Gridlock Continues for Grid Policy

Early last year, there were promising signs that electric transmission line construction would be facilitated by the convergence of the new administration’s emphasis on developing remote renewable generation resources, proposed legislative provisions expanding federal siting authority, and the granting by the Federal Energy Regulatory Commission (FERC) of generous cost-of-service returns on such investments. However, the stars did not align for transmission policy in 2009 as had been hoped, and the forecast is cloudy.

Siting Issues Remain Unresolved

One of the main disincentives to transmission line development is the long and costly siting process for new lines that have to cross multiple states, because each state has the right to stall or veto the line. Unfortunately, the U.S. Supreme Court on Jan. 19 declined to hear an appeal of a 2009 decision of the U.S. Court of Appeals for the 4th Circuit that interpreted Section 216 of the Federal Power Act in a way that diminished its usefulness for facilitating transmission siting.

Section 216, added by the Energy Policy Act of 2005, instructs the Department of Energy to designate "national interest" corridors where there is transmission congestion, which it has done for a section of the eastern and southwest United States. Section 216 provides FERC with "backstop" siting authority for proposed transmission projects in such corridors under circumstances where states could not or would not grant a siting permit on reasonable terms.

The 4th Circuit’s split 2 to 1 decision construed Section 216 to forbid FERC from exercising "backstop" siting authority when a state commission denies a siting permit, while acknowledging that FERC is granted such authority when a state commission delays action or unreasonably conditions a permit. In the curious decision, the majority held that Section 216 unambiguously withholds FERC’s authority in the case of a state denial, whereas the dissent held that the statute unambiguously grants FERC such authority.

A broad coalition of the energy industry — including the Edison Electric Institute, the American Public Power Association, and the National Rural Electric Cooperative Association — filed a Petition for Certiorari with the Supreme Court to overturn the decision. The petition was supported by amicus briefs by the four previous FERC chairmen and the U.S. Chamber of Commerce. Although FERC strongly disagreed with the Fourth Circuit’s interpretation, the U.S. solicitor general decided against filing an individual Supreme Court Petition on behalf of FERC.

The solicitor general’s response to the petition agreed that the 4th Circuit’s decision was "erroneous" and was potentially harmful energy policy. However, the solicitor general argued against the court hearing the case on several procedural grounds, including these:

• The uncertain standing of the state commissions and environmental groups to bring the 4th Circuit challenge because they had not established that their injury was "actual or imminent."

• The uncertain ripeness of the case for the court’s consideration because FERC’s action did not command anyone to do anything or refrain from any action.

• The chance that FERC could render a decision that was not consistent with the 4th Circuit’s holding in a specific state permit denial case arising outside of the 4th Circuit, thus paving the way for another court of appeals to opine on the meaning of Section 216.

The Supreme Court’s refusal to hear the appeal says nothing about the merits of the 4th Circuit decision or any other issue, as the Supreme Court takes very few cases. However, allowing the 4th Circuit’s decision to stand may force transmission developers to consider whether they should propose costly projects if they believe it possible that a state will reject the project and FERC has no backstop authority in that situation. Attempting to challenge the 4th Circuit’s decision in another forum would take several years and great expense, with no assurance of the outcome.

Other Issues Persist

Meanwhile, the legislative proposals that had been introduced in 2009 to provide FERC more specific federal backstop siting authority were included in the controversial climate change legislation, which has become bogged down for other reasons. In addition, some eastern states have protested legislation that would aid the building of transmission lines from midwest wind farms to their region because they fear the lines may undermine efforts to build local renewable resources. Moreover, the battle over who pays for new lines intensified during 2009 with legislative proposals to limit cost allocation to those receiving "measurable" benefits from a line. And there is an additional battle brewing as to whether transmission planning should be done at a national or local level.

Some progress is being made on developing new lines in sparsely populated areas. However, the same conflicting political forces that have frustrated much transmission development for the past 20 years appear likely to continue doing so, at least until the next major blackout forces compromises to be made.

—Brian R. Gish ([email protected]) is of counsel in Davis Wright Tremaine’s Energy Practice Group.