Regulatory Update – FERC transmission planning process reform

On July 15, 2021, the Federal Energy Regulatory Commission (“FERC”) issued an Advanced Notice of Proposed Rulemaking (“ANOPR”) to broadly examine FERC’s current electric regional transmission planning, cost allocation, and generator interconnection policies.  The ANOPR seeks public comment on “potential reforms for longer-term regional transmission planning and cost-allocation processes that take into account more holistic planning, including planning for anticipated future generation, rethinking cost responsibility for regional transmission facilities and interconnection-related network upgrades, and enhanced transmission oversight over how new transmission facilities are identified and paid for.”  Issuance of a final rule could have a significant impact on transmission grid planning processes throughout the nation.  Below are some key takeaways and perspectives based on the ANOPR and its public comment process.

Transmission Planning and Cost Allocation

Looking beyond FERC’s landmark transmission reforms in Order Nos. 890 and 1000, the ANOPR seeks comments on whether additional changes may be necessary to facilitate the changing electric generation resource mix, replace aging infrastructure, and accommodate evolving uses of the transmission system.  The ANOPR acknowledges that the power grid increasingly includes resources that are farther away from load centers and dense populations, and that such a trend is expected to continue as renewable resources are anticipated to continue coming online well into the future.  In light of these changes, the Commission is considering reforms to regional transmission planning and the generation interconnection procedures to more effectively allocate system upgrade costs based on benefits to both system load and new generation.

The ANOPR suggests that current planning processes may not yield the most valuable transmission infrastructure.  While FERC recognizes the need for improvement to transmission planning and cost allocation, the wide-spread nature of transmission benefits creates significant challenges to accurately estimating the benefits of transmission projects and how they are attributed to customer and user groups.  In response to these concerns, the ANOPR questions whether certain potential reforms, such as the introduction of an Independent Transmission Monitor, are needed to oversee planning processes.  This independent entity would likely operate independent of existing Regional Transmission Organizations and could make referrals to FERC if problematic planning decisions were made.

Interconnection Study Process

The ANOPR explores the potential for improving the efficiency of interconnection study processes and revising methods for allocating and recovering network upgrade costs.  The Commission seeks input on the justness and reasonableness of existing methodologies for assigning interconnection upgrade costs, and the independent entity variations that allow RTOs/ISOs to use participant funding for interconnection-related network upgrades.  The Commission questions whether its current manner of oversight for the identification and financing of new transmission facilities in the interconnection study process adequately protects customers from excessive costs.

Commission is Seeking Industry Input

The Commission is providing several opportunities for interested industry participants to provide comments on the various issues under review in the ANOPR.  Specifically, the Commission seeks comment on the following issues, among others:

(1) whether the existing regional transmission planning and cost allocation processes appropriately consider the transmission needs of anticipated future generation to drive study assumptions, or instead relies on less comprehensive information, such as existing interconnection requests with completed facilities studies, and whether such current planning criteria are appropriate or should be revised;

(2) whether the regional transmission planning and cost allocation processes’ consideration of transmission needs driven by reliability, economic considerations, and Public Policy Requirements are inappropriately siloed from one another, and, if so, whether this influences the consideration of potential benefits of a regional transmission facility (and the associated beneficiaries for purposes of allocating the costs of such a facility);

(3) whether criteria in addition to those related to reliability, economic, and Public Policy Requirements needs should be planned for and considered in the evaluation of benefits, and used to determine cost allocation in the regional transmission planning process, and these needs should be clear, credibly quantifiable and not speculative;

(4) how to appropriately identify and allocate the costs of new transmission infrastructure in a manner that satisfies the Commission’s cost-causation principle that costs are allocated to beneficiaries in a manner that is at least roughly commensurate with estimated benefits;

(5) whether or not it is appropriate for the costs of state or local public policy-driven transmission facilities to be shifted through regional cost allocation to consumers in non-participating states, or whether changes to current interconnection cost allocation mechanisms may unjustly and unreasonably shift costs to customers of load serving entities;

(6) whether and which reforms are necessary to the generator interconnection process to ensure a more purposeful integration with the regional transmission planning and cost allocation processes, a more efficient queueing process, and a more efficient and cost-effective allocation of interconnection costs;

(7) whether the regional transmission planning and cost allocation processes may have resulted in transmission facilities addressing an unduly narrow set of transmission needs, including needs located in a single transmission owner’s footprint, and having limited region-wide benefits, but that, collectively, may impose significant costs on customers;

(8) whether and how to better coordinate between regional and local transmission planning processes to identify more efficient or cost-effective solutions; and

(9) whether it is necessary, and how, to more clearly identify the lines of regulatory authority and oversight between states and federal authorities with regard to regional and local transmission facilities to ensure appropriate vetting of transmission infrastructure.  In addition, we seek comment regarding whether the current approach to oversight of transmission investment adequately protects customers, particularly given the potentially significant and very costly investments proposed to meet the transmission needs driven by a changing resource mix, and, if customers are not adequately protected from excessive costs, which potential reforms may be required and are legally permissible to ensure just and reasonable rates.

Reply comments are due November 30, 2021.  A Notice of Proposed Rulemaking is expected sometime in 2022.  A final rule is expected late in 2022 or 2023.  The final rule has the potential to create significant changes to transmission study processes throughout much of the United States and generate significant compliance obligations for transmission planners, transmission owners, and generation developers.  There will also be opportunities for interested parties to provide comments to the Commission in technical conferences (such as the technical conference that took place on November 15th) and follow-up comments to the technical conferences.

Reach out to Michael Blackwell, Linda Walsh, or another member of Husch Blackwell’s Energy and Natural Resources team for more information on the FERC ANOPR or any other federal regulatory questions you have.