07.28.2011

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Updates

On July 21, 2011, the Federal Energy Regulatory Commission (“Commission”) issued a major rulemaking imposing new electric transmission planning and cost allocation requirements on public utility transmission providers (“Order 1000”).  Order 1000 builds on the prior Order 890, in which the Commission required each public utility transmission provider to participate in a coordinated, open and transparent regional transmission planning process.  In Order 1000, the Commission finds that inadequate transmission planning and cost allocation requirements may be impeding the development of beneficial transmission lines and leading to inefficient and overlapping transmission development due to a lack of coordination.  Through the package of reforms adopted in Order 1000, the Commission seeks to ensure that each public utility transmission provider will work within its transmission planning region to create a regional transmission plan that identifies facilities needed to meet reliability, economic and public policy requirements, including fair consideration of lines proposed by nonincumbents, with cost allocation mechanisms in place to facilitate lines moving from planning to development.  The effective date of Order 1000 will be 60 days following its publication in the Federal Register.  Two rounds of compliance filings will be required, with the first due within 12 months of the effective date and the second due within 18 months of the effective date.

Background

The rulemaking process that led to the issuance of Order 1000 began with the Commission's issuance of a Notice of Proposed Rulemaking (“NOPR”) on June 17, 2010.  More than 245 comments were filed in response to the NOPR.

Planning Reforms

            Local Transmission Planning

  • To the extent a public utility transmission provider engages in local transmission planning, Order 1000 requires the provider to amend its Open Access Transmission Tariff (“OATT”) to provide procedures and mechanisms for considering transmission needs driven by public policy requirements (such as renewable portfolio standards adopted by many states) in the local transmission planning processes.

            Regional Transmission Planning

  • Each public utility transmission provider must participate in a regional transmission planning process, developed in consultation with stakeholders, through which transmission facilities and non-transmission alternatives are proposed and evaluated on a comparable basis. 
  • The regional transmission planning process must develop a regional transmission plan that identifies the transmission facilities necessary to meet the needs of transmission providers and customers in the transmission planning region (i.e., transmission providers will be obligated to take affirmative steps to identify potential solutions at the regional level that could better meet the needs of the region than solutions identified by individual public utility transmission providers in their local transmission planning process). 
  • Each public utility transmission provider must amend its OATT to provide procedures and mechanisms for considering transmission needs driven by public policy requirements in the regional transmission planning processes. 
  • Such procedures must provide all stakeholders an opportunity to provide input and offer proposals regarding these transmission needs.
  • Public utility transmission providers will be required to post on their websites an explanation of which transmission needs driven by public policy requirements will be evaluated for potential solutions in the local or regional planning process, as well as an explanation of why other transmission needs will not be evaluated.
  • The regional transmission planning process must adhere to the following seven transmission planning principles adopted in Order 890 for individual transmission planning processes:  (1) coordination; (2) openness; (3) transparency; (4) information exchange; (5) comparability; (6) dispute resolution; and (7) economic planning.  Order 1000 sets forth more detailed requirements with respect to participation in regional planning and cost allocation.  
  • Public utility transmission providers must revise their OATTs to include a description of the regional transmission planning process that contains sufficient detail to enable transmission customers to understand:

(1) The process for consulting with customers;

(2) The notice procedures and anticipated frequency of meetings;

(3) The methodology, criteria, and processes used to develop a transmission plan;

(4) The method of disclosure of criteria, assumptions and data underlying a transmission plan;

(5) The obligations of, and methods for, transmission customers to submit data;

(6) The process for submission of data by nonincumbent developers of transmission projects that wish to participate in the transmission planning process and seek regional cost allocation;

(7) The process for submission of data by merchant transmission developers that wish to participate in the transmission planning process;

(8) The dispute resolution process;

(9) The study procedures for economic upgrades to address congestion or the integration of new resources;

(10) The procedures and mechanisms for considering transmission needs driven by public policy requirements, consistent with Order 1000; and

(11) The relevant cost allocation method or methods.

    • The regional transmission planning process must include a cost allocation method or methods that satisfy six regional cost allocation principles. 

