FERC Seeks Comments on Major New Transmission Planning and Generator Interconnection Initiatives

On July 15, 2021, the Federal Energy Regulatory Commission (“FERC”) issued an Advanced Notice of Proposed Rulemaking (“ANOPR”) entitled Building for the Future Through Electric Regional Transmission Planning and Generator Interconnection.¹  The ANOPR seeks comment on more than two hundred questions regarding potential revisions to FERC’s rules governing transmission planning, cost allocation, and generator interconnection.  FERC is considering taking action to address the proliferation of renewable energy resources, the emergence of new technologies, and other factors that are transforming the electricity supply mix. 

The ANOPR raises fundamental policy questions and signals that FERC may adopt sweeping regulatory changes.  These could include: (i) requiring transmission planners to do more to anticipate future generation needs—e.g., identifying geographic zones with substantial renewable energy potential and planning for the future integration of renewable resources in them; (ii) defining the benefits and beneficiaries of transmission facilities more expansively; (iii) eliminating the use of participant funding in the interconnection process; (iv) increasing inter-regional planning coordination; (v) integrating the transmission planning and interconnection processes; and (vi) creating transmission planning and spending oversight mechanisms—including the possible establishment of independent transmission monitors.  FERC’s decisions could have a major impact on project developers, investors, transmission-owning utilities, Independent System Operators and Regional Transmission Organizations (“ISOs/RTOs”), state policy makers, and other stakeholders. 

FERC’s Chairman has made it clear that he sees the ANOPR as a transformative first step towards boosting the development of extensive new high voltage transmission lines.  At the same time, the ANOPR emphasizes that FERC has not “predetermined” any outcomes.  Instead, the ANOPR marks the “beginning of a long process”² in which FERC will gather input, hold technical conferences, and consult with the newly established joint federal-state task force on electric transmission before moving forward with a Notice of Proposed Rulemaking.³

Initial comments on the ANOPR will be due 75 days after it is published in the Federal Register.  Reply comments will be due 30 days later. 

Overview

FERC has been expected to take up the issues addressed by the ANOPR for some time.⁴  The Biden Administration has called for planning and interconnection changes to facilitate and encourage a shift to cleaner electricity production.⁵  Legislation currently before Congress would direct FERC to act in this area.⁶ 

The ANOPR articulates various justifications for a possible regulatory overhaul.  It expresses concern that the established planning and interconnection regimes, which date back more than a decade, need to be updated to reflect evolving conditions.  It suggests that existing planning processes may not adequately account for the transmission needs of a system more dependent on renewable resources that are geographically remote from loads.  The ANOPR asks whether transmission development may, as a practical matter, be driven too much by the generator interconnection process resulting in an overly narrow, short-term, ad hoc approach that discourages efficient investments.  The ANOPR also states that existing planning regimes may focus too much on local facilities and be insufficiently coordinated. 

In addition, the ANOPR explores the view that existing cost allocation methodologies may be defining benefits and beneficiaries too narrowly for cost allocation purposes and that this could violate the fundamental cost causation principle that transmission facility costs must be allocated in a manner that is at least “roughly commensurate” with their benefits.  The ANOPR also questions whether interconnection pricing policies may be overburdening renewable energy projects and contributing to long queue delays.    

Finally, the ANOPR expresses concern that, given expected increases in transmission investment, FERC may need to increase oversight of transmission planning and spending in closer collaboration with state regulators.

Key ANOPR Questions

The ANOPR seeks comment on hundreds of questions that are too numerous to reproduce in this Client Alert.  But some of the most important issues are highlighted below using the three major topical categories identified in the ANOPR

A. Regional Transmission Planning and Cost Allocation Processes

• Whether transmission providers should amend the regional transmission planning and cost allocation processes to plan for the needs of anticipated future generation, including generation that is not yet in the interconnection queue.
• Whether planning and interconnection processes incorporate sufficiently long term and comprehensive forecasts of future transmission needs, including whether they are properly accounting for federal, state, local, and utility/corporate clean energy polices, technological advances, and the shift towards greater electrification.
• Whether transmission providers should be required to identify geographic zones that can develop large amounts of renewable generation and plan transmission to integrate renewable resources in those zones as is done under Texas’s Competitive Renewable Energy Zone initiative.
• Whether, and if so how, incentives could be improved for the development of regional transmission facilities that are more cost-effective or efficient than local facilities.
• Whether interregional planning should be mandatory and interregional cost allocations permitted more often.
• Whether there should be closer integration, or even co-optimization, between the transmission planning and generator interconnection processes.

