Wellinghoff: Existence of state ROFRs will not preclude inclusion of projects in RTO planning

Though Order 1000 does not require states to comply with its removal of right of first refusal (ROFR) language from tariffs, FERC has determined that state ROFRs do not preempt RTOs from considering transmission projects that propose to cross a state with a ROFR.

The commission on March 21 ruled that PJM Interconnection (PJM) and the Midwest ISO (MISO) must include in their regional transmission plans proposed interstate transmission projects that pass through states that have a ROFR in place (Docket Nos. ER13-198-000, ER13-75-000, ER13-187-000).

In their FERC Order 1000 compliance filings, both organizations stated their intention to eliminate such projects from their regional transmission plans: the regional transmission expansion plan (RTEP) in PJM and the Midwest ISO transmission expansion plan (MTEP) in MISO.

When it created Order 1000, FERC determined that it could not abrogate states’ rights to institute or maintain a ROFR. In response to the order, several states passed ROFR laws in order to preserve incumbent utilities’ ability to have the first choice to build new transmission.

However, in the rulings, FERC found that the RTOs’ plans to eliminate from consideration proposed projects that would traverse states with a ROFR effectively gave those states too much power.

“A transmission line proposed to go from New Jersey through Delaware and into Maryland could be stopped before it was even considered if, for example, Delaware had a ROFR in place,” FERC Chairman Jon Wellinghoff told TransmissionHub March 22. Excluding such projects from consideration during the planning process would be analogous to prior restraint.

“RTOs are creations of the federal government,” Wellinghoff continued. “As such, their policies need to conform to federal regulations, not state statutes.”

FERC ruled that PJM and MISO’s filings largely complied with the rule’s requirements but, in final decisions issued March 22, the commission directed both RTOs to clarify and refine their proposals.

FERC found that PJM and MISO complied in part with the requirement to eliminate from their commission-jurisdictional tariffs and agreements provisions that establish a ROFR for an incumbent transmission provider, but directed them to clarify certain issues. For example, MISO proposed that projects that include a combination of new transmission sections and upgrade, and which are less than 20 miles in total, would retain a ROFR for the new sections.

FERC directed MISO to make an additional compliance filing justifying its proposal, or revise its tariff to delete the 20 mile threshold.

FERC also found that the filings partially complied with provisions addressing transmission needs driven by public policy requirements, but directed the RTOs to propose additional procedures.

Not all commissioners agreed with the commission’s decision.

“The orders as drafted were too unbalanced in favor of rulings that discourage the construction of needed transmission,” Commissioner Philip Moeller said in his dissent. “As I observed in my partial dissent on Order No. 1000, ‘instead of encouraging more regional cooperation, the rule could ultimately discourage such cooperation by encouraging more local transmission projects.’”

Moeller said the ultimate goal of Order 1000 is a final rule that results in needed capital investment, adding that “the ultimate objective is critical, as the lack of adequate transmission investments often disproportionately raises consumer rates due to congestion, threatens the reliability of the nation’s bulk power system, and increases reliance on older and dirtier generating resources.”

Commissioner Cheryl LaFleur acknowledged that the process strives to reach a balance that may be difficult to achieve.

“We have tried to ensure … the benefits of competition in transmission planning for customers while also recognizing the need for workable processes and allowing transmission planners to meet reliability needs,” LaFleur said in a statement.

WestConnect’s compliance filing

FERC also addressed the merits of the compliance filing made by WestConnect, concluding that the organization’s filing partially complied with Order 1000 requirements and directing further compliance filings.

FERC said WestConnect “has an obligation to identify transmission solutions in the regional transmission planning process that more efficiently or cost-effectively meet transmission needs driven by reliability and/or economic considerations or by public policy requirements.”

It also directed WestConnect to address Order 1000’s requirement to consider transmission needs driven by public policy requirements “by including clear procedures for stakeholder input to identify transmission needs driven by such requirements and stakeholder input in evaluating potential solutions to the identified needs.”

Finally, FERC told WestConnect to provide that regional cost allocations are binding on identified beneficiaries.