FERC's Transmission Planning And Permitting Final Rules Are Out: Let's Start Building

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Planning and permitting for long-distance electric transmission lines can be contentious, with multiple points of failure.
United States Energy and Natural Resources
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  • The Federal Energy Regulatory Commission (FERC) has issued Order No. 1920, which adopts specific requirements for transmission providers to conduct long-term planning for regional transmission facilities and determine how to pay for them. The rule requires transmission operators to conduct and periodically update long-term transmission planning over a 20-year time horizon to anticipate future needs.
  • Planning and permitting for long-distance electric transmission lines can be contentious, with multiple points of failure. Though these rules, which were more than two years in the making, take a big step forward, no single rule can fix all of the issues that surround the necessary build out of the transmission system.
  • The rules, Order 1920 and Order 1977 (implementing FERC's limited authority over siting electricity transmission lines), will likely garner complaints from stakeholders. Regardless of which side stakeholders are on with FERC's final rule, two things remain true: There is a need for more transmission and there is no time to waste to begin building.
  • This Holland & Knight alert summarizes the final rule and analyzes implications on transmission development.

The Federal Energy Regulatory Commission (FERC) has issued Order No. 1920, which adopts specific requirements for transmission providers to conduct long-term planning for regional transmission facilities and determine how to pay for them. The rule requires transmission operators to conduct and periodically update long-term transmission planning over a 20-year time horizon to anticipate future needs. It also provides for cost-effective expansion of transmission that is being replaced, and it expressly provides for the states' pivotal role throughout the process of planning, selecting and determining how to pay for transmission lines.

Planning and permitting for long-distance electric transmission lines can be contentious, with multiple points of failure. Though these rules, which were more than two years in the making, take a big step forward, no single rule can fix all of the issues that surround the necessary build out of the transmission system.


It is not hyperbole to say that the grid is becoming a bottleneck to greater economic development. Customers are demanding more grid capacity as regional electricity demand grows substantially for the first time in decades to serve a rapid uptick in data centers, manufacturing and end-use electrification. According to the Clean Investment Monitor, a record $67 billion of investment in manufacturing and deployment of clean energy, clean vehicle, building electrification and carbon management technology occurred in the fourth quarter of 2023, a 40 percent increase relative to the same period in 2022. During 2022 and 2023, companies announced $156 billion in new investment in clean energy and vehicle technology manufacturing, a 165 percent increase over the previous two years.

Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs) are scrambling to update the load forecasts to account for this new and evolving demand. As reflected in 2023 FERC filings, electricity demand shot up from 2.6 percent to 4.7 percent growth over the next five years.1 The Pennsylvania-New Jersey-Maryland Interconnection (PJM) tripled its annual load growth forecast for the next decade to 2.4 percent as compared to just a year ago, driven in large part by vehicle and industrial sector electrification.2 Several recent updates expect this to be an underestimate, with next year's forecast to show even higher nationwide electricity growth. There are real risks that some regions may miss out on economic development opportunities because the grid can't keep up.

Analysis and Impact of Order 1920

Order No. 1920 states, among other things, that transmission providers must plan ahead at least 20 years to develop projections of long-term transmission need, including the facilities to meet those needs, using best available data. Transmission providers must conduct this planning at least every five years. Further, the rule requires transmission providers to participate in Long-Term Regional Transmission Planning through their respective regional transmission planning processes that identifies long-term transmission needs, evaluates the benefits of long-term regional transmission facilities to meet those needs, and provides the opportunity for transmission providers to select long-term regional transmission facilities that are more efficient or cost-effective transmission solutions to those needs.

The rule's long-term outlook attempts to strike a careful balance between the certainty of short-term needs and the efficiency accompanied with long-term planning needs. There is an inherent risk in transmission providers waiting for the near-term certainty before planning to address transmission needs, because doing so may result in transmission providers relying on relatively inefficient and less cost-effective solutions to address immediate needs to the detriment of customers. Conversely, there is inherent uncertainty involved in planning to meet long-term transmission needs, and that uncertainty means that forward-looking regional transmission planning entails certain risks, including that transmission needs may change over time.

