FERC Considers Bold Electric Transmission and Interconnection Reforms to Aid Renewables

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The Federal Energy Regulatory Commission (FERC) issued an Advance Notice of Proposed Rulemaking (ANOPR), "Building for the Future Through Electric Regional Transmission Planning and Cost Allocation and Generator Interconnection." The ANOPR, issued on July 15, 2021, indicated that FERC is considering the potential need for major reforms or revisions to its regional transmission planning, cost allocation and generator interconnection regulations and policies.

The ANOPR reflects recent changes within the electricity sector as the generation fleet shifts away from resources close to population centers toward others, including renewables, that are often located far away and in geographically remote areas. This development has placed new demands on the electric transmission system, and FERC believes that these demands may require reforms to its existing transmission and interconnection rules – embodied primarily in Orders No. 890, 1000 and 2003 – in order to maintain just and reasonable customer electricity rates, as required by the Federal Power Act.

In the ANOPR, FERC is inviting comment on whether and how to implement reforms in three broad areas:

  • integrating anticipated future generation needs in identifying long-term, regional transmission facilities
  • reconsidering how to apportion cost responsibility for such facilities and interconnection-related network upgrades
  • enhancing transmission oversight as to how new transmission facilities are identified and paid for

The ANOPR asks questions such as:

  • Whether greater use of probabilistic transmission planning approaches, such as stochastic techniques, may better assess the benefits of regional transmission facilities than current, relatively more narrow approaches tailored to local transmission providers
  • Whether FERC should require transmission providers in each planning region to establish a process for identifying geographic zones that have the potential to develop large amounts of renewable generation, citing the Texas Public Utility Commission's Competitive Renewable Energy Zones (CREZ) initiative and the Midcontinent Independent System Operator's (MISO) Multi-Value Projects (MVP) process as models
  • Whether a portfolio approach to regional transmission cost allocation should be adopted, under which multiple potential transmission projects are evaluated together, citing MISO's MVP and the Southwest Power Pool's Balanced Portfolio method as models
  • Whether FERC should require transmission providers to consider a broader set of benefits when allocating transmission costs rather than merely reliability and economic considerations, such as congestion reduction, resource adequacy benefits and other less-quantifiable criteria
  • Whether it continues to be just and reasonable for FERC to allow regional transmission organizations and independent system operators to adopt participant funding approaches for interconnection-related network upgrades, in which the costs for such upgrades are allocated mainly or exclusively to interconnection customers
  • Whether FERC should require transmission providers, instead of interconnection customers, to fund upfront all or some of such network upgrade costs

Notably, although a four-member Commission issued the ANOPR unanimously (Commissioner Neil Chatterjee did not participate), the two Democratic commissioners – Richard Glick and Allison Clements – issued an optimistic joint concurrence. In addition, two Republican commissioners, James Danly and Mark Christie, each issued separate concurrences expressing concern over portions of the ANOPR. Specifically, in the individual concurrences issued by Commissioners Danly and Christie, each expressed concern that some of the proposals contemplated by the ANOPR may be unnecessary or unwise, or otherwise go beyond FERC's jurisdiction. This indicates that any future rulemaking on the ANOPR may be contentious.

Comments and reply comments on the ANOPR are due 75 days and 105 days, respectively, after it is published in the Federal Register.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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