FERC Affirms Role of Environmental Policies in Grid Planning Process

By Allison Clements and John Moore, Sustainable FERC Project

Last Friday, the Federal Energy Regulatory Commission (FERC) issued three big orders on regional Order 1000 compliance filings – an event eagerly anticipated by those of us who spend our days focused on the transmission grid (yes, there are actually a lot of us!).  When FERC issued its landmark Order 1000 in July 2011, Allison expressed optimism in her blog about the rule’s potential role in accelerating wind and solar energy development and expanding the use of energy efficiency, demand response and other non-wires solutions in grid planning. Since then, the Sustainable FERC Project and our allies around the country have engaged in countless meetings and other discussions with the major transmission grid operators and stakeholders to help shape Order 1000-compliant rules.

During many of those meetings, we expressed concerns about some utilities’ underwhelming efforts to comply with Order 1000, especially as relates to taking into account local, state and federal laws and regulations like state renewable energy and energy efficiency standards, and the new U.S. EPA power plant standards.  Designing transmission systems to account for public policy requirements should be common sense, but some grid operators continued to resist.  Late last year most transmission utilities submitted their Order 1000 compliance proposals to FERC for approval. The Project and our allies intervened and filed detailed comments in 17 of these proceedings – in many cases affirming our concerns about failure to comply with the rule’s public policy obligations.

Last Friday, FERC issued the first set of Orders on these filings –for the large grid planning regions in a large area of the intermountain West (WestConnect), the Midwest (MISO) and the Mid-Atlantic/Midwest (PJM).  We are very pleased that FERC stood firm!  It rejected aspects of all three of these grid operator proposals that skimped on planning for public policy requirements, and ordered them to submit compliant proposals within four months.  

To be clear, we were not happy with all aspects of the FERC orders, especially on how grid operators should use non-wires solutions in the grid planning process.  And we didn’t weigh in heavily during the compliance proceedings on perhaps the most controversial issue in Order 1000 - its elimination, in many instances, of the incumbent transmission-owning utilities’ rights of first refusal to build transmission projects.  FERC refused to retreat from its position in Order 1000 in favor of eliminating the right of first refusal, which it considers to be an anti-competitive practice.  (Commissioners Moeller and Clark dissented from the MISO and PJM decisions on this issue.)  FERC will be issuing more decisions in the near future, but these orders are a good step in the right direction and generally we are pleased to see that FERC gave Order 1000’s public policy requirements teeth. 

WestConnect

A big win in the WestConnect region - FERC rejected the utilities’ attempt to almost completely avoid creating rules to plan for public policy requirements – including laws and regulations driving significant new renewable power generation in this wind and solar-rich region.  FERC agreed with most of our comments on WestConnect’s proposal and sent the utilities back to the drawing board to devise clear procedures for the identification and evaluation of public policies that could affect transmission system planning and operations.  FERC also agreed that the proposed WestConnect rules lacked meaningful opportunities for stakeholder input.  We worked hard for this result and are pleased with FERC’s decision.

MISO

We also were happy with FERC’s decision in the MISO Order 1000 compliance proceeding.  MISO began in a comparatively good spot because it already had in place a planning and cost allocation process for transmission projects developed in part to address public policy-driven grid needs.  However, MISO developed its planning rules before FERC issued Order 1000, and we were concerned that the grid operator lacked specificity and clarity of process.  FERC agreed with our comments, and ordered MISO to developed clear rules to identify and select projects driven by public policies.

PJM

FERC’s decision on the Mid-Atlantic regional grid, known as PJM, proved a mixed bag and maybe demonstrates the limits of what FERC is willing to require for Order 10000 compliance.  PJM’s proposal, which FERC largely approved, gives most responsibility for planning and paying for projects with public policy benefits to the states.  For example, a new transmission line needed to bring wind power from Pennsylvania to New Jersey cannot be proposed for inclusion in PJM’s regional plan unless one or more states support the line and agree to pay for it from the outset.  We think FERC’s decision here contradicts Order 1000’s goal (and Federal Power Act requirements) of identifying more cost-effective and efficient regional solutions.  States’ inability to agree on projects to meet public policies could thwart wind and other clean energy development and otherwise increase the costs of clean power.