FERC Encourages Development of New Transmission Infrastructure Through Federal-State Cooperation

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The Federal Energy Regulatory Commission (FERC) took steps in a recent Order and Policy Statement to improve collaboration with states on electric transmission development and to promote use of alternative models for project development by states and transmission providers.

The Order establishes a Joint Federal-State Task Force on Electric Transmission in furtherance of FERC's current efforts to support state policy initiatives. The Policy Statement encourages alternative models for states to develop and pay for transmission projects, suggesting FERC is looking beyond Order No. 1000—its landmark transmission planning rule issued in 2011—in promoting transmission development. More comprehensive transmission reform efforts are expected from FERC later this summer.

Joint Federal-State Task Force on Electric Transmission

At its June 17, 2021, meeting, FERC issued an Order in Docket No. AD21-15-000, establishing the first-of-its-kind Joint Federal-State Task Force on Electric Transmission (Task Force). The Task Force was created pursuant to Section 209(b) of the Federal Power Act, which authorizes FERC to confer with any state commission regarding the relationship between rate structures, costs, accounts, charges, practices, classifications, and regulations of public utilities subject to the jurisdiction of such state commission and of FERC.1

The Task Force represents FERC's commitment to navigate the issues faced by public utilities and transmission stakeholders in developing new transmission infrastructure. The primary focus of the Task Force would be on issues related to planning and paying for transmission—including transmission to facilitate generator interconnection—that provides benefits from a federal and state perspective.

FERC reasoned that because both federal and state regulators have authority over new transmission infrastructure, with states having siting authority over most new transmission projects, a uniform approach to the exploration of transmission-related issues is important to secure the benefits that transmission can provide.2

Issues the Task Force may consider include:

  • Identifying barriers that inhibit planning and development of optimal transmission necessary to achieve federal and state policy goals, as well as potential solutions to those barriers;
  • Exploring potential bases for one or more states to use FERC-jurisdictional transmission planning processes to advance their policy goals, including multi-state goals;
  • Exploring opportunities for states to voluntarily coordinate in order to identify, plan, and develop regional transmission solutions;
  • Reviewing FERC rules and regulations regarding planning and cost allocation of transmission projects and potentially identifying recommendations for reforms;
  • Examining barriers to the efficient and expeditious interconnection of new resources through the FERC-jurisdictional interconnection processes, as well as potential solutions to those barriers; and
  • Discussing mechanisms to ensure that transmission investment is cost effective, including approaches to enhance transparency and improve oversight of transmission investment including, potentially, through enhanced federal-state coordination.

The Task Force will be comprised of all FERC Commissioners as well as representatives from 10 state commissions. The state commission representatives—who will sit in an advisory capacity—will serve one-year terms from the date of appointment by FERC and will not serve on the Task Force for more than three consecutive terms.

The Order requests that the National Association of Regulatory Utility Commissioners (NARUC) submit nominations to FERC for the 10 state commission representatives—with two from each NARUC region—no later than 30 days from the date of the Order. The first Task Force meeting is expected to be this fall.

FERC Reaffirms States and Utilities Can Enter Into Voluntary Agreements to Plan and Pay for Transmission Facilities

FERC also issued a Policy Statement in Docket No. PL21-2-000, confirming that states and utilities can enter into Voluntary Agreements to plan and pay for new electric transmission projects as an alternative to the default cost allocation approved by FERC under Order No. 1000 for Regional Transmission Organization (RTO) or Independent System Operator (ISO) planning processes. While FERC established the concept of Voluntary Agreements through Order No. 1000 in 2011, the Commission suggested that few have taken advantage of the option due to uncertainty as to whether there was a conflict between Voluntary Agreements and existing FERC rules.

The Policy Statement clarifies that Voluntary Agreements are not categorically precluded by the Federal Power Act or FERC's existing rules and regulations. Such Voluntary Agreements can include agreements among: (1) two or more states; (2) one or more states and one or more public utility transmission providers; or (3) two or more public utility transmission providers.

The Policy Statement notes that Voluntary Agreements can further FERC's priority of developing cost-effective and reliable transmission facilities by providing states with a way to plan and pay for transmission facilities that are not being developed pursuant to the regional transmission planning processes required by Order No. 1000.

Further, the Policy Statement invites states or public utility transmission providers that identify barriers to Voluntary Agreements in FERC-jurisdictional tariffs or other agreements, to file with FERC to remove or otherwise address said barriers.

In support of the Policy Statement, FERC noted that it recently approved a study agreement that initiated a Voluntary Agreement process when the New Jersey Board of Public Utilities issued an order requesting that PJM open a competitive proposal platform to solicit proposals for transmission facilities expanding the PJM transmission system and to provide for the deliverability of large scale offshore wind generation into New Jersey by 2035.

Commissioners Danly and Christie separately concurred with the Policy Statement. Commissioner Christie noted that the concept of voluntary contracts are not limited to states in ISO and RTO regions, highlighting FERC's long history of approving power pooling arrangements and other voluntary cooperative structures. Commissioner Christie also suggested that states could achieve public-policy goals with regional benefits outside the context of RTO/ISO participation.

FOOTNOTES

1  16 U.S.C. § 824h(b).
2  18 C.F.R. § 385.1301(b) (2020).

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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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