FERC denies rehearing of ROFR requirement in Order 1000-A

FERC in Order 1000-B issued Oct. 18 said it denied requests for rehearing of its right of first refusal (ROFR) requirement in Order 1000-A, a decision from which Commissioner LaFleur dissented. 

In the order, FERC affirmed its determinations in Order 1000-A, granted some clarification in some instances and denied rehearing in others. 

Order 1000-A, issued May 17, denied rehearing of Order 1000, issued in July 2011, and offered clarification of some of Order 1000’s requirements. Order 1000 reforms regional and interregional transmission planning and cost allocation, and requires the elimination of any right of first refusal (ROFR) language from transmission tariffs. 

According to the order, a project is considered regional and therefore eligible for cost allocation if any costs are allocated regionally or outside a single transmission provider’s retail distribution service territory or footprint. 

Commissioner Cheryl LaFleur said she would grant rehearing on this point and therefore dissented from the order. 

“After further consideration, I believe this decision is premature and denies transmission-planning regions the flexibility to define local projects,” Commissioner LaFleur said. “I am now persuaded that the commission should have deferred judgment on this issue until compliance, where it could have evaluated—on a case-by case-basis—proposals to define local projects in light of the principles underlying elimination of the ROFR and the requirement that costs must be allocated in a manner that is at least roughly commensurate with benefits.”

The MISO Transmission Owners Group had asked that the FERC allow utilities to retain a ROFR for projects that are selected which may not be the “more efficient or cost-effective solution to regional transmission needs.”

The group had argued that not all projects included in a regional transmission plan for which some costs are allocated outside of an individual utility’s footprint are a more efficient or cost-effective solution to regional transmission needs, FERC noted. These could be projects that are designed to meet compliance with state service obligations or “where the most efficient or cost-effective solution may not be in-service in time to satisfy reliability criteria and the decision to include the project in the plan is made primarily on the basis of reliability.”

The group had also argued that statements in Order No. 1000-A suggest that the decision regarding whether a facility is more efficient or cost-effective “is irrelevant to determining whether the requirement to remove federal rights of first refusal would apply.”

“[T]he Commission stated in Order No. 1000 that in general, if any costs of a new transmission facility are allocated regionally or outside a single transmission provider’s retail distribution service territory or footprint, that is an application of the regional cost allocation method and that new transmission facility is not a local transmission facility,” FERC said. “Therefore, once a new transmission facility is selected in the regional transmission plan for purposes of cost allocation, it is no longer a local transmission facility exempt from the requirements of Order Nos. 1000 and 1000-A regarding the removal of federal rights of first refusal. For this reason, we deny rehearing on this issue.”

Regarding the ROFR requirement, OGE (NYSE:OGE) subsidiary Oklahoma Gas & Electric argued that FERC had no power to require parties to renegotiate and revise existing agreements unless it found harm to the public interest under Section 206 of the Federal Power Act. 

“[T]he Commission found that a federal right of first refusal has the potential to undermine the identification and evaluation of more efficient or cost-effective solutions to regional transmission needs, which in turn can result in rates for Commission-jurisdictional services that are unjust and unreasonable or otherwise result in undue discrimination by public utility transmission providers.”

FERC further noted that the Federal Trade Commission supported its conclusion that ROFRs can create a barrier to entry that discourages non-incumbent transmission developers from proposing alternative solutions for consideration at the regional level. 

Transmission Access Policy Study Group asked that FERC require public utility transmission providers in non-RTO regions to file specific application of the cost allocation method, which FERC rejected.

“Transmission Access Policy Study Group has not persuaded us that the determination not to require the filing of specific applications of the cost allocation method was in error,” FERC said. “Order No. 1000’s reforms are intended, in part, to establish an open and transparent transmission planning process and require transmission planning regions to adopt a cost allocation method or methods that provide ex ante certainty. Both the Order No. 1000 compliance process and the resulting commission-approved regional transmission planning process and associated cost allocation method(s) are required to have built-in mechanisms to help ensure that the processes and cost allocation methods are in fact transparent and provide the certainty that Transmission Access Policy Study Group seeks.”

FERC also pointed out that, as explained in Order 1000-A, stakeholders have the option of filing a Section 206 complaint if they believe that there was an incorrect application of the cost allocation method.

FERC offers clarification 

The commission granted clarification on another of Transmission Access Policy Study Group’s requests, specifically that FERC clarify that Orders 1000 and 1000-A do not alter the scope or applicability of Order No. 681.

Order 681 set out guidelines for ISOs and RTOs to follow regarding the availability of long-term firm transmission rights, including a guideline providing that load-serving entities (LSEs) have priority over non-load serving entities in the allocation of long-term firm transmission rights that are supported by existing capacity.

“[N]othing in Order Nos. 1000 or 1000-A changes the requirements of Order No. 681, including the Order No. 681 established preference for load-serving entities in the allocation of long-term firm transmission rights,” FERC said, adding, “the commission did not alter the application of Order No. 681 to new transmission facilities that are subject to the requirements of Order No. 1000.”

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.