B. Identification of Cost and Responsibility for Regional Transmission Facilities and Interconnection-Related Network Upgrades

• Whether the existing approach to cost allocation for regional transmission facilities fails to consider the “full suite” of their benefits and beneficiaries, including “hard to quantify benefits.”
• Whether the regional transmission planning and cost allocation processes’ consideration of transmission needs driven by reliability, economic considerations, and Public Policy Requirements are inappropriately “siloed.”
• Whether a shift to “a more integrated and holistic process for regional transmission planning and cost allocation is appropriate.” For example, whether interconnection customers should be treated as beneficiaries of transmission facilities that facilitate their interconnection even if those facilities were built before they entered the interconnection queue.
• Whether the Commission should require transmission providers to establish a broader set of transmission benefits for cost allocation and whether FERC should define a minimum set of benefits that must be considered.
• Whether and how FERC’s participant funding and crediting interconnection pricing policies should be revised. In particular, whether FERC should eliminate the independent entity variations that allow ISOs/RTOs to use participant funding. 
• If participant funding of interconnection-related network upgrades is not eliminated, whether FERC should develop cost-sharing measures to recognize that “later-in-time interconnection customers” may accrue benefits from upgrades built to accommodate earlier requests.
• Whether FERC should limit the number of “speculative” interconnection requests that customers may submit in an effort to “discover” the lowest cost point of interconnection.
• Whether there should be a fast-track generator interconnection process to facilitate interconnection of facilities that have committed to connecting to new regional transmission facilities or that have reached a more advanced stage of “readiness.”

C. “Enhanced” Transmission Oversight

• Whether FERC should enhance oversight of transmission planning and spending.
• Whether current transmission planning processes, especially in non-ISO/RTO regions provide sufficient transparency.
• Whether FERC should require the creation of “independent transmission monitors,” potentially modeled on existing independent market monitors, to oversee various aspects of transmission planning and costs.
• Whether independent monitors would be needed in both non-ISO/RTO regions and ISO/RTO regions, what functions they might perform— including whether they might—oversee generator interconnection processes, and the legality of requiring the establishment of such monitors under the Federal Power Act.
• Whether an independent transmission monitor could do more to cost-effectively review transmission planning processes and costs before construction starts?
• Whether state regulators should play a larger role in overseeing transmission planning and spending and whether any existing uncertainty about current state and federal roles should be resolved.
• Whether FERC should revise its policies governing the recovery of abandoned transmission project costs.

Analysis and Next Steps

Commissioner Chatterjee is expected to leave the Commission in the near future and is not participating in the ANOPR proceeding.  The other four Commissioners all voted for the ANOPR because they agreed that it is appropriate for FERC to review its policies at this time.  However, the Commissioners also produced three separate concurring opinions that reveal markedly divergent views. 

FERC’s two Democrats, Chairman Glick and Commissioner Clements, wrote a joint opinion which emphasized that the issues raised by the ANOPR are likely to be the “Commission’s principal focus in the months to come”⁷  They acknowledged that FERC will need to carefully consider stakeholder input “before proceeding to reform our rules and regulations.”⁸  But they also insisted that FERC does “not have the luxury of sitting back and debating these issues ad nauseum.”  They closed by declaring:

With the clean energy transition gaining steam, we can either continue with the status quo, trying to meet the transmission needs of the future by building out the grid in a myopic, piecemeal fashion, or we can start holistically and proactively planning for those future transmission needs.  We believe that today’s [ANOPR] represents an important and essential first step in the right direction and toward the type of transmission planning and cost allocation paradigm that is necessary to protect consumers, support reliability, and ensure just and reasonable rates.⁹

