FERC decision to deny rehearing of Order 1000 not a surprise to industry

Across the spectrum of responses FERC’s decision to deny rehearing of Order 1000 has inspired, surprise is not one of them, industry sources told TransmissionHub.

Rather, it would have been unexpected had FERC’s chairman and commissioners done anything else.

“When they put out a generic policy rule-making like this, that’s as important as it is, they’ve all reached their decision, where they want to go before it goes out,” an industry lawyer told TransmissionHub. “The rehearing is typically around the edges – fix and tuck, if you will. It would’ve been shocking if they had not denied rehearing.”

FERC on May 17 issued a 557-page order (RM10-23-001) affirming its determinations in Order 1000 (RM10-23-000), a near-600 page rule issued in July 2011, thereby denying dozens of rehearing requests. Though many in the industry are still poring over its pages, the industry lawyer said he had not yet found anything controversial.

Order 1000 seeks to rectify certain deficiencies in the preceding FERC Order 890, which FERC found was “too narrowly focused geographically” and failed to provide for “adequate analysis of the benefits associated with interregional transmission facilities,” the commission said in the May 17 order.

“As we noted in Order No. 1000, changes are at work in the electric utility industry that have created an additional, and potentially significant, need for new transmission infrastructure,” FERC said in its decision.

FERC cited changes to the generation mix caused by environmental regulations and renewable portfolio standards that are resulting in early retirements of coal-fired generation, an increasing reliance on natural gas, and large-scale integration of renewable generation.

“The Commission concluded in Order No. 1000 that current transmission planning and cost allocation requirements are inadequate to meet these challenges. Current requirements threaten to thwart identification of transmission solutions that are more efficient or cost-effective than would be the case without the reforms contained in Order No. 1000,” FERC said in the decision. “As a result, the Commission concluded – and we affirm here – that it is necessary and appropriate that we take proactive steps to ensure that this threat does not result in such adverse consequences.”

“We’re not surprised,” Randy Satterfield, American Transmission Company‘s (ATC) vice president of public affairs told TransmissionHub. “We think FERC mostly got it right in Order 1000, and what they did yesterday is reaffirm their commitment to Order 1000 and reaffirm their commitment to the process that they’ve laid out.”

The order requires regional and interregional transmission planning coordination and the development of cost allocation methodologies, and eliminates the right of first refusal (ROFR) for incumbent transmission developers.

“We’re strong supporters of the elimination of ROFR for projects that provide regional benefits and have regional cost sharing strategies,” Satterfield said. “That’s a very positive development, not only for industry, not only for transmission development but for end-use electricity customers, because competition is going to impact end-users in a positive way.”

There were over 60 requests for rehearing (RM10-23-001), prior to the May 17 order, from entities including the Edison Electric Institute, ATC, ITC Holdings (NYSE:ITC), American Electric Power (NYSE:AEP), state commissions, including the Georgia Public Service Commission, RTOs and consumer advocates.

While some have lodged complaints with the entirety of the order, others have had more specific issues they wanted FERC to address.

“Our concerns were largely related to cost allocation and the interpretation of the definition of interregional projects,” Melissa McHenry, a spokesperson for AEP, told TransmissionHub. “We would have liked additional clarity on cost allocation for interregional projects, and the broader interpretation around the definition about what an interregional project is. We do understand the desire to defer to regional and interregional processes to address those issues and we’ll work through those processes to address those concerns.”

McHenry said AEP will be able to provide comments to FERC during compliance filings if the company still has concerns after the stakeholder processes plays out.

The Coalition for Fair Transmission Policy (CFTP) also was not surprised by FERC’s decision on rehearing Order 1000, Sue Sheridan, president of the coalition, said. The CFTP on May 17 said it remains concerned that the order “fails to adequately ensure that electricity consumers are protected from high rates that are unfair and unreasonable.”

Georgia PSC commissioner Stan Wise said he would have preferred for FERC to have affirmed its arguments but said he was “not terribly upset” by the decision. 

“It’s undisputed that Georgia and the southern states have done the job they’re required to do and clearly this FERC recognizes that,” Wise told TransmissionHub. “I think they know that Georgia, the Southeast is not the problem. What we always wanted … was just to affirm that fact and encourage FERC to recognize the fact that the southern states are not the problem here that 1000 is trying to address.”

However, the WIRES group called FERC’s decision “half a loaf.”

For those who take issue with the existence of Order 1000, litigation is the most likely recourse. Jim Fama, EEI’s vice president of energy delivery, and Steve Transeth, a consultant for the MISO Northeast Customer Coalition and former member of the Michigan Public Service Commission, in October 2011 predicted such an outcome.

“There’s no more regulatory process left,” an industry source told TransmissionHub May 18. “What’s left would be potentially a legal issue, so everything has to be read very carefully. Now, it’s sort of a lawyer’s game.”

About Rosy Lum 525 Articles
Rosy Lum, Analyst for TransmissionHub, has been covering the U.S. energy industry since 2007. She began her career in energy journalism at SNL Financial, for which she established a New York news desk. She covered topics ranging from energy finance and renewable policies and incentives, to master limited partnerships and ETFs. Thereafter, she honed her energy and utility focus at the Financial Times' dealReporter, where she covered and broke oil and gas and utility mergers and acquisitions.