On May 13, 2024, the Federal Energy Regulatory Commission (FERC) issued its final rule, Building for the Future Through Electric Regional Transmission Planning and Cost Allocation (Order No. 1920), which is anticipated to have broad implications on electric regional transmission planning and cost allocation. The issuance of Order No. 1920 followed years of rulemaking that generated tens of thousands of pages of comments from hundreds of stakeholders. The final rule was highly anticipated and proclaimed as "historic" by FERC itself. The final rule was also accompanied by a lengthy dissent by FERC Commissioner Mark Christie.
Order No. 1920 requires transmission providers to conduct long-term regional transmission planning at least every five years, which includes the consideration of forward-looking factors over a 20-year transmission planning horizon. Transmission providers are required to develop at least three distinct Long-Term Scenarios that incorporate the following seven factors: (1) federal, federally-recognized Tribal, state, and local laws and regulations that affect the future resource mix and demand; (2) federal, federally-recognized Tribal, state, and local laws and regulations on decarbonization and electrification; (3) state-approved utility integrated resource plans and expected supply obligations for load-serving entities; (4) trends in technology and fuel costs; (5) resource retirements; (6) generator interconnection requests and withdrawals; and (7) utility and corporate commitments and federal, state, and local goals affecting resource mix and demand. Transmission providers are also required to develop an evaluation process to identify long-term regional transmission facilities for potential selection in the regional plan. During the evaluation process, transmission providers will be required to apply a set of seven itemized benefits for each proposed transmission facility: (1) avoided or deferred reliability transmission facilities and aging infrastructure replacement; (2) either reduced loss of load probability or reduced planning reserve margin; (3) production cost savings; (4) reduced transmission energy losses; (5) reduced congestion due to transmission outages; (6) mitigation of extreme weather events and unexpected system conditions; and (7) capacity cost benefits from reduced peak energy losses.
Order No. 1920 also addresses cost allocation methodology. Order No. 1920 requires a six month "engagement period" to allow the relevant state entities the opportunity to reach agreement on a cost allocation method. In addition, transmission providers are required to file an ex ante "backstop" cost allocation method for long-term regional transmission facilities regardless of whether an agreement is reached with the state entities during the engagement period.
In another important aspect of the final rule, Order No. 1920 requires transmission providers to identify potential opportunities to "right-size" replacement transmission facilities to more efficiently or cost-effectively address long-term transmission needs. Transmission providers must also adopt tariff provisions that provide a federal right of first refusal for a transmission provider to develop any "right-sized" facility. A federal right of first refusal for "right-sizing" facilities should not be confused with something FERC chose not to do: Order No. 1920 does not establish a conditional federal right of first refusal based on joint ownership, despite such a right being proposed in its 2022 Notice of Proposed Rulemaking (NOPR). Instead, FERC explained it would continue to consider the NOPR proposal and potential federal right of first refusal reforms in other proceedings.
Commissioner Christie's dissent argued that Order No. 1920 was fundamentally different from the NOPR and, therefore, denied the states the authority that was proposed in the NOPR. The dissent also asserted that Order No. 1920 is susceptible to legal challenges, both as exceeding FERC's authority under the Federal Power Act, and under the major questions doctrine recently applied in West Virginia v. Environmental Protection Agency.1 Chairman Willie Phillips and Commissioner Allison Clements issued a concurrence that addressed many of the dissent's assertions.
Order No. 1920 is set to become effective 60 days after publication in the Federal Register.
Footnote
1. 597 U.S. 697 (2022).
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