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FERC transmission rulemaking ranks 'extremely high' on chairman's priority list

Highlights

FERC, NARUC task force will be key component

Cost allocation policies need updating

Federal Energy Regulatory Commission Chairman Richard Glick said issuing a major new electric transmission planning rule by the end of next year is at the top of his list of power-related priorities.

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The highly anticipated rulemaking effort is an "extremely high" priority, the Democrat told S&P Global news reporters in a July 16 interview.

FERC announced an advanced notice of proposed rulemaking (ANOPR) a day earlier at its monthly open meeting. It seeks comments on how the agency's transmission planning, cost allocation and generator interconnection policies can be reformed to accommodate a growing number of renewable energy resources.

The issuance of the ANOPR was the start of a process designed to produce a final rule that would likely require FERC-jurisdictional regional grid operators to plan transmission around expected renewable generation facilities, which are often put in remote areas.

FERC is also seeking comments on how its cost allocation policies can be updated to better capture the full range of benefits that new transmission lines provide. The agency is also seeking comments on how the commission's interconnection policies can be reformed so that interconnection customers are not forced to foot the entire bill for network upgrades when other transmission customers and electricity consumers are expected to benefit from those projects.

Reason for decision

Glick said the commission decided to issue an ANOPR instead of a proposed rule after reviewing the regulatory history of Order 1000, FERC's last major transmission planning regulation issued in 2011. A decade after it was issued, industry experts agree that Order 1000 has fallen short in encouraging transmission buildout at the pace and scale needed to avoid the worst effects of climate change.

"If I had my druthers, I'd like to move as quickly as possible on this," Glick said. "But I also recognize we need to create a record before we move forward with a proposed rulemaking."

Glick also stressed that the ANOPR should be read in connection with a joint state-federal transmission task force announced in June. The task force, which will feature all sitting FERC members and 10 members of the National Association of Regulatory Utility Commissioners, will work to address transmission roadblocks such as state siting considerations and cost allocation methodologies.

Cost allocation, consumer protections

The ANOPR seeks comment on whether FERC's current rules for cost allocation fail to fully account for "hard-to-quantify" benefits that flow from new transmission lines. Glick said in the interview that reliability benefits represent one such example.

"As we plan for transmission, we usually do a cost analysis where this transmission line is going to cost X but it's going to bring in cheaper power, and it's going to cost Y, and as long as Y equals X we'll move forward with the project," Glick said. "But as pointed out in the ANOPR, there are other benefits that are harder to quantify, and I think reliability is certainly one of them."

Glick added that Congress could help by clarifying which types of benefits are appropriate to consider when allocating costs for new transmission lines. The chairman noted that current cost allocation practices generally identify beneficiaries as consumers directly served by a new line.

"But there are people who benefit in other ways, too," Glick said. "I think if Congress could provide some additional clarification as to what benefits we could look at, that would be helpful to us."

Glick also highlighted potential transparency reforms in the ANOPR designed to protect consumers amid a transmission construction boom.

"There's going to be a lot of investment in transmission, and we need to make sure those investments are made wisely and efficiently and don't stick consumers with unneeded costs," Glick said. "We talk a lot about cost allocation and planning and interconnection, but we don't spend a lot of time thinking about how we are going to make sure that utilities make the wise decisions or most efficient decisions for consumers."

RTO expansion

Glick, during the interview, also expressed his support for the expansion of regional transmission organizations, but stopped short of advocating mandates.

"My view is that RTOs provide significant benefits," he said, later adding that "there's a lot of support in the West for putting together an RTO ... [and] it's pretty clear to me that greater coordination would do them a world of good in terms of increasing their reliability. But I stop short of saying we're going to force every utility into an RTO."

For one, he said, FERC lacks the authority needed over public power to force them to join an RTO, and much of the US West consists of public power entities. The commission has generally taken the approach of encouraging RTO participation, such as through rate incentives.

"And so I think the best thing to do is to encourage them," Glick said. "We've been doing it gently. I think we need to maybe do it more loudly and more forcefully."

Mandate is part of legislation

The CLEAN Future Act, introduced in March by House Democrats, includes a provision that would mandate RTO membership nationwide, and nine former FERC members in June sent a letter to the commission urging the use of the agency's "broad authorities and tools" to create ubiquitous RTO wholesale markets across the country.

A group of 18 former state utility regulators, including former FERC Commissioner Tony Clark, have countered that effort, warning FERC last month that such action could impede state leaders' decision making and progress toward a clean energy transition. Clark even co-authored a white paper, released July 13, contending that RTOs, as currently structured, are not well-suited to handle the demands of the changing energy landscape.

Glick said he had met with the former FERC members in favor of RTO expansion and had reached out to Clark to set a meeting with him and the state regulators.

"We're going to continue to call for state coordination and greater state involvement in planning for an RTO," he said.