FERC Opens New Rulemaking To Explore Rate Impacts Of Transmission Grid Expansion

Noting that the electricity sector is “transforming as the generation fleet shifts from resources located close to population centers toward resources, including renewables, that may be located far from load centers,” the Federal Energy Regulatory Commission (FERC) has issued an Advance Notice of Proposed Rulemaking (ANOPR) in Docket RM21-17 seeking stakeholder comment on whether and how to “build for the future” by revising existing regulations governing regional transmission planning, cost allocation, and generator interconnection.

The ANOPR is the first step in a rulemaking process that may conclude with adoption of FERC proposals, or alternative approaches proposed by participants. The ANOPR will build on the existing Order No. 2003 interconnection process, and the transmission planning reforms adopted ten years ago in Order No. 1000, which established requirements for a more open, integrated, and cost-effective approach to regional transmission planning. According to the ANOPR, these existing transmission planning and cost allocation processes do not enable integration of near and longer-term generation projects, and may fail to identify the most efficient or cost-effective transmission facilities needed to accommodate anticipated future generation. In addition, the current approach of assigning network upgrade costs only to an identified generation project or cluster may not be appropriately allocating costs to all benefitting customers.

To address these challenges, and the related issues of queue management and pricing policy, FERC seeks comment on a number of potential reforms, including:

• Improving the modelling of future transmission needs by considering existing and anticipated federal, state and local climate and clean energy laws and regulations, utility and corporate energy and climate goals, technology trends, and resource retirements.
• Developing long-term planning scenarios and methodologies that account for legal, policy and technological changes and reflect anticipated benefits.
• Expanding participation by state and local government, and other stakeholders, in developing future scenarios and modifications to regional planning and cost allocation processes.
• Identifying technical and collaborative approaches to identify geographic zones that have potential for significant renewable resource and energy storage development, and realistically measuring commercial interest in project development within such zones.
• Incentivizing regional transmission development.
• Enhancing interregional or state-to-state coordination.
• Coordinating between regional transmission planning and the cost allocation and generator interconnection processes.
• Improving cost allocation processes and methods for identifying and quantifying cost causation and benefits, while ensuring that costs are not unjustly shifted to customers of load-serving entities and addressing other fairness and “free rider” issues.
• Reconsidering the use of participant funding and crediting approaches for financing interconnection-related network upgrades, given potential for inefficiencies in transmission planning and siting and/or inequitable cost allocation, and examining alternatives such as up-front transmission provider funding for all, or a portion of, network upgrades, or a fee-based, interconnection customer contribution.
• Considering improvements in queue management such as penalties or fees to discourage multiple and/or speculative interconnection requests, a fast-track process for generation committed to regional transmission facilities or generation with signed power purchase commitments.
• Incorporating grid-enhancing technologies.
• Improving transmission oversight through approaches such as empowering an independent transmission planning monitor, coordination with state regulators, limiting cost recovery for abandoned projects, or considering performance-based regulation.

FERC also calls for comments on how best to transition to new interconnection pricing paradigms and new regional transmission planning and cost allocation processes that may be adopted in this rulemaking proceeding. The ANOPR issues are broad in scope and may affect California and regional transmission providers, electric utilities, renewable and storage project developers, local governments and electric utility ratepayers.

Opening comments are due October 12, 2021, reply comments November 9, 2021.

Contact: Brian Biering or Lynn Haug