The Nickel Report

Recently certain policy advocates have suggested that the Federal Energy Regulatory Commission (FERC) should attempt to revitalize the Federal Power Act Section 216 “backstop siting” authority as a means of addressing climate change.  Their objective is to facilitate the construction of more long-haul transmission lines from areas with excess renewable generation, so zero-emitting generation can reach more markets.

This post does not comment on that objective.  It comments on the backstop siting authority.  Specifically, it discusses whether FERC’s backstop siting authority extends only to cases where a State decision has been delayed, or also where approval has been denied.  In short, the statute in fact was designed to extend to both delays and denials.  I represented a coalition that worked on and advocated for the provision.

Referring to the authority as “siting” authority is a bit of a misnomer.  The authority encompasses siting, but explicitly extends to permitting – i.e., not just where a transmission line goes, but whether it goes.  But “backstop siting” is the vernacular, and we’ll use that here.

The backstop siting authority idea arose around 1999, a time when deregulated competitive wholesale electricity markets were still emerging.  For robust regional wholesale generation markets to develop, the group we represented argued that more transmission capacity needed to be built.  However, there were impediments to companies doing so.  Notably, transmission rates were too low for developers and investors to take the investment risk; and central to this post, States might not approve a transmission line passing through their territory en route to serving consumers in other States.  These concerns resulted in Sections 1241 and 1221 of the Energy Policy Act of 2005, now incorporated in law as Sections 216 and 219 of the Federal Power Act.[1]

A critical part of the backstop siting authority was to respect State authority as much as possible.  Congress could have assigned to FERC in the first instance the determination of whether an interstate transmission line is needed, bypassing the States entirely.  Clearly there is an interstate – federal – interest in interstate transmission and regional generation markets.  But no one made a serious request to give FERC “first-stop” authority, and there was no prospect that Congress would not have done so if they had.

At the time, many in the utility sector did not even want to advocate for FERC to determine whether more interstate transmission capacity was needed in an area, out of concern over creating unnecessary tensions between FERC and the States, who share carefully balanced regulatory authority over electricity.  The idea arose to assign elsewhere – beyond FERC or the States – the authority of determining where transmission capacity across State boundaries was needed.  The Department of Energy became the entity to designate National Interest Electric Transmission Corridors (NIETCs) in areas where it determined there were transmission constraints or congestion.

Only within an NIETC – an area where DOE determined a need for transmission – is FERC authorized to exercise backstop siting authority.

A key issue is whether the authority applied in cases where a State denied a permit to construct a facility.  Section 216 gives FERC authority to step in where it finds that a State –

• withheld [emphasis added] approval for more than 1 year after the filing of an application seeking approval pursuant to applicable law or 1 year after designation of the relevant national interest electric transmission corridor, whichever is later; or
• conditioned its approval in such a manner that the proposed construction or modification will not significantly reduce transmission congestion in interstate commerce or is not economically feasible.”[2]

As today’s advocates point out, unfortunately, this authority has been undercut substantially by a Fourth Circuit Court of Appeals opinion in 2009.[3]  The Fourth Circuit held that the plain meaning of the word “withheld” does not include denial.

The Fourth Circuit’s opinion is at odds with the text of the language, FERC’s interpretation of it, and the way it was understood when it was debated and enacted.  To read the text as not providing FERC authority to step in in cases of State denials of interstate transmission is to suggest that Congress in effect intended a State veto over competitive wholesale generation markets; and that Congress only wanted to prevent States from blocking transmission by delaying approvals or making a proposed line too expensive, but not by blocking it outright.  FERC cited the dictionary in concluding that the plain meaning of the word “withheld” includes denial:

Webster’s Third New International Dictionary defines “withhold” as “. . . to desist or refrain from granting, giving, or allowing . . . .” The same dictionary defines “deny” as “. . . to refuse to grant: WITHHOLD” [caps in original].[4]

Congressional debate over the provision includes concern from the States that “FERC will have authority to override State decisions on transmission siting.”[5]  If “withheld” only included delays but not denials, there would be no State decision to override.

This is not the only concern with Section 216 and its implementation.  If advocates intend to press the Biden Administration to make productive use of Section 216, among other things they will need to revive the NIETC designation process, and assure that any transmission project that does make its way to FERC for approval is considered in the thorough but accelerated fashion that Congress intended.

[1] 16 U.S.C. 824p and 16 U.S.C. 824s.

[2] 16 U.S.C. 824p(b)(1)(C).

[3] Piedmont Environmental Council v. FERC, 558 F. 3d 304, Feb. 18, 2009.

[4] 71 Fed. Reg. 69440, at 69445, Dec. 1, 2006.

[5] Testimony of Marilyn Showalter, National Association of Regulatory Utility Commissioners, House Energy & Commerce Committee Hearing Report No. 109-1, p. 108.