Interregional Transmission Coordination

    • Each public utility transmission provider must coordinate, through its regional transmission planning process, with the public utility transmission providers in each neighboring transmission planning region within its interconnection to address transmission planning coordination issues related to interregional transmission facilities.
    • Each public utility transmission provider must revise its OATT to describe, among other things, how its interregional transmission coordination procedures address the process for coordination between public utility transmission providers in neighboring transmission planning regions (1) with respect to each interregional transmission facility that is proposed to be located in both transmission planning regions and (2) to identify possible interregional transmission facilities that could address transmission needs more efficiently or cost-effectively than separate regional transmission facilities.
    • Each public utility transmission provider must revise its OATT to ensure that the following requirements are included in any applicable interregional transmission coordination procedures: 

(1)  A commitment to coordinate and share the results of each transmission planning region’s regional transmission plans to identify possible interregional transmission facilities that could address transmission needs more efficiently or cost-effectively than separate regional facilities, as well as a procedure for doing so;

(2)  A formal procedure to identify and jointly evaluate transmission facilities that are proposed to be located in both transmission planning regions;

(3)  An agreement to exchange, at least annually, planning data and information; and

(4)  A commitment to maintain a website or e-mail list for the communication of information related to the coordinated planning process.

Each public utility transmission provider must work with transmission providers located in neighboring transmission planning regions to develop a mutually agreeable method or methods for allocating between the two transmission planning regions the costs of a new interregional transmission facility that is located within both transmission planning regions.

Nonincumbent Developer Reforms

    • Public utility transmission providers must eliminate provisions in Commission-jurisdictional tariffs and agreements that establish a federal right of first refusal for an incumbent transmission provider with respect to transmission facilities selected in a regional transmission plan for purposes of cost allocation.  Order 1000 does not grant or deny transmission developers the ability to use rights-of-way held by other entities, even if transmission facilities associated with such upgrades or uses of existing rights-of-way are selected in the regional transmission plan for purposes of cost allocation.
    • Order 1000 adopts a framework requiring development of qualification criteria and protocols to govern the submission and evaluation of proposals for transmission facilities to be evaluated in the regional transmission planning process.  Each public utility transmission provider must revise its OATT to address:

(1)  Qualification criteria for determining an entity's eligibility to propose a transmission project for selection in the regional transmission, plan for purposes of cost allocation;

(2)  The information that a prospective developer must submit in support of its proposal and the timeline for doing so;

(3)  The process of evaluating whether to select a proposed transmission facility, and the circumstances and procedures under which the regional transmission plan will be reevaluated to determine whether delays in development require evaluation of alternatives; and

(4)  Procedures, developed in consultation with stakeholders, to ensure that all projects are eligible to be considered for selection in the regional transmission plan for purposes of cost allocation (such as through a nondiscriminatory competitive bidding process).

Cost Allocation for New Transmission Facilities

    • Each public utility transmission provider (or, where applicable, each regional transmission organization or independent system operator) must revise its OATT to establish a method, or set of methods, for allocating the costs of new transmission facilities selected in the regional transmission plan for purposes of cost allocation (“regional cost allocation”), and each public utility transmission provider within a transmission planning region must develop a method or set of methods for allocating the costs of new interregional transmission facilities that two (or more) neighboring transmission planning regions determine resolve the individual needs of each region more efficiently and cost-effectively (“interregional cost allocation”).
    • Transmission providers in each region must have a cost allocation method or methods for transmission facilities selected in a regional transmission plan that reflects the benefits that those transmission facilities provide.  While each transmission planning region may develop an allocation method or methods for different types of transmission projects, such method or methods should apply to all transmission facilities of the same type.
    • Each regional cost allocation and interregional cost allocation must adhere to the following principles:

    (1)  Allocation between regions or within a region must be done in a manner that is "roughly commensurate" with estimated benefits;

    (2)  There may be no involuntary allocation of costs to non-beneficiaries;

    (3)  If a "benefit to cost threshold" is used to determine eligibility for regional or interregional cost allocation, the required ratio of benefits to costs may not exceed 1.25 unless it is justified and approved by the Commission;

    (4)  The allocation method must allocate costs solely within the transmission planning region(s) in which the transmission facility is located, unless another entity outside such region(s) voluntarily agrees to assume costs;

    (5)  The allocation method and data requirements for determining benefits and identifying beneficiaries must be transparent; and

    (6)  Different cost allocation methods may be used for different types of transmission facilities, such as transmission facilities needed for reliability, congestion relief, or to achieve public policy requirements.

    Compliance Filing Deadlines

      • The compliance filing deadline is 12 months from the effective date of Order 1000, except for the requirements associated with interregional transmission coordination procedures and interregional cost allocation methods.
      • The compliance filing deadline is 18 months from the effective date for interregional reforms.

      © 2011 Perkins Coie LLP