In Memoriam: Harold L. Talisman
April 28, 2022

FERC Issues Notice of Proposed Rulemaking to Revise Transmission Planning and Cost Allocation Policies

On April 21, 2022, the Federal Energy Regulatory Commission (FERC) issued a Notice of Proposed Rulemaking (NOPR) to revise the requirements for electric regional transmission planning and cost allocation. While narrower than the Advanced Notice of Proposed Rulemaking previously issued in the same proceeding, the NOPR proposes significant changes to FERC’s regulations.

Specifically, the NOPR proposes to require that transmission providers engage in Long-Term Regional Transmission Planning, which FERC describes as regional transmission planning on a forward-looking basis with a long-term horizon to meet transmission needs driven by changes in the resource mix and demand.  The proposed rulemaking would require public utility transmission providers to revise their open access transmission tariffs (OATTs) to comply with a number of proposed Long-Term Regional Transmission Planning requirements, including considering dynamic line ratings and advanced power flow control devices in regional transmission planning processes.  

With respect to transmission cost allocation, the NOPR proposes to require transmission providers to seek agreement from relevant state entities within their transmission planning region as to the cost allocation method or methods that will apply to transmission facilities selected through Long-Term Regional Transmission Planning (Long-Term Regional Transmission Planning Facilities).

Regarding the construction work in progress (CWIP) incentive, the NOPR proposes that Long-Term Regional Transmission Planning Facilities would not be eligible for the recovery of 100% of CWIP as an incentive.

Finally, the NOPR amends FERC’s earlier Order No. 1000 requirements, in part, to permit the exercise of federal rights of first refusal (ROFR) for transmission facilities selected in a regional transmission plan for purposes of cost allocation, where the transmission provider in whose service territory the facility will be built establishes joint ownership of the transmission facilities under certain circumstances.

The NOPR also includes several proposals aimed at enhancing transparency in local transmission planning processes, better coordination between regional and local transmission planning to identify opportunities to “right-size” replacement transmission facilities, and revising interregional coordination procedures to account for transmission needs identified in Long-Term Regional Transmission Planning. 

Comments on the NOPR are due to FERC on July 18, 2022, and reply comments are due on August 17, 2022.

Read on for more details on each of the NOPR’s key proposals.

Long-Term Regional Transmission Planning

The NOPR would require transmission providers, in coordination with state entities and other stakeholders, to:

1.    identify the needs of the transmission system due to resource mix and demand changes through creation of long-term scenarios;

2.    assess the ability of regional transmission facilities to meet such needs over, at a minimum, a twenty-year horizon, starting on the estimated in-service date of the facilities; and

3.    create transparent and not unduly discriminatory selection criteria for decisions about which transmission facilities to include in the regional transmission plan for cost allocation purposes to meet transmission needs. 

The NOPR proposes to require that the long-term scenarios developed as part of the Long-Term Regional Transmission Planning, must: (1) use a planning horizon of at least twenty years with reassessment and revision at least every three years; (2) involve categories of factors for future transmission needs identified by FERC; (3) use a set of at least four plausible and diverse scenarios; (4) use “best available data” for the scenario development; and (5) consider whether to recognize certain geographic zones with the potential for a substantial amount of new generation. 

Additionally, as a factor in the development of long-term scenarios, transmission providers must consider interconnection needs that were identified multiple times during previous generator interconnection processes, but were not resolved due to withdrawal of the underlying interconnection request. Specifically, the interconnection needs must meet certain criteria such as: (1) the interconnection-related upgrades to address the need were identified in at least two interconnection queue cycles of studies; (2) the upgrade to address the need has a voltage of at least 200 kilovolts (kV) or estimated cost of at least $30 million; (3) the upgrades to address the need have not been and are not currently being developed; and (4) the upgrades to address the need were not identified in an executed interconnection agreement or one requested to be filed unexecuted. When identifying such interconnection needs, the transmission provider must look-back five years, identifying if a needed interconnection upgrade has been identified in generator interconnection studies in at least two interconnection queue cycles during the past five years, beginning on the date that an interconnection request is withdrawn after an interconnection study identified a needed network upgrade meeting the above criteria.

Under the NOPR, Long-Term Regional Transmission Planning will include the evaluation of benefits of regional transmission facilities, and to that end the NOPR provides a detailed list of proposed non-mandatory, non-exhaustive Long-Term Regional Transmission Benefits for use in such evaluation. The NOPR also proposes to require transmission providers to include as part of their Long-Term Regional Transmission Planning tariff provisions selection criteria that are transparent, not unduly discriminatory, and meant to maximize the benefits to consumers over time without overbuilding facilities. Transmission providers also would be required to develop processes for working with relevant state entities to develop such selection criteria.

