The U.S. Federal Energy Regulatory Commission (FERC) finalized an order last Thursday that it says reforms its transmission planning and cost allocation requirements “to benefit consumers by enhancing the grid’s ability to support wholesale power markets and ensuring transmission services are provided at just and reasonable rates.”
Order No. 1000 requires public utility transmission providers to improve transmission planning processes and allocate costs for new transmission facilities to beneficiaries of those facilities. It also requires public utility transmission providers to align transmission planning and cost allocation.
These changes, FERC says, will remove barriers to development of transmission facilities and were approved after considering more than 200 sets of public comments. Order No. 1000 builds on FERC’s open access reforms of Order No. 888 (1996) and the planning reforms of Order No. 890 (2007).
The new rule establishes three requirements for transmission planning:
- Each public utility transmission provider must participate in a regional transmission planning process that satisfies the transmission planning principles of Order No. 890 and produces a regional transmission plan.
- Local and regional transmission planning processes must consider transmission needs driven by public policy requirements established by state or federal laws or regulations. Each public utility transmission provider must establish procedures to identify transmission needs driven by public policy requirements and evaluate proposed solutions to those transmission needs.
- Public utility transmission providers in each pair of neighboring transmission planning regions must coordinate to determine if there are more efficient or cost-effective solutions to their mutual transmission needs.
The rule also establishes three requirements for transmission cost allocation:
- Each public utility transmission provider must participate in a regional transmission planning process that has a regional cost allocation method for new transmission facilities selected in the regional transmission plan for purposes of cost allocation. The method must satisfy six regional cost allocation principles.
- Public utility transmission providers in neighboring transmission planning regions must have a common interregional cost allocation method for new interregional transmission facilities that the regions determine to be efficient or cost-effective. The method must satisfy six similar interregional cost allocation principles.
- Participant-funding of new transmission facilities is permitted, but is not allowed as the regional or interregional cost allocation method.
The rule also promotes competition in regional transmission planning processes by removing from FERC-approved tariffs and agreements a federal right of first refusal for transmission facilities selected in a regional transmission plan for purposes of cost allocation, subject to certain limitations.
In his media comments, Chairman Jon Wellinghoff said that “The key driver of the action we consider today in this Final Rule is reliable transmission service at just and reasonable rates.”
As did three of his fellow commissioners, Wellinghoff noted that the new rule could facilitate transmission development needed for new renewable generation: “the mix of generation resources seeking to use the transmission system is changing. These changes result from the resource mixes chosen by the regions, which in part reflect public policy requirements such as renewable portfolio standards established by states. This Rule will facilitate identification of transmission needs driven by a region’s public policy requirements, and consideration of efficient and cost-effective transmission solutions to meet those needs. I should point out that the enhanced transmission planning which we require today is not for one type of technology versus another, but is technology neutral.”
Commissioners Cheryl A. LaFleur, John R. Norris, and Philip D. Moeller also addressed renewables in their remarks. Moeller, for example, noted that “a well-designed transmission network can allow efficient and cost-effective renewable resources to compete on an equal basis with traditional sources of power.”
Norris also commented that “our reforms to rights of first refusal in federal tariffs provide for competition in the design, building and ownership of regional transmission facilities, which will allow a new wave of capital and innovation to flow into transmission.”
LaFleur also addressed the issue of opening up competition: “At a time of great expansion in the transmission grid, it is imperative that we invest in the right transmission for customers. Allowing both incumbents and nonincumbents the ability to propose transmission projects will help make that happen. I note the Final Rule opens up the planning process, but rejects the proposed structure in the proposed rule that would have guaranteed that project sponsors retain project rights for a defined period of time. This was widely viewed as unworkable by commenters.”
In his comments on the decision, Commissioner Marc Spitzer said, “While I recognize there are legitimate differences of opinion on transmission planning and cost allocation, the grid should no longer be plagued by piecemeal, ad hoc, facility-by-facility determinations. Rules that provide certainty and clarity up-front on a regional basis will engender much needed investment in transmission, which in turn benefits our nation’s consumers.” He also noted that the rule “does not mandate a uniform approach nationwide.”
Though the vote finalizing the order was unanimous, Moeller expressed some caveats. Among them was the fact that the rule only addresses long-distance transmission lines, “which is only a subset of the critical issues that are inhibiting needed investment.” Additionally, “this rule also cannot address issues of state law, regardless of the reliability needs that are served by a new transmission line. Moreover, this rule did not address whether a transmission provider can thwart competitive options by refusing to upgrade its transmission system. For these reasons, this rule will not resolve all of the difficult issues that discourage this nation from constructing needed transmission lines.”
Order No. 1000 takes effect within 60 days of publication in the Federal Register.