Since its issuance in July 2011, FERC Order 1000 has accomplished what it set out to do: the inception of industry-wide change.
This week, the first official compliance filings with the order are due. Those entities that have not requested deadline extensions will make their regional compliance filings on Oct. 11, outlining how they will meet the order’s requirements to coordinate regional transmission planning and cost allocation for transmission projects.
Jim Hoecker, advisor to the WIRES group, cautioned that regional filings, because of FERC’s deference to regions and states in the order, would likely vary widely, and risked rejection.
“FERC has put itself in a position of having said, ‘Bring me a rock,’” Hoecker said, referring to the corporate game in which an employee attempts to guess the requirements of a manager who rejects the employee’s proposal and asks for another solution, yet doesn’t offer more guidance.
The order also mandates that regions take into consideration public policy issues, like renewable portfolio standards (RPS), when planning transmission. Further, it requires the removal of right of first refusal (ROFR) language from transmission tariffs – which many in the industry said was the most contentious issue – and, as with regional coordination, it requires interregional coordination. Interregional compliance filings are due April 11, 2013.
In the weeks and months after the order was issued, many industry participants were quick to criticize it, arguing that it was too vague – while the order stipulates that only consumers who benefit from transmission will pay for it, it stops short of defining benefits – or that it wasn’t flexible enough, or that the timeline for meeting regional planning requirements was too stringent – the order requires the formation of regions where currently there are none, like in the Southeast and the West, but does not delineate exactly how they should be formed. Entities in those regions of the country complained that an Oct. 11 deadline did not give them enough time to form regions and also develop a cost allocation methodology.
Others were quick to capitalize.
American Electric Power (NYSE:AEP), currently the largest transmission owner in the United States, formed a joint venture, Transource Energy, with Great Plains Energy (NYSE:GXP), in order to take advantage of a landscape opening to competitive transmission development, as a result of Order 1000’s ROFR removal.
“FERC certainly wanted to set the tone for competitive transmission going forward and it was important for us to put together an engine for that future growth, and we saw … a near-term project that could provide the ability for us to put that critical mass in place and really give us an advantage to run forward in the marketplace,” AEP CEO Nick Akins said in April. Transource is to be AEP’s vehicle for competitive transmission.
Others attempted to leverage Order 1000’s ROFR removal requirement to argue that certain transmission tariffs, which currently favor incumbents, should be found unjust and unreasonable, as in the cases of Pioneer Transmission vs. Northern Indiana Public Service Co. (NIPSCO) and Xcel Energy (NYSE:XEL) versus American Transmission Co. (ATC). Ultimately, FERC ruled against non-incumbents ATC and Pioneer, finding that Order 1000 was prospective only and did not apply either to current projects or retroactively.
“These orders highlight the very situation that Order No. 1000 is designed to remedy,” FERC Chairman Jon Wellinghoff said after ruling in favor of Xcel Energy and NIPSCO. “In Order No. 1000, the commission stated that it is unjust and unreasonable to grant incumbent transmission providers a federal right of first refusal with respect to certain transmission projects because doing so may result in the failure to consider more efficient or cost-effective solutions to regional needs and, in turn, result in the inclusion of higher-cost solutions in the regional plan.”
To circumvent the ROFR requirement, some states, namely North Dakota, South Dakota and Minnesota, passed laws establishing ROFRs. While FERC issued the requirement in Order 1000, the commission said it would defer to state laws on the matter.
The ROFR laws were precipitated by a concerted effort by utilities, including Xcel Energy, that were involved in the CapX2020 project, a series of transmission lines in Minnesota, South Dakota, North Dakota and Wisconsin designed to support increasing demand and integrate renewable resources into the grid.
While some have resisted, others have accepted the new order and undertaken compliance. WestConnect has said it will be a region; four of nine Western Electricity Coordinating Council (WECC) subregional planning groups are forming regions; the Midwest ISO and Southwest Power Pool have been working on drafting compliance measures, as well as ColumbiaGrid. The California ISO in July said it was largely in compliance with Order 1000’s regional requirements. Whatever the various reactions to the order, it is clear than in the 15 months since it was issued, many have fallen in line – forming committees and task forces to evaluate how to comply, forming regions and drafting compliance filings. It has helped that FERC in May issued an order denying rehearing on Order 1000, a move the industry expected.
Whether the compliance filings proposed will, in the end, live up to that corporate game of “Bring me a rock” futility remains to be seen. However, it is safe to say that Order 1000 has successfully proven a catalyst for change.