Additionally, the NOPR proposes to require that transmission providers more fully consider dynamic line ratings and advanced power flow control devices in transmission planning by considering: (1) whether adding these advanced technologies will meet the same transmission needs more efficiently or cost-effectively than adding other transmission facilities; and (2) whether, when assessing potential transmission facilities, adding these advanced technologies as part of the potential transmission facilities would be more efficient or cost-effective than alternatives.

If a transmission provider seeks to retain its existing regional transmission planning and cost allocation procedures for considering transmission needs driven by public policy requirements, the NOPR proposes to require that transmission providers demonstrate that such existing procedures will not interfere with or subvert the Long-Term Regional Transmission Planning requirements adopted through a final rule on the NOPR by showing that such existing procedures are consistent with or superior to any such final rule.

Long-Term Regional Transmission Planning Cost Allocation, CWIP Eligibility, and Federal ROFR Reforms

Regional Cost Allocation

The NOPR proposes two main reforms to its cost allocation requirements for Long-Term Regional Transmission Planning that largely focus on state entities’ participation. First, it proposes to require each public utility transmission provider in each region to revise its OATT to include either: (1) a long term regional cost allocation method to allocate the costs of for Long-Term Regional Transmission Planning Facilities; or (2) a “State Agreement Process” by which state entities may voluntarily agree to a cost allocation method; or (3) a combination of the first two approaches.  As part of this requirement, transmission providers would be required to seek the agreement of relevant state government entities regarding the regional planning cost allocation approach selected. 

The NOPR also proposes to require transmission providers to revise their OATTs to provide a process for providing state entities within the region a specific time period for negotiation of a regional cost allocation method for Long-Term Regional Transmission Planning Facilities that is different than any ex ante regional cost allocation method that would otherwise apply. If the specific time period expires without relevant state entities agreeing on a cost allocation method, the transmission developer would be entitled to use any ex ante regional cost allocation method that would otherwise apply for that regional transmission facility.

The NOPR also proposes to require public utility transmission providers to identify on compliance with the final rule the Long-Term Regional Transmission Benefits they will use in their ex ante cost allocation method for Long-Term Regional Transmission Planning.

No Eligibility for CWIP Incentive for Long-Term Regional Transmission Planning Facilities

The NOPR proposes to permit transmission providers only to book costs incurred during Long-Term Regional Transmission Planning Facility pre-construction or construction as Allowance for Funds Used During Construction (AFUDC) and to recover such costs after the project is in service. Notwithstanding this limitation, a transmission provider may still request 50% CWIP in rate base as a transmission development incentive under Order No. 679 provided it complies with the regulatory requirements for securing such incentive.

Federal ROFR

The NOPR proposes to restore in limited circumstances a federal ROFR that FERC eliminated in Order No. 1000. Specifically, under the NOPR, an incumbent transmission provider could exercise a ROFR for transmission facilities in its retail distribution territory or footprint that are selected in a regional transmission plan for purposes of cost allocation on the condition that the incumbent transmission provider establishes joint ownership of the transmission facilities with unaffiliated partners who have a meaningful level of participation and investment in the proposed facilities.  

Interregional Coordination

While the NOPR does not include any proposals to change the existing transmission coordination and cost allocation requirements adopted in Order No. 1000, the NOPR proposes to require transmission providers to revise their existing interregional transmission coordination procedures adopted in compliance with Order No. 1000 to apply them to the proposed Long-Term Regional Transmission Planning reforms proposed in the NOPR.

Transparency Enhancements

The NOPR also proposes to require transmission providers to add to their OATTs provisions to enhance transparency regarding: the criteria, models, and assumptions they use in their local transmission planning process; the local transmission needs that they identify through that process; and the potential local or regional transmission facilities that they will evaluate to address local transmission needs. 

“Right-Sizing” Transmission Facilities

The NOPR would also require transmission providers to evaluate in the Long-Term Regional Transmission Planning process whether transmission facilities operating at or above 230 kV that are expected to be replaced in-kind with a new transmission facility during the next ten years can be “right-sized” for regional transmission needs. For right-sized replacement transmission facilities selected in a regional transmission plan for cost allocation purposes to meet the needs identified through Long-Term Regional Transmission Planning, the NOPR proposes to require the creation of a ROFR for the transmission provider that in its in-kind replacement estimates, included such in-kind replacement transmission facilities, extending to any part of such facilities within the applicable transmission provider’s footprint or retail service territory. 

For more information, please contact: Wendy Reed (reed@wrightlaw.com), Matthew Binette (binette@wrightlaw.com), Tory Lauterbach (lauterbach@wrightlaw.com), Elizabeth Trinkle (trinkle@wrightlaw.com), Abe Johns (johns@wrightlaw.com), or Ade Adeniyi (adeniyi@wrightlaw.com).

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