United States: Federal Energy Regulatory Commission Issues Order No. 1000 – "Transmission Planning And Cost Allocation By Transmission Owning And Operating Public Utilities"

On July 21, 2011, the U.S. Federal Energy Regulatory Commission (FERC) issued Order No. 1000, "Transmission Planning and Cost Allocation by Transmission Owning and Operating Public Utilities," adopting a Final Rule that reforms the pro forma Open Access Transmission Tariff (OATT) and the electric transmission planning and cost allocation principles previously adopted in FERC Order 890, "Preventing Undue Discrimination and Preference in Transmission Service."

The reforms set forth in Order No. 1000 apply to new transmission facilities and include the following key reforms:

• Regional Planning: Public utility transmission providers must participate in a regional planning process through which transmission facilities and non-transmission alternatives may be proposed and evaluated. The process must (1) be included as an attachment to the transmission tariff of the individual transmission provider or the transmission tariff of the Regional Transmission Organization to which it belongs, and (2) obligate the public utility transmission provider to participate in the development of a regional transmission plan.
• • A regional transmission plan must meet the following transmission planning principles: (1) coordination, (2) openness, (3) transparency, (4) information exchange, (5) comparability, (6) dispute resolution, and (7) economic planning.
  • Local and regional transmission planning processes must include procedures to identify transmission needs based on public policy requirements established by state or federal laws or regulations and develop plans to address those public policy-based transmission needs.
• Interregional Transmission Coordination: Through their respective regional planning processes, public utility transmission providers must develop and implement: (1) procedures for joint evaluation and sharing of information regarding the respective transmission needs of transmission planning regions, and (2) potential solutions to those needs.
• Regional Cost Allocation Methods: Public utility transmission providers must have in place a method, or set of methods, for allocating the costs of new transmission facilities selected in a regional transmission plan for purposes of cost allocation. A "transmission facility selected in a regional transmission plan for purposes of cost allocation" is one that has been selected, pursuant to a FERC-approved regional transmission planning process, as a more efficient or cost-effective solution to regional transmission needs.
• Interregional Cost Allocation Methods: Public utility transmission providers in each planning region must have, together with the public utility transmission providers in a neighboring transmission planning region, a common method, or set of methods, for allocating the costs of a new interregional transmission facility that is jointly evaluated by the two or more transmission planning regions in their interregional transmission coordination procedures.
• • Regional and interregional cost allocation methods must satisfy the following cost allocation principles: (1) Costs must be allocated for new transmission facilities in a manner that is at least roughly commensurate with the benefits received by those who will pay the costs; (2) costs may not be involuntarily allocated to entities that do not receive benefits; (3) if a benefit to cost threshold is used to determine which transmission facilities have sufficient net benefits to be selected in a regional transmission plan for purposes of cost allocation, the threshold must not be so high that transmission facilities with significant positive net benefits are excluded from cost allocation; (4) the allocation methods for the costs of a transmission facility selected in a regional transmission plan must allocate costs solely within that transmission planning region unless another entity outside the region voluntarily assumes those costs; (5) the cost allocation methods and data requirements for determining benefits and identifying beneficiaries for a transmission facility must be transparent, with adequate documentation to allow a stakeholder to determine how they were applied to a proposed transmission facility; and (6) different cost allocation methods may be chosen for different types of transmission facilities.
  • Participant funding is permitted, but not as a part of the regional or interregional cost allocation method itself.
• Removal of Rights of First Refusal: Public utility transmission providers must remove from their OATTs or other FERC-jurisdictional tariffs and agreements any provisions that grant a federal right of first refusal to an incumbent transmission provider with respect to transmission facilities that are selected in a regional transmission plan for purposes of cost allocation.
• • The removal of rights of first refusal does not apply to transmission facilities that are not selected in a regional transmission plan for purposes of cost allocation or to upgrades to transmission facilities. Further, competitive bidding may still be used to solicit transmission projects or project developers, and state or local laws or regulations regarding the construction of transmission facilities will not be affected.

Order No. 1000 will take effect 60 days from publication in the Federal Register. Within 12 months of the effective date of Order No. 1000, each public utility is required to make a compliance filing to revise its OATT to reflect new requirements regarding regional planning and cost allocation. Within 18 months of the effective date of Order No. 1000, each public utility is required to make a compliance filing to revise its OATT to reflect new requirements relating to interregional coordination and cost allocation.

What the Reforms Set Forth in Order No. 1000 Mean to You

• The requirement to engage in regional planning creates the potential for increased transmission development and expanded opportunities for both incumbent and non-incumbent transmission providers to participate in such development.
• The removal of the right of first refusal represents a victory for non-incumbent transmission developers, although state and local laws may still present obstacles to development.
• The cost allocation principles represent a defeat for those parties favoring a strict allocation of costs to the beneficiaries of new transmission.
• Order No. 1000 necessarily leaves many of the details of the regional planning process to the compliance filings to be submitted by public utility transmission providers. The true impact of the order will not be known until FERC begins to act on the compliance filings, particularly those submitted by transmission providers that are not members of a Regional Transmission Organization.

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