Electric Transmission 204: Examining FERC’s Notice of Proposed Rulemaking

The NOPR proposes new nationally-applicable cost allocation principles and requires all transmission providers, whether in Regional Transmission Organizations or in bilateral markets, to participate in regional planning processes. It would direct planners to consider for inclusion in regional plans transmission facilities that advance public policy goals such as state renewable portfolio standards. Moreover, it seeks to remove any undue preference or advantage for incumbent transmission providers with respect to transmission development.

On September 17, 2010, the Environmental and Energy Study Institute (EESI) and WIRES (Working group for Investment in Reliable and Economic electric Systems) held a briefing on the Notice of Proposed Rulemaking (NOPR) issued by the Federal Energy Regulatory Commission (FERC) and currently pending public comment. Following up on FERC Staff’s 2009 Notice of Inquiry and several technical conferences, the Commission is proposing major changes in how electric transmission is planned and potentially how it is paid for, as well as which entities may be permitted to compete to finance, construct, and own transmission infrastructure in the future. This briefing addressed the NOPR’s potential implications for the competitive environment, efficiency of the transmission planning process, fuel diversity, renewable energy development, consumer prices, and grid reliability. Perspectives from FERC, a state regulator, and various industry groups were heard.

This briefing was the seventh in a series co-sponsored by EESI and WIRES. The first six briefings were "How the Grid Works", "Policy Challenges to Grid Expansion", "Upgrading the Grid", "Cost Allocation", "Integrating Variable Renewable Resources", and "Planning to Expand and Upgrade the Grid".

• FERC is proposing a rule that would require regions (but not entire interconnections) to develop transmission plans and cost allocation methods that consider the benefits of new transmission facilities – including reliability, economics, and compliance with public policies such as Renewable Portfolio Standards. The rule would also require neighboring regions to better coordinate planning and cost allocation.
• Cost allocation would be more closely linked to the planning process; each region could propose its own cost allocation method.
• Efficiency is gained with regional planning, which helps tap into more areas of power generation.
• There is a need to plan for all transmission customers, not just native load.
• Long term transmission rights are needed for new generation facilities to obtain financing.
• The proposed rule would have different impacts on RTO (Regional Transmission Organization) regions and non-RTO regions. RTOs would be obvious facilitators of regional planning processes, but in non-RTO regions, there isn’t necessarily an established structure to deal with this requirement.
• Load Serving Entities should have a more prominent role in the planning process.
• If utilities exercise the “right of first refusal” and do not let outside entities build in their transmission region, then they should not ask FERC for rate incentives to build themselves.