The Federal Energy Regulatory Commission (FERC) recently issued a Proposed Policy Statement that contemplates permitting developers of new merchant transmission projects or new nonincumbent, participant funded transmission projects to allocate up to 100 percent of a project’s capacity through bilateral negotiations. This represents another step in FERC’s gradual shift away from a policy that restricted capacity allocations to anchor shippers, and required open seasons in order for a merchant transmission developer to obtain negotiated rate authority.

Background -

Over a decade ago, FERC began granting negotiated rate authority to merchant transmission developers out of recognition that they assume the full market risk of developing a transmission line (unlike traditional utilities that recover the cost of building transmission from captive and wholesale customers). Since first granting negotiated rate authority, FERC has been concerned about the potential for undue discrimination by merchant transmission developers in selecting and negotiating rates with customers...