The Federal Energy Regulatory Commission Oct. 17 opened investigations into whether three grid operators — the ISO New England, PJM Interconnection and Southwest Power Pool — are inappropriately exempting certain transmission projects from the competitive bidding process.
In initiating the separate proceedings, FERC expressed concern that the regional transmission organizations may be implementing what is known as the immediate-need reliability exemption in a manner that "is inconsistent with or more expansive" than what the commission directed in its Order 1000.
Issued in 2011, Order 1000 opened the doors for competitive transmission developers to participate in regional transmission planning. Among various provisions, the order sought to remove barriers to entry that discouraged nonincumbent transmission developers from proposing grid solutions that may be the most efficient or cost-effective.
In approving compliance filings related to that order, however, FERC also authorized the ISO-NE, PJM and SPP to create immediate-need reliability exemptions allowing transmission owners to retain the federal right of first refusal to build facilities needed in a short time frame to address reliability needs.
To limit the use of such exemptions, FERC said projects receiving the exemption must be needed in three years or less to solve reliability criteria violations. The commission also required the grid operators to post online explanations detailing the decision to designate an incumbent transmission owner as the entity responsible for a project, including other transmission or nontransmission alternatives the region considered.
And in addition to providing stakeholders with the opportunity to publicly comment on a proposed project, FERC required grid operators to submit lists of prior year designations of all immediate-need reliability projects owned by incumbents. Those lists must include the transmission project's "need-by" date and the date the project was actually energized.
'The wrong types of transmission projects'
Between 2015 and 2018, PJM named 241 immediate-need reliability projects, by far the most of any of the three grid operators, FERC noted in its Oct. 17 order. The ISO-NE ranked second with 29 such projects, followed by SPP with five. While the total projects receiving the immediate-need reliability designation varied, FERC identified numerous concerns with each grid operator's list of projects.
The commission specifically noted that 28% of PJM's immediate-need projects designated in 2014 have in-service dates "well beyond" their need-by dates. Meanwhile, the ISO-NE reported that only two of its 29 approved immediate-need projects have gone into service. Turning to SPP, the commission said that grid operator's website indicates that none of its immediate-need reliability projects have gone into service, including those with need-by dates past the present date.
FERC, therefore, asked the grid operators to respond to a series of questions, including a requested explanation for how they determine whether a transmission project is needed in three years or less to solve reliability criteria violations.
Moreover, the proceedings could also establish whether the commission's conditions for use of the exemption need to be revised further. FERC also asked the grid operators to respond to potential changes that could include shortening the current three-year time frame for immediate-need reliability projects and requiring the use of anticipated in-service date instead of need-by date to determine project eligibility. The commission is also weighing whether to create an abbreviated competitive process for immediate-need reliability projects, according to the Oct. 17 order.
In concurring with the order, Commissioner Richard Glick — a frequent critic of Order 1000 — expressed concern that the exemption at issue is creating incentives that undermine the buildout of longer interregional transmission lines to accommodate more intermittent generation sources such as wind and solar facilities.
"Everyone around here recognizes that some states have set very ambitious clean energy goals, a lot of corporations around America have done the same, and we're not going to be able to achieve those goals if we don't build out the transmission system," he said Oct. 17 at the commission's monthly open meeting. "My fear is that we're not going to build those transmission projects because we're encouraging companies to build the wrong types of transmission projects, the smaller projects, because then they can build those themselves and not have to worry about being subject to competition."
FERC directed each of the grid operators to respond within 60 days from when the investigations are noticed in the Federal Register. The commission said it expects to issue a final order in the proceedings within six months of receiving the gird operators' responses. (FERC dockets EL19-90, EL19-91, EL19-92)