Order No. 1920 requires transmission providers to establish an evaluation process that identifies long-term regional transmission facilities that address long-term transmission needs, measures the benefits of the identified transmission facilities, and designates a point in the evaluation process at which transmission providers will determine whether to select or not select identified transmission facilities. Transmission providers must also establish selection criteria that are transparent and not unduly discriminatory or preferential, aim to ensure that more efficient or cost-effective long-term regional transmission facilities are selected and seek to maximize benefits accounting for costs over time without over-building transmission facilities. This builds off FERC's existing Order Nos. 890 and 1000 transmission planning principles: 1) coordination, 2) openness, 3) transparency, 4) information exchange, 5) comparability and 6) dispute resolution.

Specifically, Order No. 1920 states that when evaluating and selecting long-term transmission facilities, transmission providers must measure and use at least seven enumerated economic and reliability benefits. These seven benefits are: 1) avoided or deferred reliability transmission facilities and aging infrastructure replacement, 2) either reduced loss of load probability or reduced planning reserve margin, 3) production cost savings, 4) reduced transmission energy losses, 5) reduced congestion due to transmission outages, 6) mitigation of extreme weather events and unexpected system conditions and 7) capacity cost benefits from reduced peak energy losses. These requirements together establish a long-term, forward-looking and more comprehensive approach to regional transmission planning, which will help to ensure that transmission providers identify, evaluate and select more efficient or cost-effective transmission solutions to address long-term transmission needs.

Importantly, the Order requires that an interconnection-related network upgrade associated with identified interconnection-related transmission needs must satisfy the minimum cost and voltage criteria to qualify for evaluation for selection. This aims to curb the trend in recent years of substantially increased spending on interconnection-related network upgrades. The high cost of interconnection-related network upgrades has directly increased the rate at which generators withdraw from the interconnection queue.

Order No. 1920 also requires transmission providers to consider several alternative transmission technologies in their regional transmission planning processes – dynamic line ratings, advanced power flow control devices, advanced conductors and transmission switching. This is beneficial because these alternative transmission technologies, such as dynamic line ratings, have the ability to increase transmission line ratings and thus permit more economic energy transfers, which, in turn, could result in production cost savings, reduced congestion due to fewer transmission outages resulting from improved situational awareness and capacity cost benefits from reduced peak energy losses. These benefits have a direct effect on what transmission providers are required to evaluate in Long-Term Regional Transmission Planning.

On the highly contentious subject of how to pay for these new transmission lines, the Order permits, but critically does not require, transmission providers to adopt a State Agreement Process, wherein Relevant State Entities agree to such a process that would provide up to six months after selection for its participants to determine, and transmission providers to file, a cost allocation method for specific long-term regional transmission facilities. Specifically, the Order establishes a six-month engagement period, during which transmission providers must: 1) provide notice of the starting and end dates for the six-month time period, 2) post contact information that Relevant State Entities may use to communicate with transmission providers about any agreement among Relevant State Entities on a Long-Term Regional Transmission Cost Allocation Method(s) and/or a State Agreement Process, as well as a deadline for communicating such agreement, and 3) provide a forum for negotiation of a Long-Term Regional Transmission Cost Allocation Method(s) and/or a State Agreement Process that enables meaningful participation.

Another key component in the Order requires transmission providers to adopt enhanced transparency for local transmission planning information and identify potential opportunities to "right-size" replacement transmission facilities to more efficiently or cost-effectively address long-term transmission needs. Transmission providers must also adopt tariff provisions that provide a federal right of first refusal for a transmission provider to develop any "right-sized" facility. The reason for this is that a lack of coordination could result in a regional transmission planning process that fails to identify opportunities to right-size planned in-kind replacement transmission facilities and may result in the development of duplicative or unnecessary transmission facilities that increase costs to customers and thus result in rates that are unjust and unreasonable.

Notably, the Order does not establish a conditional federal right of first refusal based on joint ownership, as FERC had originally proposed in its notice of proposed rulemaking (NOPR) on this subject. Instead, in the final rule, FERC declines to give investor-owned utilities and public power utilities the right of first refusal for jointly built transmission projects, which would have given them the right to build a project without it going out to bid by independent transmission companies. Opponents of the right of first refusal had argued that this option would have provided negative investment incentives that would not have adequately encouraged incumbent transmission providers to develop and advocate for transmission facilities that benefit more than just their own local retail distribution service territory or footprint. In the Order, FERC explained that this issue may be more appropriately addressed in other proceedings.

