Utilities, regulators, advocates file appeals court challenge to FERC Order 1000

Some three dozen utilities, regulatory bodies and industry organizations have jointly filed three petitions with a federal appeals court seeking to overturn key provisions of FERC Order 1000 and two subsequent revisions.

The parties submitted briefs totaling 235 pages with the U.S. Court of Appeals for the District of Columbia Circuit on May 28, opposing the cost allocation provisions and transmission planning requirements of FERC Orders 1000, 1000-A and 1000-B.

In addition, the court is being asked to determine “whether FERC exceeded its statutory authority, and usurped state jurisdiction, by requiring transmission providers to remove from tariffs and contracts any right of first refusal [ROFR] that utilities have to construct and own new transmission facilities,” the parties said in their briefs.

“FERC’s regulatory grasp exceeds its statutory reach,” Sue Sheridan, president and chief counsel of petitioner group, the Coalition for Fair Transmission Policy (CFTP), told TransmissionHub June 4.

Other petitioners and intervenors include four state public service commissions, three ISOs, the American Public Power Association, National Rural Electric Cooperative, the Large Public Power Council, NARUC, major utility companies including Exelon (NYSE:EXC) and Southern Company (NYSE:SO), as well as numerous local utilities such as Jersey Central Power & Light and the Sacramento Municipal Utility District.

Other signatories agreed with Sheridan, and pointed to the statutory authority provided to FERC under the Federal Power Act (FPA).

“Sections 205 and 206 of the FPA empower FERC to ensure that transactions involving voluntary planning arrangements are just, reasonable and non-discriminatory, but not to mandate transmission planning in the first instance,” parties said in the briefs.

In the brief specific to cost allocation, the parties charged that FERC’s directive also exceeds its authority under the FPA and contradicts Supreme Court precedent by providing transmission developers with a mechanism to secure funding for their projects on a socialized basis, from entities with whom they have no business relationship and to whom they do not provide service.

“Our biggest concern has been the cost allocation rule,” Sheridan said. “The idea that you can be charged even if you don’t have a relationship, the idea that … FERC can make certain customers pay costs which have not been found specifically to be just and reasonable,” is problematic.

Whatever FERC’s policy objectives, the petitioners wrote, the FPA does not permit it to establish a tax socializing the cost of transmission development without respect to commercial relationships the commission is not permitted to forge, but upon which its regulatory authority is premised.

The cost allocation brief concluded by asserting that “no lawful revisions can be envisioned” for Order 1000, and asked the court to vacate the cost allocation provisions of the order.

In the filings, the petitioners recalled that historically, public utilities coordinated transmission planning voluntarily, and transmission development matters like siting, construction and related planning activities have been subject to state, rather than federal, regulation.

Orders 1000, 1000-A and 1000-B “require extensive and unprecedented changes to transmission planning, development, and cost allocation that will affect all transmission service providers and their customers,” the petitioners said.

The parties listed what they said would be negative effects of FERC’s transmission planning efforts. The orders “will harm, not facilitate, transmission planning and expansion by undermining reliability and the efficiencies provided by vertical integration and by making transmission planning more bureaucratic, contentious and litigious,” the brief said.

The petitioners also offered up several criticisms of the rationale behind FERC’s rule making.

“FERC generically found that these mandates may ‘promote the more efficient and cost-effective development of new transmission facilities’ because, in FERC’s view, the historical practice of voluntary transmission planning and cost allocation posed a ‘theoretical threat’ to just and reasonable rates,” the petitioners wrote, while others challenged FERC’s ability to predicate its requirements solely on the “theory” that its mandates “might” lead to a more efficient transmission system. 

Some petitioners argued that FERC’s orders are “arbitrary and capricious because they are aimed, not at correcting specific abuses or unreasonable existing rates, but at addressing what FERC describes as the ‘theoretical threat’ that existing planning arrangements might not produce a ‘more efficient and cost-effective’ transmission system,’” petitioners wrote.

Some objected that mandating the consideration of transmission needs driven by a range of federal, state and local public-policy requirements violates the FPA by making the needs of load-serving entities “an optional consideration.”

With regard to the elimination of the ROFR, petitioners cited the 2011 partial dissent of FERC Commissioner Philip Moeller, who opined that its elimination by Order 1000 creates an incentive for incumbent transmission owners to avoid participating in the regional planning processes.

“For this reason, instead of encouraging more regional cooperation, the rule could ultimately discourage such cooperation by encouraging more local transmission projects,” Moeller wrote in his partial dissent.

FERC’s transmission planning mandates also unlawfully infringe on the states’ long-standing authority over transmission development, the petitioners said. FERC maintains that the states continue to retain their authority over siting and construction by refusing to site projects.

“By mandating a regional transmission planning process (that will both select which facilities will be included in the plan and which facilities will construction those facilities), and controlling which projects receive cost allocation, FERC, not the states, effectively decides whether a project should be built,” the brief stated.

Initial briefs are due in September, and final briefs in November, according to Sheridan. Oral arguments on the petitions have not yet been scheduled, but are anticipated either at the end of this year or in early 2014.