Power & Pipes

FERC, CFTC, and State Energy Law Developments

More than a decade since issuing Order No. 1000, FERC is formally developing new rules for regional transmission planning and cost allocation after what FERC calls “mounting evidence” that existing planning processes are inadequate to meet transmission needs of the future. In a notice of proposed rulemaking (NOPR) issued on April 21, 2022, FERC proposed a series of reforms to build on its existing body of landmark transmission rulemaking.

In this series of posts, we discuss each of the key pillars of FERC’s proposed reforms: long-term regional transmission planning; regional transmission cost allocation; incentives for construction work in progress (CWIP); and revisiting a federal right of first refusal.

According to FERC, one of the biggest shortcomings of existing regional transmission planning is its focus on short-term needs. Long-term planning, while part of planning processes today, is not sufficient in FERC’s view and has led to “piecemeal” transmission development and an overreliance on meeting transmission needs through generator interconnection processes, which are not designed with larger regional facilities in mind.

FERC proposed to remedy that shortcoming by requiring transmission providers to participate in a regional transmission planning process that includes “Long-Term Regional Transmission Planning,” which FERC describes as regional planning on a sufficiently long-term, forward-looking basis that would include the identification of transmission needs driven by changes in resource mix and demand, and the evaluation and selection of projects to meet those needs. FERC’s vision for Long-Term Regional Planning involves a multi-pronged set of reforms addressing the following areas:

  • Long-Term Scenarios: FERC proposed requiring transmission providers to identify transmission needs driven by changes in the resource mix and demand through the development of “Long-Term Scenarios” (i.e., hypothetical sequences of events used as tools to identify the transmission needs identified in the NOPR) shaped by certain minimum criteria. Those criteria include: (1) the use of a transmission planning horizon no less than 20 years into the future in developing Long-Term Scenarios coupled with reassessing and revising those scenarios at least once every three years; (2) a set of Commission-identified categories of factors that may affect transmission needs driven by changes in the resource mix and demand into their Long-Term Scenarios; (3) the development of a plausible and diverse set of at least four Long-Term Scenarios; (4) the use of “best available data” for developing Long-Term Scenarios; and (5) the consideration of whether to identify geographic zones with the potential for development of large amounts of new generation.
  • Coordination with Interconnection Processes: FERC proposed requiring Long-Term Regional Transmission Planning efforts to address persistent interconnection facility needs that were identified, but ultimately dropped, under existing generator interconnection processes. This reform would address what FERC views as a potential barrier to integrating new sources of generation that may otherwise continue to exist if not for the lack of those interconnection facilities.
  • Evaluating Benefits: Under FERC’s proposed framework, once a public utility transmission provider in a transmission planning region identifies the region’s transmission needs driven by changes in the resource mix and demand, it will need to evaluate the benefits of those regional facilities for purposes of selection and cost allocation. FERC is proposing requiring transmission providers to clearly identify the benefits considered for that evaluation and how they are calculated. To that end, FERC proposed a broad set of benefits transmission providers could consider, and may give transmission providers the option to evaluate benefits based on a portfolio of facilities as opposed to on a facility-by-facility basis.
  • Selection Criteria: FERC proposed requiring transmission providers to include in their open access transmission tariffs (OATTs) project selection criteria that are “transparent and not unduly discriminatory or preferential” and that seek to maximize benefits to consumers over time without over-building facilities. FERC also proposes to require transmission providers to include in their OATTs a process to coordinate with relevant state entities in developing the aforementioned criteria.

FERC made clear that its Long-Term Transmission Planning proposals are not intended to supplant existing regional transmission planning and cost allocation processes developed under Order No. 1000. However, the proposals dig deeper into regional planning and indicate FERC’s desire for transmission planning with a more nuanced view of long-term needs and the benefits provided by projects selected to meet those needs.

Check Power and Pipes for further updates on other key aspects of FERC’s new Transmission NOPR.