Another item that was not addressed in the Order was the proposal to limit the availability of the construction work in progress (CWIP) incentive. FERC stated that any action on the CWIP incentive is more appropriately considered in a separate proceeding to allow for a holistic approach to transmission incentives after the Commission has finalized its Long-Term Regional Transmission Planning reforms.

Overall, Order No. 1920 provides for a more efficient or cost-effective transmission expansion, effectuated through regional transmission planning processes, and will eliminate a potential barrier to entry for new generation resources, thereby enhancing competition in wholesale electricity markets and facilitating access to lower-cost generation.

Analysis and Impact of Order 1977

Order No. 1977, issued in conjunction with Order No. 1920, will help facilitate an efficient and transparent build out of the nation's electric grid. In this Order, FERC amends its regulations governing applications for permits to site electric transmission facilities to help ensure consistency with the amendments stemming from the Infrastructure Investment and Jobs Act (IIJA) to the Federal Power Act (FPA) Section 216, to modernize certain regulatory requirements, and to incorporate other updates and clarifications to provide for the efficient and timely review of permit applications.

The Order also clarifies that the Commission has the authority to issue permits to construct or modify electric transmission facilities in a national corridor if a state has denied a siting application. It establishes a Code of Conduct whereby an applicant must show that it has made good faith efforts to engage with landowners early in the permitting process. Finally, Order No. 1977 requires applicants to develop engagement plans to environmental justice communities and Indian tribes.

The draft final rules will become effective 60 days after the date of publication in the Federal Register.


The level of investment needed to expand the electric transmission system has failed to keep pace with changing dynamics and growing demand. Every indicator points to the fact that industry stakeholders need to make big investments and need to move quickly, relative to recent history. The electricity system is rapidly evolving, putting reliability and resilience at risk, and the U.S. Department of Energy's (DOE) National Transmission Needs Study shows that there are reliability and resilience benefits from additional transmission investments. FERC's Order 1920 and 1977 will help advance the build out of transmission in multiple ways. Order 1920 creates a bigger role for states to play in the planning process, incentivizes transmission technology alternatives and increase pathways to meet long-term transmission needs, while doing so affordably and equitably.

These Orders, however, are only one tool to leverage and are insufficient alone. In parallel, DOE has been active developing programs to maximize federal support for transmission investments and streamline processes as much as possible, within their existing authority. DOE's Grid Deployment Office (GDO) is leading the charge on programs and strategies to support transmission investments, including Grid Resilience and Innovation Partnership (GRIP) grants and Transmission Facilitation Program (TFP), a revolving fund program whereby DOE will serve as an "anchor customer" to buy capacity on interregional transmission lines. DOE recently unveiled a list of 10 potential national interest electric transmission corridors (NIETC), which is a designation that would allow the federal government to expedite the development of grid expansion projects in those areas. The proposed corridors total more than 3,500 miles across targeted regions where a lack of transmission capacity can drive up consumer electricity bills. As part of the NEITC's designations, DOE can provide direct loans for eligible transmission projects in these corridors, through the Transmission Facility Financing (TFF) program. Finally, DOE has its existing authority to provide loan guarantees through the Loan Programs Office. On the permitting side, DOE also recently announced the Coordinated Interagency Authorizations and Permits (CITAP) Program, to make the federal permitting process for transmission infrastructure more efficient and effective without sacrificing the quality of environmental reviews. CITAP will work to cut in half the time to site and permit a transmission project.

Finally, recent efforts reflect the actions that can be taken within existing authority. Congress could also step in and act on any number of recent proposals such as an Investment Tax Credit for transmission investment and a broad range of permitting reforms. All this to say, now is the time to take action for what is truly needed for the nation's electric grid.

Holland & Knight will continue to monitor this evolving space. If you have any questions, please contact the authors or another member of Holland & Knight's Clean Technology Team.


1 National Load Growth Report, GridStrategies, December 2023.

2 PJM Load Forecast Report, January 2024.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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