• FERC Requests Comments Concerning Transmission Planning Processes and Cost Allocations
  • October 15, 2009 | Authors: Steven W. Snarr; Michael N. Thatcher
  • Law Firm: Holland & Hart LLP - Salt Lake City Office
  • On October 8, 2009, the Federal Energy Regulatory Commission (FERC) issued a Notice of Request for Comments in Docket No. AD09-8-000, soliciting information and comments from stakeholders in the electric transmission industry concerning the need to refine the transmission line planning process, including the cost allocation process for rate determinations. The request for comments comes as a result of information obtained by FERC through three regional technical conferences held by FERC Staff during September in an attempt to:

    (1) determine the progress and benefits realized by each transmission provider’s transmission planning process . . . ; (2) examine whether existing transmission planning processes adequately consider needs and solutions on a regional or interconnection-wide basis . . . ; and (3) explore whether existing processes are sufficient to meet emerging challenges to the [inter-regional] transmission system, such as . . . the integration of large amounts of location-constrained generation . . ..

    FERC Staff found that “under current transmission planning processes, there is no comprehensive structure in place to identify the optimal set of facilities that address needs that affect multiple systems” and that “this lack of coordinated planning over the seams of current planning regions could be needlessly increasing costs for customers of individual transmission providers or resulting in discrimination among potential users of the grid.” FERC Staff also found “some areas are struggling with how to adequately address transmission expansion necessary to integrate renewable generation resources.” It was also noted that in some areas “merchant transmission developers choose to plan proposed facilities outside the transmission providers’ planning processes.”

    In light of these and similar concerns, FERC is asking interested persons to provide comments, including specific examples, addressing various questions, including the following:

    • Are existing transmission planning processes adequate to identify and evaluate potential solutions to needs affecting the systems of multiple transmission systems?
    • Are there adequate opportunities for stakeholders to participate in planning activities that span different regions?
    • How are reliability impact studies aligned with economic-based evaluations of sub-regional or regional projects and assessments of projects needed to satisfy renewable energy standards?
    • How should merchant and independent transmission projects be treated for purposes of regional transmission planning? Do rights of first refusal for incumbent transmission owners unreasonably impede the development of merchant and independent transmission?
    • Is the interconnection queue process hindering the ability to plan the transmission system to integrate new generation?

    FERC’s regional technical conferences also identified “the lack of mechanisms to allocate and recover the cost of certain types of new transmission facilities and upgrades to existing facilities” as “the single largest impediment to any transmission development, especially across multiple RTOs or across RTO and non-RTO regions.”

    Noting that FERC has taken steps to encourage the development of new transmission facilities, and that it has addressed the specific cost allocation rules for new facilities and upgrades within RTO boundaries,1 FERC is also seeking comments on how it can “provide greater certainty in its policies for allocating the cost of new transmission facilities, particularly for facilities that cross multiple transmission systems.”

    FERC is asking interested persons to provide comments, including specific examples, addressing various cost allocation and rate design questions, including the following:

    • Describe the relative impact of a lack of up-front certainty about cost allocation on specific projects as it relates to other impediments to development.
    • Should processes be established to help stakeholders address cost allocation matters over larger geographic regions?
    • Are there regional cost allocation methodologies outside RTOs, and broader regional cost allocation within RTOs, that should be considered or established?
    • How can customers that benefit from a particular facility be determined?
    • Should cost allocation mechanisms continue to differ based on whether a project is deemed necessary based on reliability and adherence to approved reliability standards versus economic considerations?
    • Should the determination of beneficiaries of a transmission facility include generators as well as loads?
    • How should non-quantifiable costs or benefits be identified, factored in or otherwise weighted?

    Comments to FERC are due no later than November 9, 2009. Reply comments should be submitted by December 4, 2009.

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    1. See, e.g., Midwest Indep. Transmission Sys. Operator, Inc., 114 FERC ¶ 61.106 (2006), order on reh’g, clarification and compliance, 117 FERC ¶ 61,241, order on reh’g and clarification, 118 FERC ¶ 61,209 (2007), order on reh’g and compliance, 120 FERC ¶ 61,280, order on reh’g and compliance, 122 FERC ¶ 61,127 (2008); and PJM Interconnection, L.L.C., Opinion No. 494, 119 FERC ¶ 61,063 (2007), order on reh’g and compliance, Opinion No. 494-A, 122 FERC ¶ 61,082 (2008), remanded in part sub nom. Illinois Commerce Comm’n v. FERC, 576 F. 3d 470 (7th Cir. 2009) (pending request for rehearing and rehearing en banc).

    The Seventh Circuit decision highlights the divergent economic interests of various transmission providers located in different geographic areas within an RTO, depending upon where specific transmission upgrades may be located and how such upgrades might be used. See, S.W. Snarr, Seventh Circuit Gets Territorial in Remanding FERC’s Postage-Stamp Rate Decision, November 2009, Natural Gas & Electricity Journal.