On July 21 the US Federal Energy Regulatory Commission (FERC) made a number of reforms, labeled by one commentator "likely the most progressive clean energy action the federal government will take this year," (Richard Caperton at the Center for American Progress, July 28) to its transmission planning and cost allocation requirements. FERC says the reforms will "benefit consumers by enhancing the grid’s ability to support wholesale power markets and ensuring transmission services are provided at just and reasonable rates."
Order No. 1000 requires public utility transmission providers to improve transmission planning processes and allocate costs for new transmission facilities to beneficiaries of those facilities. It also requires public utility transmission providers to align transmission planning and cost allocation. These changes will remove barriers to development of transmission facilities. Approved after considering more than 200 sets of public comments, Order No. 1000 builds on FERC’s open access reforms of Order No. 888 (1996) and the planning reforms of Order No. 890 (2007).
The transmission planning requirements established in the rule include development of regional transmission plans, consideration of transmission needs driven by public policy requirements established by state or federal laws or regulations, and coordination between pairs of neighboring transmission planning regions.
The cost allocation requirements established in the rule include development of regional and interregional cost allocation methods that satisfy certain principles. Under the rule, participant-funding of new transmission facilities is permitted but cannot be used as the regional or interregional cost allocation method.
The rule also promotes competition in regional transmission planning processes by removing from FERC-approved tariffs and agreements a federal right of first refusal for transmission facilities selected in a regional transmission plan for purposes of cost allocation, subject to certain limitations.
Order No. 1000 takes effect within 60 days of publication in the Federal Register. Transmission providers must make compliance filings on most issues within one year of the effective date. Interregional transmission coordination and cost allocation compliance filings are required within 18 months of the effective date. Public utility transmission providers must consult with stakeholders in the region in developing and implementing their compliance filings.
An analysis of the ruling is available at the online publication Renew Grid, at http://www.renewgridmag.com/e107_plugins/content/content.php?content.7076. The full Order No. 1000, and other information regarding the rule, may be found at http://www.ferc.gov/industries/electric/indus-act/trans-plan.asp.
In statements released in association with its July 21 ruling, the US Federal Energy Regulatory Commission issued notice that its Order #1000 would:
(1) require that each public utility transmission provider participate in a regional transmission planning process that produces a regional transmission plan;
(2) require that each public utility transmission provider amend its OATT to describe procedures that provide for the consideration of transmission needs driven by public policy requirements in the local and regional transmission planning processes;
(3) remove from Commission-approved tariffs and agreements a federal right of first refusal for certain new transmission facilities; and
(4) improve coordination between neighboring transmission planning regions for new interregional transmission facilities.
Also, the Final Rule requires that each public utility transmission provider must participate in a regional transmission planning process that has:
(1) A regional cost allocation method for the cost of new transmission facilities selected in a regional transmission plan for purposes of cost allocation; and
(2) An interregional cost allocation method for the cost of certain new transmission facilities that are located in two or more neighboring transmission planning regions and are jointly evaluated by the regions in the interregional transmission coordination procedures required by the ruling. Each cost allocation method must satisfy six cost allocation principles:
a) The cost of transmission facilities must be allocated to those within the transmission planning region that benefit from those facilities in a manner that is at least roughly commensurate with estimated benefits. In determining the beneficiaries of transmission facilities, a regional transmission planning process may consider benefits including, but not limited to, the extent to which transmission facilities, individually or in the aggregate, provide for maintaining reliability and sharing reserves, production cost savings and congestion relief, and/or meeting public policy requirements established by state or federal laws or regulations that may drive transmission needs.
b) Those that receive no benefit from transmission facilities, either at present or in a likely future scenario, must not be involuntarily allocated the costs of those facilities.
c) If a benefit to cost threshold is used to determine which facilities have sufficient net benefits to be included in a regional transmission plan for the purpose of cost allocation, it must not be so high that facilities with significant positive net benefits are excluded from cost allocation. A transmission planning region or public utility transmission provider may want to choose such a threshold to account for uncertainty in the calculation of benefits and costs. If adopted, such a threshold may not include a ratio of benefits to costs that exceeds 1.25 unless the transmission planning region or public utility transmission provider justifies and the Commission approves a greater ratio.
d) The allocation method for the cost of a regional facility must allocate costs solely within that transmission planning region unless another entity outside the region or another transmission planning region voluntarily agrees to assume a portion of those costs. However, the transmission planning process in the original region must identify consequences for other transmission planning regions, such as upgrades that may be required in another region and, if there is an agreement for the original region to bear costs associated with such upgrades, then the original region’s cost allocation method or methods must include provisions for allocating the costs of the upgrades among the entities in the original region.
e) The cost allocation method and data requirements for determining benefits and identifying beneficiaries for a transmission facility must be transparent with adequate documentation to allow a stakeholder to determine how they were applied to a proposed transmission facility.
f) A transmission planning region may choose to use a different cost allocation method for different types of transmission facilities in the regional plan, such as transmission facilities needed for reliability, congestion relief, or to achieve public policy requirements established by state or federal laws or regulations. Each cost allocation method must be set out clearly and explained in detail in the compliance filing for this Final Rule.
An analysis of the ruling is available at the online publication Renew Grid, at http://www.renewgridmag.com/e107_plugins/content/content.php?content.7076