FERC Affirms Order No. 1000 Transmission and Cost Allocation Rule Requiring Open and Transparent Regional Planning and Cost-Effective Solutions for Transmission Needs

On February 17, 2012, the Federal Energy Regulatory Commission (FERC) issued Order No. 1000-A denying requests for rehearing and upholding its Order No. 1000 Transmission Planning and Cost Allocation Rule.

Order No. 1000 requires interested stakeholders, including electric utilities that provide transmission services, to participate in open and transparent regional and interregional planning processes to determine which transmission projects will best suit growing transmission needs. Planning processes are also required to address cost allocation methods to ensure that costs associated with approved projects are appropriately allocated to the rates of those stakeholders who will benefit from the transmission infrastructure improvements.

With respect to transmission planning, Order No. 1000 requires that regional planning processes consider transmission needs driven by public policy requirements established by state or federal laws or regulations, such as renewable portfolio standards. Neighboring transmission planning regions must coordinate their planning efforts to ensure efficient and cost-effective solutions to satisfy mutual interregional transmission needs.

Regional planning processes must also address cost allocation methods for new transmission facilities and embrace methodologies that satisfy the following six cost allocation principles:

• Costs allocated "roughly commensurate" with estimated benefits,
• Those who do not benefit from transmission do not have to pay for it,
• Benefit-to-cost thresholds must not exclude projects with significant net benefits,
• No allocation of costs outside a region unless other region agrees,
• Cost allocation methods and identification of beneficiaries must be transparent,
• Different allocation methods could apply to different types of transmission facilities.

While participant-funding of new transmission facilities is permitted, Order No. 1000 does not allow this approach to be used as the regional or interregional cost allocation method.

FERC is also requiring that incumbent public utility transmission providers remove from Commission-approved tariffs and agreements any right of first refusal that would otherwise provide a preference for the incumbent utility to build transmission projects that become approved as part of the regional and interregional planning processes. Order No. 1000 also clarifies that public utility transmission providers may rely on regional transmission facilities to satisfy their reliability needs or service obligations.

While Order No. 1000 has no direct applicability to non-public transmission providers, to the extent that such entities rely on public utility transmission providers for service under reciprocity agreements, their pledge of reciprocity would include a commitment to participate in regional planning processes.

Order No. 1000 became effective on August 11, 2012, the date it was published in the Federal Register. Public utility transmission providers are required to make a compliance filing with FERC not later than August 11, 2013, incorporating most of the requirements of Order No. 1000. Compliance filings addressing interregional coordination and interregional cost allocations must be made not later than February 11. 2014.

Any Order No. 1000-A requirements that modify initial compliance requirements of Order No. 1000, will become effective 60 days after Order No. 1000-A is published in the Federal Register.