FERC agrees to ‘further consider’ issue tied to revised definition of bulk electric system

FERC has granted limited rehearing of its June 13 order extending the effective date for NERC’s revised definition of the bulk electric system (BES) from July 1, 2013 to July 1, 2014 to reconsider whether utilities would be required to apply the revised definition before seeking a local distribution determination (Docket Nos. RM12-6-003 and RM12-7-003).

The rehearing, which FERC granted Aug. 7 in a two paragraph order, was requested July 9 by Pacific Northwest Generating Cooperative and Northwest Requirements Utilities, which said in their request that FERC violated the Federal Power Act (FPA) when it ruled that entities would first have to apply the revised BES definition before seeking a determination of whether a facility serves local distribution needs.

“Whether a facility is used in the local distribution of electric energy is independent of whether a facility falls within the definition of the BES,” the entities said. “Stating that an entity must apply the BES definition before evaluating facilities used in the local distribution of electric energy impermissibly associates the BES definition with questions of which facilities can fall within FERC’s jurisdiction under the FPA.”

Facilities used in the local distribution of electric energy are outside FERC’s mandatory reliability standard jurisdiction, and delaying local distribution determinations by virtue of the one-year delay in the implementation of the revised BES definition is “inappropriate” and illegal, the parties said.

“Since the commission lacks jurisdiction over local distribution facilities under the FPA, postponing utilities’ ability to seek a jurisdictional determination results in the unlawful application of the reliability standards to facilities outside the commission’s jurisdiction,” the entities said. “An agency’s action in excess of its statutory authority is unlawful.”

In the rehearing request, the parties said FPA Section 215 gives FERC and NERC jurisdiction over users, owners and operators of the bulk power system (BPS), which “is defined to exclude ‘facilities used in the local distribution of electric energy.’” The organizations pointed out that FERC has not clarified the distinction between the BPS and the BES and, until it does, it has indicated that it will continue to rely upon NERC’s definition of the BES.

The pivotal point, however, is simply whether the facilities are used for distribution, a point that has already been upheld in court, the organizations said.

In a 2003 case involving Detroit Edison, the Washington, D.C. Circuit Court said, “Section 201(b)(1) denies FERC jurisdiction over ‘facilities used in local distribution.’ FERC would rewrite the statute to exclude only ‘facilities used exclusively in local distribution.’ Such an interpretation would eviscerate state jurisdiction over numerous local facilities, in direct contravention of Congress’ intent.”

It is therefore not necessary to consider the BES definition when considering whether facilities are subject to FERC’s jurisdiction, the parties said. Instead, it is only necessary to consider whether they are used in the local distribution of electric energy.

“The FPA establishes a clear jurisdictional boundary,” the parties said. “The jurisdictional test hinges on whether a facility is ‘used in the local distribution of electric energy’ [and] are therefore outside FERC and NERC’s reliability jurisdiction.”

As of press time, no date for the rehearing had been set.