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FERC kicks off major rulemaking effort to help speed electric grid build-out

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FERC kicks off major rulemaking effort to help speed electric grid build-out

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The Federal Energy Regulatory Commission is considering sweeping changes to its rules for U.S. electric transmission planning and development.
Source: aydinmutlu/Getty Creative via Getty Images

The Federal Energy Regulatory Commission on July 15 took the first step in developing a major proposed electric transmission planning rule that could eventually transform the nation's energy landscape.

In an advanced notice of proposed rulemaking, or ANOPR (RM21-17), the commission sought comments on how it should address obstacles that have stymied electric transmission build-out at the pace and scale needed to avoid the worst effects of climate change.

FERC's last major transmission planning rule, Order 1000, was issued in 2011. That rule was designed to encourage interregional transmission planning among FERC-jurisdictional grid operators, but so far, no interregional transmission lines selected through an Order 1000-mandated transmission plan have been completed to date.

Order 1000 also sought to foster more competition among transmission developers, but critics have noted that the regulation has led incumbent transmission owners to pursue an increasing number of smaller, local reliability projects shielded from the order's competitive bidding requirements.

Meanwhile, academic studies estimate the U.S. will need to double or even triple its electric transmission capacity to decarbonize its economy by midcentury.

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Former FERC members who originally approved Order 1000 have since argued that the regulation needs to be strengthened. But the draft ANOPR approved July 15 poses a series of questions indicating the commission is moving toward a complete overhaul of its transmission planning, cost allocation and generator interconnection rules.

FERC staff noted during a presentation at the agency's July 15 monthly open meeting that potential reforms considered in the ANOPR are aimed at producing a more holistic transmission planning process while ensuring rates remain just and reasonable.

Planning for the future

The draft ANOPR seeks comment in several key areas.

In recognition that many of the best U.S. wind and solar resources are in remote areas, FERC asked commenters to weigh in on whether regional transmission organizations and independent system operators should plan for anticipated future generation needs. Specifically, the ANOPR asks whether the commission should require transmission providers to identify geographic zones with high renewable energy potential and plan transmission lines to serve those zones.

The ANOPR also seeks comment on whether further reforms are needed to align various grid operators' cost allocation methodologies for major transmission projects. Under FERC's current cost-causation principle, transmission costs are allocated to beneficiaries in a manner that is roughly commensurate with estimated benefits. Nevertheless, disagreements over how benefits should be defined have hampered transmission build-out in recent years.

In addition, the ANOPR asks whether grid operators' current participant funding model for transmission system upgrades has become unjust and unreasonable. That model requires generators that trigger the need for a transmission system upgrade to largely pay for the project even when its benefits are expected to accrue to other market participants and electricity consumers.

Finally, among other issues, the ANOPR seeks feedback on whether FERC's current oversight approach to transmission investment adequately protects consumers from excessive costs.

The full text of the ANOPR was not immediately available.

'A sense of urgency'

The ANOPR follows a joint transmission task force FERC announced last month with members of the National Association of Regulatory Utility Commissioners, which is scheduled to meet for the first time July 21 at an annual policy summit.

During the July 15 meeting, Chairman Richard Glick pointed out that the need to expand the U.S. electric transmission system has become a central talking point as federal lawmakers debate multiple energy and infrastructure packages.

Glick also told reporters after the meeting that he could see a potential new grid authority housed within the U.S. Energy Department helping identify renewable energy zones and national interest electric transmission corridors. A $1.2 trillion bipartisan infrastructure framework announced in June included money for the grid authority but provided few other details.

"I think certainly the Department of Energy, whether it be through a grid authority or through their other capabilities, would be instrumental in identifying those zones, for instance," Glick said.

In highlighting the need for more transmission during the meeting, Glick noted that U.S. interconnection queues now hold about 750 GW of new generating resources and renewable energy projects comprise 93% of that capacity.

"In my opinion, we need a transmission planning process that better takes into account the generation resources that are going to be built in the future," Glick said. "In addition, we need a transmission cost allocation approach that better recognizes the beneficiaries associated with transmission capacity, and we need an expedited interconnection process that also ensures that those that benefit from network upgrades pay for them."

Commissioner Allison Clements linked the ANOPR to recent climate-related grid emergencies in the U.S. West and Texas, which have experienced major grid outages amid drought, extreme heat waves and cold snaps. "We see the critical reliability and resilience role that large regional and interregional transmission lines can play," Clements said.

Commissioner James Danly argued that FERC must respect states' siting authority over their own energy facilities when crafting a proposed rule. "When we consider subjects such as this, we run the risk of extending our policy beyond our jurisdiction," Danly said.

And Commissioner Mark Christie expressed concern about any provisions that could produce major rate hikes for consumers. "We cannot cause a massive increase in consumer bills and just transfer massive amounts of wealth from consumers to developer interests without ensuring that there's a commensurate benefit," Christie said.

Initial comments on the ANOPR are due 75 days after its publication in the Federal Register.

"My hope and expectation is that after reviewing the comments we get in response to today's ANOPR, the commission will proceed to a notice of proposed rulemaking and eventually a final rule as expeditiously as possible," Glick said during the meeting. "What lies ahead will not be easy, but I feel a sense of urgency because the transition to clean energy future is accelerating."