February 15, 2007

Will FERC's transmission siting rule create more jurisdictional conflict?

By Scott Hempling, National Regulatory Research Institute

Federal Energy Regulatory Commission (FERC) Order No. 689, issued on Nov. 16, 2006, established requirements and procedures for granting permits to build transmission facilities within "national interest electric transmission corridors" designated by the U.S. Department of Energy (DOE). After summarizing the statutory and regulatory background, this opinion piece addresses jurisdictional conflict between FERC and states, and among states.

 

Statutory background

With Section 216 of the Federal Power Act (added by Section 1221 of the Energy Policy Act of 2005), Congress changed a century of state-centered transmission practice. Attributing transmission shortages in part to a history of state-by-state decision-making that did not sufficiently serve the national interest, Congress authorized FERC to grant transmission siting permits that preempt contrary state decisions.

The new federal role involves two agencies. First, Congress authorized the DOE to designate a transmission corridor as a "national interest" corridor for either of two reasons: transmission constraints within it adversely affect economic vitality or economic growth; or to improve supply diversification, U.S. energy independence, national defense, or homeland security.

Second, FERC is authorized to issue permits to construct or modify transmission in the corridors, but only if:

• A state has withheld approval of a transmission project for more than one year or has conditioned its approval in a manner which "will not significantly reduce transmission congestion in interstate commerce or is not economically feasible";
• The applicant does not qualify under state law for siting approval; or
• The state lacks authority to approve the construction or modification or to consider interstate benefits.

After establishing its jurisdiction, FERC may permit the project if it satisfies five criteria in Sections 216(b)(2) through (6) of the Federal Power Act (FPA). The FERC permittee then may acquire the necessary right-of-way by the exercise of the right of eminent domain. Under FERC's regulations, the permit overrides any contrary state finding.

---