FERC defends controversial transmission rule in court

Source: Hannah Northey, E&E reporter • Posted: Monday, September 30, 2013

The Federal Energy Regulatory Commission this week defended one of its largest and most controversial rules in a federal appeals court against a host of state regulators, utilities and industry groups that have accused the agency of overstepping its authority.

FERC told the U.S. Court of Appeals for the District of Columbia Circuit that it acted within its legal rights under the Federal Power Act to issue its 2011 ruling, dubbed “Order 1000,” which aims to transform the way power lines are planned across the country.

The landmark rule that was ushered in under outgoing FERC Chairman Jon Wellinghoff aims to boost competition in the transmission markets, change the way new lines are paid for and ensure planners take state and federal policies like renewable portfolio standards into consideration when approving new projects.

But Order 1000, which FERC is currently implementing, has drawn the ire of states and existing utilities with an interest in keeping current rules intact and has triggered concern among top lawmakers including the Democratic chairman of the Senate Energy and Natural Resources Committee, Sen. Ron Wyden of Oregon (E&E Daily, March 6).

After the agency refused to hold a rehearing on the rule, more than 20 state regulatory agencies, energy companies and the National Association of Regulatory Utility Commissioners appealed the order in federal court. Issues involving states’ rights, legal contracts and the fairness of spreading the cost of new power lines are among the problems with the rule that the groups have raised.

NARUC, for example, has argued the rule could force some utilities to remove or add specific language to tariffs, prompting a change in state law that FERC has no authority over

“Through these orders, it has become apparent to NARUC that much of the vague language contained in the orders is now being construed by FERC in a manner that undermines the protections to state jurisdiction that FERC had otherwise provided,” the group wrote in a filing to the court.

Another group, the Coalition for Fair Transmission Policy, echoed concerns that House Republicans voiced when the rule was released in 2011 — namely, that the agency could force the socialization of expensive, long-distance power lines needed to tap into remote pockets of wind and solar power.

FERC says it has the power to change rates based on “theory rather than evidence” and divvy up the costs of new power lines to transmission customers that have no relationship with the actual facility owner, the coalition said. “Such broad powers could allow FERC to impose the broad socialization of costs upon electric consumers and is not supported by the Federal Power Act,” the group said.

But FERC argued that it “reasonably required” transmission planners to partake in regional planning, that it used its legal authority to fix discriminatory practices that allow existing transmission owners to reject new projects first and that the commission acted within its rights under the Federal Power Act.

“The commission exercised its authority proactively to address the theoretical threat posed by existing planning and cost allocation processes, which could thwart identification of more efficient and cost-effective transmission solutions,” the agency wrote.

Sources watching the case said a decision could come by late summer or fall 2014.