On July 15, 2021, the Federal Energy Regulatory Commission (FERC) issued an Advance Notice of Proposed Rulemaking (ANOPR) that seeks public comment on a number of potential reforms to improve the electric regional transmission planning and cost allocation and generator interconnection processes. If any of the proposals set forth in the ANOPR are adopted, they could result in sweeping changes in how the U.S. electric grid is expanded and in how renewable power is connected to that grid.
A Diversity of Views Among the FERC Commissioners
FERC stated the electricity sector is transforming as the generation fleet shifts from resources close to population centers toward resources, including renewables, that may often be located far from load centers. The growth of new resources seeking to interconnect to the transmission system and the differing characteristics of those resources are creating new demands on the transmission system.
In light of these evolving conditions, FERC is considering whether changes should be made to the existing regional transmission planning and cost allocation and generator interconnection processes and, if so, which changes are necessary to ensure that transmission rates remain just and reasonable and that reliability is maintained. FERC has not predetermined that any specific proposal discussed in the ANOPR should be made or in what final form. Instead, FERC seeks public comment on numerous proposals and questions raised in the ANOPR and also welcomes alternative proposals.
From discussions at the July 15 FERC meeting, it is clear that there was a range of views among the FERC Commissioners on the topics covered by the ANOPR, perhaps explaining why FERC elected to obtain public input and build a record on a variety of issues before proposing specific new regulations.
In a concurrence issued with the ANOPR, FERC Chairman Glick and Commissioner Clements highlighted concerns that existing regional transmission planning processes may be siloed, fragmented, and not sufficiently forward-looking, such that transmission facilities are being developed through a piecemeal approach that is unlikely to produce the type of transmission solutions that could more efficiently meet the needs of the changing resource mix.
The pair instead favors a more holistic, forward looking approach to transmission planning that would include a "build it and they will come approach" to building out the transmission grid in anticipation of the development of future renewable power generation, electric storage, and related technologies. Chairman Glick and Commissioner Clements also emphasized their belief that other new initiatives will be needed, including reform to interregional transmission planning.
In a separate concurrence, Commissioner Danly supported efforts to address interconnection logjams but expressed views that some of the proposals in the ANOPR would exceed FERC's legal authority, violate cost causation principles, create stifling layers of oversight, infringe on utility rights, and have other adverse consequences.
Commissioner Christie's separate concurrence indicates his support for some unspecified proposals in the ANOPR but raises concerns that others may cause massive increases in consumer bills for little benefit or would inappropriately expand federal regulation over local utility regulation.
Some of the more substantial changes discussed in the ANOPR may gain support by a majority of the Commission later this year when it is anticipated that another Democratic Commissioner is likely to be nominated to join FERC.
Subjects for Comment
FERC seeks public comment on a number of specific topics and questions related to three main subjects in the ANOPR.
The first main subject is whether FERC should require amendments to regional transmission planning and cost allocation processes to plan for the transmission needs of the anticipated future generation resource mix. FERC proposes a number of potential reforms related to planning for the transmission needs of potential future generation.
Those potential reforms include modeling future scenarios to ensure they incorporate sufficiently long-term and comprehensive forecasts of future transmission needs driven by the future generation mix, identifying geographic zones that have potential for high amounts of renewable resource development to meet increased demand and plan transmission to facilitate the integration of renewable resources in those zones, and enhanced interregional or state-to-state coordination. FERC also asks for comments on whether and how to improve coordination between the regional transmission planning and cost allocation and generator interconnection processes.
Second, FERC requests comment on how to better identify cost and responsibility for regional transmission facilities and interconnection-related network upgrades. FERC asks whether it should require a more forward-looking approach to the regional transmission planning process that plans for anticipated future generation, potentially producing a different and broader set of benefits and beneficiaries for purposes of cost allocation. FERC also puts forth potential reforms related to its participant funding and crediting policy for interconnection-related network upgrades.
Today, many Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs) in the most populated regions of the U.S. use "participant funding," requiring developers of generation projects to fully pay for network upgrades to the electric grid that would not otherwise have been built in the near term "but for" the proposed generator interconnections. This can significantly increase the costs of building and connecting new renewable generation projects.
Among other things, FERC questions whether this participant funding for interconnection-related network upgrades is unjust and unreasonable and whether RTOs and ISOs should instead implement the FERC pro forma crediting policy where any payments made by generation developers would be offset by credits against future transmission service bills to deliver power from those generators.
Finally, FERC proposes potential reforms to provide enhanced oversight of transmission planning and spending on transmission facilities to ensure that transmission rates remain just and reasonable. FERC asks for comment on different potential areas of oversight that include how new regional transmission facilities are identified and paid for, local transmission planning and increased clarity regarding roles and responsibilities between state and federal regulators as to local facilities, and state commission oversight of transmission planning and cost allocation processes.
FERC proposes mandating the establishment of "independent transmission monitors" to review transmission planning processes such as those administered by RTOs and ISOs and to oversee the costs of transmission projects under development to inform a FERC determination of whether any transmission costs were imprudent and, therefore, should not be recovered from ratepayers.
Initial and reply comments in response to the ANOPR are due 75 and 105 days, respectively, after publication in the Federal Register. FERC would then follow the ANOPR with a specific Notice of Proposed Rulemaking expected no earlier than December and potentially a Final Rule in mid to late 2022.