Driven by the entry of renewable generation resources locating far from load centers and the new demands placed on the grid by their differing characteristics, the Federal Energy Regulatory Commission (FERC) launched a comprehensive review of its policies regarding regional transmission planning, interconnection and cost-allocation.  In an Advance Notice of Proposed Rulemaking (ANOPR), the agency requested public comments on its current policies and offered potential areas for reform with a view toward anticipated future generation.  According to FERC Chairman Richard Glick, “(a) piecemeal approach to expanding the transmission system is not going to get the job done. We must take steps today to build the transmission that tomorrow’s new generation resources will require.”

This initiative is likely to result in specific proposals from FERC and ultimately reform of its rules and policies that could substantially change how the electric grid is planned and paid for.  Accordingly, the ANOPR should be of interest to any company with a current or anticipated interest in, or use of, grid facilities.

This is the second initiative in as many months that FERC has taken a big step toward addressing the kind of grid needed for renewable generation  As discussed in a prior post to the blog, last month FERC established a Joint Federal-State Task Force on Electric Transmission with state and local regulatory agencies to address barriers to transmission planning and development, opportunities for states to coordinate on regional transmission solutions, and barriers to interconnecting new resources.

The ANOPR

After providing a comprehensive discussion of its current policies regarding transmission planning, cost allocation and interconnection, FERC says “it is now appropriate to examine whether the existing regional transmission planning and cost allocation and generator interconnection processes adequately account for the transmission needs of the changing resource mix.”  Accordingly, the ANOPR identifies the following major aspects as potential areas for reform.  For each aspect, the ANOPR requests comments on the adequacy of current policies and also suggests potential reforms.

Regional transmission planning and cost allocation processes.  Potential reforms include (1) planning for the transmission needs of anticipated future generation, i.e., not limited to resources in current interconnection queues, to achieve more cost-effective transmission solutions in regional transmission plans, and (2) requiring transmission providers to identify geographic zones that have the potential for large amounts of renewable generation and to plan transmission to facilitate the integration of renewable resources in those zones.  FERC also wants comments on how the regional transmission planning and cost allocation and generator interconnection processes could be better coordinated or integrated.

Identifying the benefits, cost and responsibility for grid facilities. One potential reform is to eliminate the current policy that requires interconnecting generators to pay the total cost of grid network upgrades that would not be needed but for the interconnection.  FERC observes that a network upgrade may sufficiently benefit grid customers or later-in-time interconnections that it is appropriate to allocate the costs more broadly.  Eliminating the policy could increase integration of generation by reducing cost uncertainty to resources in the  interconnection queue and by removing a potentially prohibitive cost assignment to the resource first in line in the interconnection queue, which will bear the full brunt of needed grid upgrade costs that may also  benefit resources next in line.

Enhanced transmission oversight.  Given the potentially significant investment in transmission facilities to come, FERC is considering enhanced oversight of transmission planning and spending to ensure that transmission rates remain just and reasonable.  For example, FERC could require that transmission providers establish an independent entity to monitor the planning and cost of transmission facilities in a region and to possibly provide advice on the design and implementation of the regional transmission planning and cost allocation processes.  FERC also requests comment on involving state commissions in transmission planning and cost allocation processes and in limiting the costs that can be recovered for regional transmission facilities that are abandoned prior to going into service.

Commissioner statements

While the ANOPR was approved unanimously, all four commissioners issued concurring  statements.[1]

Chairman Glick and Commissioner Clements issued a joint concurrence that provides a deeper discussion of certain topics than appears in the ANOPR, such as the extent of the shift toward renewable resources and the reasons for it.  The concurrence is also more conclusory regarding how and why the current regional transmission planning, cost allocation and generator interconnection processes may no longer ensure just and reasonable rates for transmission service.  Finally, the concurrence offers the following:

We anticipate that this effort will be the Commission’s principal focus in the months to come.  In addition to reviewing the record assembled in response to today’s order, we intend to explore technical conferences and other avenues for augmenting that record—including through the joint federal-state task force (footnote omitted)—before proceeding to reform our rules and regulations.

Commissioner Danly’s concurrence observes that many of the proposals would “exceed or cede our jurisdictional authority, violate cost causation principles, create stifling layers of oversight and ‘coordination,’ trample transmission owners’ rights, force neighboring states’ ratepayers to shoulder the costs of other states’ public policy choices, treat renewables as a new favored class of generation with line-jumping privileges, and perhaps inadvertently lead to much less transmission being built and at much greater all-in cost to ratepayers.”  Accordingly, Commissioner Danly requests that comments address whether each proposal is a proper exercise of the Commission’s authority and the ultimate effect on ratepayers.

Commissioner Christie’s concurrence notes that “(t)his consideration of potential reforms is especially timely as the transmission system faces the challenge of maintaining reliability through the changing generation mix and efforts to reduce carbon emissions” but notes that he does not endorse any of the proposals included in the order.

Comment deadlines

Initial and reply comments on the ANOPR are due 75 days, and 105 days, respectively, after publication in the Federal Register.

[1] Commissioner Chatterjee, whose term has expired, did not participate in this matter.

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Photo of Bud Earley Bud Earley

Bud Earley, a non-lawyer senior advisor, provides analysis and advice on a wide range of federal and state energy regulatory issues, including transaction and rate issues, regional transmission organization (RTO) tariffs and rules, interconnection, retail choice and demand response for electricity customers…

Bud Earley, a non-lawyer senior advisor, provides analysis and advice on a wide range of federal and state energy regulatory issues, including transaction and rate issues, regional transmission organization (RTO) tariffs and rules, interconnection, retail choice and demand response for electricity customers, a natural gas pipelines and hydroelectric facility licenses, and LNG export authorizations.

Working with Covington teams, Mr. Earley has provided expert advice and analysis to investment firms, utilities, independent power producers, project developers, customers, marketers and U.S. and international energy companies,

Prior to joining Covington, Mr. Earley served for over 30 years in various staff positions at the Federal Energy Regulatory Commission (FERC). While at the FERC, Mr. Earley was instrumental in developing and applying policies regarding the transition of the electric utility industry to competition, including policies regarding independent power producers, transmission access, standard generator interconnection procedures, organized electricity markets, mergers and market-based rates.