FERC Rejects Challenges To Landmark Rulemaking Order On New Electric Transmission Infrastructure

On May 17, 2012, the Federal Energy Regulatory Commission ("FERC" or "Commission") issued an "Order on Rehearing and Clarification" reaffirming its Order No. 1000,1 which the Commission issued in August 2011 as a major reform of FERC policies governing the planning for, and cost treatment of, new electric transmission projects. The May 17 Order, Order No. 1000-A,2 denied requests for rehearing that had challenged Order No. 1000's central directives. FERC also clarified certain elements of Order No. 1000's requirements.

Overview of FERC Order No. 1000

Order No. 1000 requires each Public Utility Transmission Provider ("Transmission Provider")

To participate in a regional planning process that evaluates transmission alternatives based on the principles of FERC's Order No. 8903 and to produce a regional transmission plan that evaluates, inter alia, transmission needs driven by public policy requirements that are established by state or federal laws or regulations ("Public Policy Requirements"); To remove from the Transmission Provider's Open Access Transmission Tariff ("OATT") or other FERC-jurisdictional tariffs and agreements any federal "rights of first refusal" with respect to transmission facilities that are selected in a regional transmission plan for purposes of cost allocation; To coordinate across neighboring transmission planning regions on the development of procedures for joint evaluation of transmission projects and sharing of transmission planning information and solutions, to determine whether interregional transmission projects will provide more cost-effective solutions to transmission needs; and To develop methods to allocate, to the beneficiaries of new transmission projects selected through regional or interregional transmission planning processes, the costs of those facilities, in accordance with certain regional and interregional cost allocation principles. Topics Clarified in Order No. 1000-A

Regional Transmission Planning. Order No. 1000 requires all Transmission Providers to participate in a regional transmission planning process that complies with Order No. 890 and produces a regional transmission plan. Through this process, Transmission Providers must, inter alia, consider transmission needs driven by Public Policy Requirements, evaluate alternative transmission solutions that might meet the transmission needs more efficiently than the projects proposed by individual Transmission Providers, and consider proposed non-transmission alternatives on a comparable basis. In Order No. 1000-A, the Commission denied requests for rehearing—including those requests that had challenged the Commission's legal authority to mandate Transmission Providers' participation in a regional transmission process—and clarified various aspects of Order No. 1000's terms and conditions to govern regional transmission planning:

In Order No. 1000-A, FERC once again declined to define the specific size or other characteristics of a planning "region" other than to state that an individual utility, acting by itself, cannot satisfy this requirement. FERC explained that Order No. 1000 defined a "transmission planning region" as a region in which Transmission Providers, in consultation with stakeholders and affected states, have joined for purposes of satisfying the requirements of Order No. 1000, including, among other purposes, the development of a regional transmission plan.4 The Commission stated that the scope of a transmission planning region should be determined by the integrated nature of the regional power grid and the reliability and resource issues in a specific region.5 Regional Transmission Organization ("RTO") regions already may satisfy many aspects of Order No. 1000's regional planning requirements.6 FERC emphasized that Transmission Providers must have a clear enrollment process for regional transmission planning that defines how entities, including entities other than Transmission Providers, may elect to become part of the transmission planning region. OATTs for Transmission Providers must include a list of all Transmission Providers and other entities that have enrolled in transmission planning in a region.7 FERC clarified in Order No. 1000-A that participation by an entity other than a FERC-jurisdictional Transmission Provider in Order No. 1000 compliance processes—e.g., in the development of a Transmission Provider's proposed regional transmission planning process and regional cost allocation method—does not obligate that entity to join the transmission planning region and thus to become potentially subject to the allocation of costs under the regional cost allocation method. Such an entity will not be deemed to have joined a transmission planning region, and thus to have become eligible for cost allocation, until it has actually enrolled in the transmission planning region.8 FERC clarified that nothing in Order No. 1000 is intended to preempt or otherwise conflict with state authority over siting, permitting, and construction of transmission facilities; integrated resource planning; or similar processes. Order No. 1000's reforms were not intended to dictate substantive outcomes, such as what transmission facilities will be built and where. These decisions are normally made at the state level. Rather, Order No. 1000's transmission planning reforms are intended to ensure that there is an open and transparent regional transmission planning process that produces a regional transmission plan.9 FERC clarified that Order No. 1000 does not require that transmission facilities included in a Transmission Provider's local transmission plan be subject to approval at the regional or interregional level, unless that Transmission Provider seeks to have any of those facilities selected in the regional transmission plan for purposes of cost allocation.10 FERC explained that Order No. 1000 does not require that any federal or state laws (including municipal or county laws) or regulations be evaluated as part of the transmission planning process.11 In Order No. 1000-A, the Commission explained...