On November 21, 2024, FERC voted to approve Order No. 1920-A, an order on rehearing and clarification that modifies Order No. 1920, the May 2024 landmark regional transmission planning and cost allocation rule. In this post, we provide short summaries of the existing Order No. 1920, the changes made in Order No. 1920-A (and the likely reasons behind those changes), and the implications we expect for large-scale transmission development and cost allocation.
Background on Order No. 1920
With Order No. 1920, issued May 13, 2024, FERC aimed to force
utilities and RTOs into proactive planning and construction of
major transmission lines, and climate advocates and the clean
energy industry applauded the rule. Order No. 1920 required that
regional transmission planners identify the benefits of large
transmission projects (even those driven by a single state's
clean-energy policies, such as an RPS) to consumers across
multi-state regions and allocate development costs on a multi-state
basis commensurate with those benefits. State regulators were not
given a veto over such cost allocations; though they could consult
with regional transmission planners on cost allocation proposals,
planners were free to ignore states' proposals.
But development of Order No. 1920 caused internal tumult at FERC. Though the initial draft of the rule was released on April 21, 2022, with unanimous approval, when the time came to issue the final Order, the sole sitting Republican-selected Commissioner, Mark C. Christie, dissented. In his dissent, Commissioner Christie argued sharply that the final Order No. 1920 was inappropriately slanted in favor of "politically preferred" generation technologies (e.g., wind and solar) and would illegally impose unreasonable transmission development costs on unconsenting consumers. Commissioner Christie has repeatedly staked out his view since joining the Commission in 2021 that imposing the costs of one state's energy-related policies (such as an RPS) on another state by allocating transmission development costs related to those policies to consumers in states that did not adopt those policies is not allowable under the Federal Power Act.
Order No. 1920-A
As is typical with landmark FERC orders, several parties requested rehearing and clarification of Order No. 1920, arguing in their requests that the Commission make various modifications to the rule. Order No. 1920-A serves to incorporate certain of those modifications into the final rule.
Among several smaller changes, Order No. 1920-A makes one major change that appears to have brought Commissioner Christie on board with the final rule: transmission planners now must file for FERC's consideration not only their own proposed cost allocation for projects selected for development but also any alternative cost allocation proposal set out by the states in the affected region. Other significant changes include that (i) planners must negotiate with state regulators to effectuate post-hoc changes to cost allocation schemes and (ii) large corporate power-purchasing preferences need not be a factor in long-term planning scenarios.
Order No. 1920-A was approved unanimously by the Commission (and though the newly-seated Republican-selected Commissioner Lindsay See recused herself, she nonetheless has spoken positively of the rule).
Implications for Transmission Planning and Cost Allocation
Order No. 1920-A largely preserves the impetus of Order No. 1920 and is expected to drive increased large-scale transmission planning and development—especially in single-state RTOs, like CAISO and NYISO, which historically have been much less likely than multi-state RTOs to devise multi-state cost allocation schemes.
The decision to require transmission planners to submit to FERC alternate cost-allocation schemes proposed by states likely reflects the three Democratic-selected FERC Commissioners' understanding that Commissioner Christie's support will be crucial to the success of reforms, given the possibility that Commissioner Christie will be appointed the Acting Chair of the Commission come January 2025 and the likelihood that he will emerge as the de facto swing vote on the Commission when FERC is reconstituted to a 3-2 Republican-appointed majority in either 2025 or 2026.
We anticipate that in transmission planning regions where some, but not all, states have implemented aggressive clean-energy development policies (e.g., PJM, the nation's largest RTO by load served and which comprises utility territories across a politically diverse group of constituent states), state regulators will file transmission cost allocation proposals that limit (or even eliminate) the costs allocated to non-participating states. FERC will then adjudge whether the transmission planning entity's proposal or the states' proposal is more "just and reasonable" within the meaning of the Federal Power Act and FERC precedent. With Commissioner Christie remaining on the Commission and a Republican-appointed majority expected within two years, we can expect that FERC will express a preference for cost allocation schemes that limit the cost impacts of transmission development arising from clean energy policies outside of the enacting states. Accordingly, Order No. 1920-A may reduce (relative to Order No. 1920) the ambitiousness of transmission planning proposals or the ability of planners to spread costs across planning regions. Ambiguity remains as to how receptive FERC will be to transmission planning entities' claims that benefits of proposed projects will accrue to consumers across a multi-state region and that costs should be allocated accordingly.
Compliance filings are due no later than June 10, 2025, and transmission providers must commence their first compliant long-term regional planning cycle no later than June 10, 2027.
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