pwr_july-2024 - 13

LEGAL & REGULATORY
Stephen
Hug
T
Scott
Johnson
Ben
Reiter
FERC Adopts
Transmission
Reform; Commissioner
Cries Foul
here has been a growing consensus in recent years that
the transmission planning process must be reformed to
ensure reliability in the face of a rapidly changing grid. Despite
the need for new transmission to integrate record numbers
of interconnection requests and to address emerging reliability
challenges, investment in new transmission facilities has
been relatively flat, or declined, in many regions over the past
several years. For instance, the " National Transmission Needs
Study " issued by the Department of Energy in October 2023
found that transmission investment has steadily declined since
2015 in multiple regions around the country.
Order No. 1920
The disconnect between system needs and investment has
made efforts to address shortcomings in existing transmission
and interconnection planning processes a top priority
for the Federal Energy Regulatory Commission (FERC). On
May 13, 2024, FERC approved its much-anticipated final
rule on transmission planning and cost allocation: Order
No. 1920. The final rule, which was approved 2-to-1 over
the objections of the sole Republican commissioner, directs
numerous reforms intended to require more proactive and
efficient transmission planning and establish a cost allocation
framework capable of supporting investment in new
transmission facilities. Transmission providers are required
to submit compliance filings revising their tariffs to comply
with the final rule approximately 12 months after it is published
in the Federal Register.
One of the central reforms of the final rule is the requirement
that transmission providers participate in a long-term
regional planning process, one that evaluates long-term transmission
needs and benefits over a minimum planning horizon
of 20 years. The process would use planning scenarios that
account for factors driving future transmission needs, such as
state and federal regulations promoting decarbonization, generator
interconnection requests, and generation retirements.
The regional planning process must include procedures for
the evaluation and selection of long-term regional transmission
facilities for purposes of cost allocation. Order No. 1920 also
directs transmission providers to adopt one or more default ex
ante cost allocation methods for transmission facilities selected
through the long-term regional planning process. The final
rule provides transmission providers the flexibility to adopt a
" State Agreement Process, " which would provide state regulators
the ability to voluntarily agree to a cost allocation method
for a long-term regional transmission facility either before, or
up to six months after, selection in a regional transmission plan.
In addition to these reforms, Order No. 1920 also requires
transmission providers to: (1) evaluate solutions to address
transmission needs identified through the interconnection process
in multiple study cycles; (2) consider certain advanced
July 2024 | POWER
transmission technologies in their planning processes; and (3)
require transmission providers to consider whether transmission
facilities anticipated to be replaced in the following 10 years
could be " right sized " to increase the facility's transfer capability.
Focus on Standardization
Order No. 1920 stands out from prior efforts at transmission
reform in terms of the commission's willingness to prescribe
specific criteria and methodologies to identify and evaluate solutions
to transmission needs. FERC's last effort at transmission
planning reform in Order No. 1000, issued in 2011, placed a premium
on regional flexibility. Order No. 1920 reflects an interest
in greater uniformity, including the use of minimum planning horizons,
mandatory use of planning scenarios, and standard criteria
for evaluating the benefits of transmission facilities.
Order No. 1920 also is noteworthy for the commission's
departure from aspects of the proposed rule that would have
given state regulators greater oversight over aspects of the
long-term regional transmission planning process. For example,
the final rule abandons the proposal to require transmission
providers to seek agreement of state regulators to their
long-term regional transmission cost allocation methodology;
instead, the final rule establishes a six-month engagement period
in which state regulators would have the opportunity to
communicate and negotiate with transmission providers about
their cost allocation methodology.
Long-Term Effects Uncertain
While Chairman Willie Phillips and Commissioner Allison Clements
praised the historic significance of the final rule, Commissioner
Mark Christie issued a lengthy dissent, arguing the
rule will raise costs for consumers to " serve the profit-making
interests of developers of politically preferred generation, primarily
wind and solar, and to serve corporate 'green energy'
preferential purchasing policies. " Commissioner Christie also
criticized the commission's decision to depart from the proposed
rule in a manner that he believes diminishes the role of
state regulators in the long-term planning process.
The partisan division reflected in Christie's dissent raises
questions about the long-term durability of Order No. 1920.
The politicization of Order No. 1920 is likely to place the order
in the crosshairs of any subsequent Republican administration.
And Christie's dissent provides a pathway for parties that wish
to challenge the order on appeal-with reviewing courts likely
to take more seriously arguments that have been endorsed by
a FERC commissioner. Ultimately, Order No. 1920 and its ability
to survive these challenges will have a significant impact on
the long-term trajectory of investment in and expansion of the
transmission grid. ■
-Stephen Hug is a partner, Scott Johnson is a senior counsel,
and Ben Reiter is a counsel at Akin.
www.powermag.com
13
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