On December 31, 2015, FERC issued an order addressing the merits of an application filed on April 16, 2015 by Southern California Edison (SCE) to establish that certain of its 115 kV facilities are classified and used in local distribution, and thus not subject to North American Electric Reliability Corporation (NERC) mandatory Reliability Standards applicable to those facilities that make up the Bulk Electric System. The SCE request encompassed seven facility configurations representing nearly 2,500 circuit miles of its facilities operated at 115 kV, and load service to approximately 4,500 MW (19%) of SCE's peak load. 685 MW of generation was also connected to the various facilities in question. FERC granted in substantial part SCE's request to declare the facilities as used in local distribution with the limited exception of certain protections systems and transmission lines near the North of Lugo 115 kV system, which it determined to be not subject to an exemption from the Reliability Standards.

In recent years, FERC has revised the definition of the Bulk Electric System to provide greater clarity through a bright line 100 kV test, with certain inclusions and exclusions to that threshold based on particular characteristics of generation and transmission/distribution facilities. But the Bulk Electric System definition always followed the guidance of the Federal Power Act Section 215(a)(1), which limited the reach of the Reliability Standards regime to exempt those facilities "used in the local distribution of electric energy." The revisions to the Bulk Electric System definition included avenues for an entity to challenge determinations about applicability of the Reliability Standards through the NERC process as well as an opportunity for an entity to take its case directly to FERC for a determination. SCE chose the latter route.

SCE's case rested on a technical and engineering demonstration of facts related to the 115 kV facilities in question, as well as its application of traditional FERC tests used in ratemaking contexts, such as the Seven Factor Test, to support its claim that the specific design, function, and use of the facilities supports were rooted in local distribution. FERC used SCE's data and concluded for the most part that the 115 kV facilities in question were indeed local in nature. SCE was careful to explain that the facilities were originally designed at higher voltage despite their local nature to reduce line losses in remote areas, and are configured as they are to improve voltage stability and safety, and for operational flexibility. It explained how the facilities were historically and are currently treated within the California ISO grid, both from that grid's inception and more recently as part of certain re-classification efforts to remove local distribution facilities from grid operations.

NERC and the Western Electricity Coordinating Council (WECC) agreed that SCE's application directly to FERC was an appropriate means to determine that the indicated facilities are local distribution. As the Commission noted in Order No. 743, "to the extent that any individual line would be considered to be local distribution, that line would not be considered to be part of the [BES]." NERC and WECC's comments did focus specifically on reliability factors relevant to determine whether SCE's 115 kV facilities should be classified as local distribution and the need for more information regarding the Facilities in question before an accurate determination can be made regarding the material impact of the Facilities at issue on the BES. FERC required SCE to supply more information, which it did, and which helped to form the basis of the determination. When the Seven Factor Test was considered, the Commission deemed most of the 115 kV system as local distribution. Simply stated, the Seven Factor Test considers:

1. Proximity of facilities to retail customers
2. Radial configuration
3. One-way power flows into the local distribution system
4. When power enters it is not reconsigned or transported to another market
5. Consumption of the power in a restricted area
6. Use of meters to measure flows into the system
7. Reduced voltages

When applied by FERC to SCE's case, the Commission made the appropriate local distribution findings.

Solely as to SCE's protection systems and transmission lines near the Control and Inyokern 115 kV substations on the North of Lugo circuit, the Commission denied the request for declaration of facilities as local distribution. While FERC found the facilities met the characteristics of the Seven Factor Test, it took into consideration the fact that relay misoperations of the associated protection systems with these facilities could cause loss of multiple bulk transmission lines that terminate in the two substations. SCE had characterized these concerns as "marginal" and that even in transmission planning studies of protection systems at Control and Inyokern, it could be shown that SCE met NERC's Transmission Planning (TPL) Reliability Standards. FERC did not buy the argument and found the potential reliability concern trumped SCE's explanation.

Finally, FERC explained that this was not the end of the road for SCE's quest. In the very last footnote of the order, FERC explained that while it had made the determination that the facilities in SCE's application were used in local distribution, SCE still had to take that determination back to NERC for the implementation into the Bulk Electric System definition.

A copy of the order can be found here.