audit Requirements
Financial Assistance Rules define “non-profit” (10 CFR § 600.3)
DOE may presume all cooperatives are “non-profits”
Cooperatives seeking to avoid burden of non-profit status can negotiate with Contracting Officer that “part of net earnings [does] inure to the benefit of any private shareholder or individual” e.g., capital credits
40
Single Audit Information: OMB Circular A-133
Audits of States, Local Governments, & Non-Profits, OMB Circular A-133
Schedule of Expenditures of Federal Awards (SEFA) Data Collection Form (SF-FAC) submit online at:
http://harvester.census.gov/fac/collect/formoptions.html
Recipients must identify each sub-recipient & document at the time of the sub award & disbursement of funds: Federal award number Catalog of Federal Domestic Assistance (CFDA)
number Amount of Recovery Act funds
Recipients agree to require their sub-recipients to include on their SEFA information to specifically identify Recovery Act funding
41
Audit Requirements Generally
Non-Profits subject to: Subpart B (10 CFR §§ 600.101 et seq.) OMB Circular A-133 Single Audit Information
http://www.whitehouse.gov/omb/assets/omb/circulars/a133/a133.pdf
Others subject to: Subpart D (10 CFR §§ 600.301 et seq.) Generally Acceptable Government Auditing
Standards (GAGAS) for RUS Borrowers may or may not satisfy DOE independent audit requirements
RUS policy is to accept A-133 audit in lieu of required RUS audit if cooperative agrees to A-133 audit at request of another agency
42
Key References
American Reinvestment & Recovery Act of 2009 www.recovery.gov
Department of Energy www.energy.gov Office of Management & Budget (OMB)
http://www.whitehouse.gov/omb/ DOE Smart Grid Investment Grant (DE-
FOA-0000058) and Demonstration Grant (DE-FOA-0000036) Funding Opportunity Announcements
DOE Contracting Officers and Technical Negotiators