FERC Proposes Broad Transmission Planning and Cost Allocation Reforms

The Federal Energy Regulatory Commission on April 21 issued a proposed rule to improve regional transmission planning and cost allocation, addressing the need for increased resilience and reliability of energy infrastructure while achieving cost savings for consumers. Among the key provisions, the proposal would require each transmission provider to seek the agreement of relevant state entities within the planning region regarding the cost allocation for facilities selected as part of long-term regional transmission planning. The proposed rule would require transmission providers to conduct regional planning on a sufficiently long-term basis to address changes in the resource mix and demand.

The proposal, which takes on two of the most complex issues blocking grid expansion – transmission planning and cost allocation – would grant utilities the rights of first refusal to build new power line projects in cases when they share ownership with another party, a model that has historically held down costs of new transmission projects, according to the commission.

FERC Chairman Rich Glick said that the commission’s majority could not demonstrate its existing transmission planning and cost allocation policies are unjust and unreasonable, which is FERC’s justification for revising the policies under section 206 of the Federal Power Act.

FERC’s last comprehensive set of transmission policy reforms, Order 1000, which was enacted in 2012, required regional transmission organizations to compete in most large new grid projects and removed any federal rights of first refusal held by incumbent utilities to build the projects. FERC is seeking to remedy long-recognized shortfalls with Order 1000 that have drawn persistent complaints and to encourage the buildout of transmission to deliver remotely located renewable power to market, which is seen as critical to President Biden’s goal of achieving carbon neutrality by 2050.

The proposed requirement for longer-term transmission planning may serve to boost prospects for grid expansion because the longer timeframe likely will result in projections of greater benefits from projects. That boosts the odds that a project will pass cost-benefit tests and be cleared for construction and broad cost allocation. Besides planning 20 years ahead, the proposal would require transmission owners to “identify transmission needs through multiple long-term scenarios that incorporate a minimum set of factors, such as federal, state, and local laws and regulations that affect the future resource mix and demand; trends in technology and fuel costs; resource retirements; generator interconnection requests and withdrawals; and extreme weather events.”

The agency also proposed a list of long-term benefits that utilities may use in assessing the new projects, including requiring utilities to identify what benefits it uses in cost-benefit calculations. The proposed rule also would require utilities to consider dynamic line ratings and advance power flow control devices more fully in regional transmission planning, with the goal of expanding the capacity of existing power lines.

The commission invites public comment as to what improvements could be made to support the deployment of more efficient, cost-effective transmission infrastructure. Comments must be submitted within 75 days of publication in the federal register. Reply comments must be submitted 30 days after the initial comment deadline.