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Trade associations debate standardizing transmission planning under FERC's Order 1000

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Trade associations debate standardizing transmission planning under FERC's Order 1000

Post-technical conference comments submitted by the majortrade groups addressing issues related to competitive transmission developmentwere wide-ranging and varied.

For instance, the Edison Electric Institute warned FERC not totake away any of the flexibility granted by Order 1000 — the agency's landmarktransmission planning and cost allocation final rule.

"Any new competitive approaches should be driven by theindividual region in order to address their unique challenges," the EdisonElectric Institute said. "As each region rolls out its implementation,changes and improvements continue to be made through lessons learned andindividual stakeholder processes."

In contrast, the Transmission Access Policy Study Groupargued for thestandardization of cost-containment provisions that can make apples-to-applescomparisons of different proposals difficult.

But the need for transparency throughout the process wasstressed by most of the trade groups, including with respect to the costdetails of proposals and the weighting of factors to be used in projectselection. And several emphasized the importance of FERC providing guidance allalong the way to ensure that transmission planners and other stakeholdersadhere to commission policy and are not blindsided by changing expectations.

Issued in July 2011, FERC's Order 1000 new requirements withrespect to the planning of power lines as well as the allocation of the cost ofthose lines both within and between regions. Over the following couple ofyears, transmission planners filed, and FERC approved, tailored proposals forcomplying with Order 1000. For instance, some adopted a sponsorship model fortransmission development and others chose to use a competitive bidding approach.

However, various issues have since arisen regarding therule's mandate for competitive transmission development. So, the agency in lateJune held a two-day technical conference to address those issues and subsequentlyasked stakeholdersto submit post-technical conference comments answering some or all of more thantwo dozen questions.

In response to that call, the Edison Electric Institutepraised FERC for its willingness to tackle the issues raised in the technicalconference but warned the agency not to "embark on any efforts toestablish a broad rulemaking and/or seek standardization of existingpractices." Order 1000-compliant regional and interregional planningprocesses "are still in their infancy," and transmission plannerstherefore have only just begun considering potential changes based on their ownexperiences, the institute noted.

While Edison Electric Institute did not back FERC'sestablishing a "prescriptive" method for evaluating cost containmentproposals, it said any methods used for that task must be "clear andtransparent."

The Transmission Access Policy Study Group similarly saidrevisiting Order 1000's interregional coordination requirements would bepremature at this time given that "some regions have not yet completedeven one full interregional cycle." Unlike the Edison Electric Institute,however, the Transmission Access Policy Study Group suggested that cost containmentprovisions should be standardized to include "all costs withoutexemptions," although the group said a less comprehensive provision thatwould include ROE, capital structure and incentives but allow other costs to berecovered on a full cost-of-service basis might be acceptable.

But acknowledging the need for regional variation, the TransmissionAccess Policy Study Group also said costs containment provisions that do notmeet the standardization requirement should still be allowed in RTO regionsthat use a competitive solicitation model, although they should be accordedless weight than standardized bids. For regions that use a sponsorship model,cost containment provisions should be just one of the many factors consideredand bids that contain them should not be "generically favored," thestudy group said.

The Transmission Access Policy Study Group also insistedthat developers should not be granted ROE incentives simply because theyvoluntarily propose a cost containment provision to improve their chance ofbeing selected and that unsuccessful bidders should not be able to recoverrelated costs. Noting that a recent solicitation in the Southwest Power Poolfor an approximately $8.3 million project generated 11 bids that collectivelycost between $3.3 million and $4.4 million to prepare, the study group said,"[s]uch subsidization should be eliminated, or at an absolute minimumcapped, to avoid the unintended consequence of spawning a cottage industry ofpoorly designed bids."

The American Wind Energy Association, Interwest EnergyAlliance, Mid-Atlantic Renewable Energy Coalition, Renewable Northwest, TheWind Coalition and Wind on the Wires, however, jointly standardizing cost containmentprovisions, arguing that doing so would reduce competition and stifleinnovation. They also insisted that the current interregional planningstructure "is simply unsuited to the task of planning and building modern,efficient" transmission systems because it fails to look at the issue in aholistic manner.

"Proactive interregional planning should evaluate thebroad range of options, needs, and benefits available when considering proposedtransmission investments," the wind parties said. "The commissionshould require that interregional processes consider projects that addressdifferent needs in different regions, such as reliability benefits in one buteconomic or public policy in another."

Moreover, the wind parties said FERC should considerrequiring consistency and standardization between neighboring regions'interregional planning processes and mandating that those processes be"run concurrently with the regional processes." They also said regionaltransmission planning and generation interconnection should not be two discreteprocesses because they are so intertwined.

The American Public Power Association and National RuralElectric Cooperative Association jointly stressed the importance of ensuring that "anycaveats or carve-outs" in cost containment provisions do not reduce ornegate any associated ratepayer benefits. More generally, they said FERC"should ensure that any new actions or policies are designed to address ademonstrated need to protect competition, not a perceived need or a desire toprotect competitors."

While the American Public Power Association and the NationalRural Electric Cooperative Association also said they see benefits tostandardizing cost containment provisions, they took no position regarding"what form that standardization should take or how best to achieveit."

The Electricity Consumers Resource Council it strongly supportscompetition so long as it is "demonstrably workable and not undulymanipulated by artificial regulatory incentives, administrative proxies formarket forces, or other vestiges of regulation." According to the council,real competition "does not allow any recourse to regulators if a developerfails to get the price or bid she wanted."

The Electricity Consumers Resource Council expressed concernthat the focus on public policy needs is resulting in the overbuilding oftransmission and inadequate consideration of nontransmission solutions.

"The transmission incentives offered by FERC may bedistorting the 'market' for competitive projects, increasing the tensionbetween incumbent utilities and non-incumbent developers, and biasing theselection process in favor of transmission when a generation fix mightotherwise be lower cost and provide more longer-term benefits to end-useconsumers," the council said. "The mixture of competition, riskmitigation measures and performance incentives is mutually inconsistent."(AD16-18)