• Congress and FERC Seek to Modify Transmission Policies to Promote Renewable Energy Development
  • July 14, 2009
  • Law Firm: Jones Day - Washington Office
  • In June, the Chairman of the Federal Energy Regulatory Commission (FERC), Jon Wellinghoff, testified before the House Energy Subcommittee that a strong and smart electric grid is the key to bringing renewable generation online and reducing greenhouse gas emissions. Recent actions by FERC, as well as draft legislation before both the House and Senate, support the Chairman's view that transmission can help change the nation's energy mix.

    FERC's policy shift on negotiated rates for merchant transmission companies (Transcos) is an example of how transmission policy can promote renewable energy development. Under its previous policy, FERC required Transcos applying for negotiated rates to allocate 100 percent of their initial capacity through a preconstruction open season. Transcos could not allocate capacity to so-called "anchor customers" prior to the open season. Such practices were considered discriminatory and nontransparent.

    In approving negotiated rates for two Transcos (Chinook Power Transmission, LLC and Zephyr Power Transmission, LLC), FERC abandoned its prior policy and authorized anchor customers to hold 50 percent of the initial capacity on each proposed line. The policy shift makes it easier for Transcos to fund long-distance transmission facilities to bring remote renewable energy to market. FERC has not addressed whether it would apply the same rationale to negotiated rates for transmission projects designed to bring to market energy from remote coal-fired or nuclear generation facilities.

    In Congress, both the House and the Senate have drafted bills that direct FERC to supervise nationwide planning with stakeholders for large-scale transmission projects that promote renewable energy and reliability. The Waxman-Markey climate change bill, which passed the House on June 26, 2009, also authorizes FERC to issue certificates of public convenience and necessity to construct or modify transmission projects. The bill also expands FERC jurisdiction beyond "national interest electric transmission corridors," though limited to the Western Interconnect, and authorizes FERC to act when states delay or deny siting permits for regional transmission projects.

    The Senate energy bill, which has not yet reached the floor, would grant FERC siting authority for "high priority national transmission projects." Paying for transmission remains a sticking point for stakeholders; unfortunately, the Senate bill offers little on allocating costs, and Waxman-Markey is silent on the issue.