Chairman Glick separately stated in FERC’s official ANOPR press release that, “[a]s the generation fleet shifts at an unprecedented rate from resources located closer to population centers towards resources located far from load centers, we must evaluate whether our transmission planning and cost allocation and generator interconnection processes require a more innovative and anticipatory approach,” and that “[w]e must take steps today to build the transmission that tomorrow’s new generation resources will require.”¹⁰ 

By contrast, Republican Commissioner Danly indicated that he would likely oppose many of the ANOPR’s specific proposals.  He recognized that there are problems with the existing regulatory framework, including “interconnection logjams” and practices that might “be needlessly propping up fantasy projects while viable projects get lost in the crowd.”¹¹  But he argued that many of the ANOPR’s proposals, would: 

[E]xceed or cede our jurisdictional authority, violate cost causation principles, create stifling layers of oversight and “coordination,” trample transmission owners’ rights, force neighboring states’ ratepayers to shoulder the costs of other states’ public policy choices, treat renewables as a new favored class of generation with line-jumping privileges, and perhaps inadvertently lead to much less transmission being built and at much greater all-in cost to ratepayers.¹²

Similarly, Commissioner Christie suggested that the “ANOPR contains some good proposals, some potentially good proposals (depending on how they are fleshed out), and frankly, some proposals that are not ---and may never be--- ready for prime time, or could potentially cause massive increases in consumers’ bills for little or no commensurate benefit or inappropriately expand the role of federal regulation over local utility regulation.”¹³

These statements suggest that it will be difficult for FERC to adopt proposals that would enjoy consensus support.  If compromise cannot be reached, then the eventual arrival of a third Democrat to replace Commissioner Chatterjee may result in a 3-2 majority supporting the ANOPR’s more controversial suggestions.  But if FERC were to propose dramatic regulatory changes without consensus support they would be more likely to be challenged and could be more vulnerable on appeal. 

Please contact any of the attorneys identified in this Client Alert with any questions or for assistance regarding the issues raised by the ANOPR. 
 

¹ 176 FERC ¶ 61, 024 (2021).  The ANOPR was issued in Docket No. RM21-17-000. 

²  ANOPR (Christie, Comm’r, concurring at P 4). 

³ ANOPR (Glick and Clements, Comm’rs concurring at P 13, “In addition to reviewing the record assembled in response to today’s order, we intend to explore technical conferences and other avenues for augmenting that record—including through the joint federal-state task force. . . . .” citing Joint Federal-State Task Force on Electric Transmission, 175 FERC ¶ 61,224 (2021).

⁴ See, e.g., https://www.greentechmedia.com/articles/read/the-top-priorities-of-fercs-most-likely-new-chairman-under-a-biden-administration (Nov. 18, 2020) (“Glick added that it’s highly unlikely that the Biden administration will be able to meet its aggressive decarbonization goals ‘unless we can access significant amounts of newly built renewable resources’ which won't be possible ‘unless we significantly build out the grid.’”)

⁵ See, e.g., https://www.whitehouse.gov/briefing-room/statements-releases/2021/04/27/fact-sheet-biden-administration-advances-expansion-modernization-of-the-electric-grid/.

⁶ For example, the energy infrastructure legislation recently approved by the Senate Energy and Natural Resources Committee would give FERC 18 months to complete a rulemaking to increase the effectiveness of interregional transmission planning and cost allocation.  

⁷ ANOPR (Glick and Clements, Comm’rs concurring at P 13.)

⁸ Id.

⁹ ANOPR (Glick and Clements, Comm’rs concurring at P 14.)

¹⁰ See https://www.ferc.gov/news-events/news/ferc-begins-reform-process-build-transmission-system-future.

¹¹ Id.

¹² ANOPR (Danly, Comm’r concurring at P 2.)

¹³ ANOPR (Christie, Comm’r concurring at P 5.)