RM10-23-000 Transmission Planning and Cost Allocation by

620 Pages·2011·1.47 MB·English

136 FERC ¶ 61,051
UNITED STATES OF AMERICA
FEDERAL ENERGY REGULATORY COMMISSION

18 CFR Part 35

[Docket No. RM10-23-000; Order No. 1000]

Transmission Planning and Cost Allocation by Transmission
Owning and Operating Public Utilities

(Issued July 21, 2011)

AGENCY: Federal Energy Regulatory Commission.
ACTION: Final Rule
SUMMARY: The Federal Energy Regulatory Commission is amending the transmission
planning and cost allocation requirements established in Order No. 890 to ensure that
Commission-jurisdictional services are provided at just and reasonable rates and on a
basis that is just and reasonable and not unduly discriminatory or preferential. With
respect to transmission planning, this Final Rule: (1) requires that each public utility
transmission provider participate in a regional transmission planning process that
produces a regional transmission plan; (2) requires that each public utility transmission
provider amend its OATT to describe procedures that provide for the consideration of
transmission needs driven by public policy requirements in the local and regional
transmission planning processes; (3) removes from Commission-approved tariffs and
agreements a federal right of first refusal for certain new transmission facilities; and (4)
improves coordination between neighboring transmission planning regions for new
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interregional transmission facilities. Also, this Final Rule requires that each public utility
transmission provider must participate in a regional transmission planning process that
has: (1) a regional cost allocation method for the cost of new transmission facilities
selected in a regional transmission plan for purposes of cost allocation; and (2) an
interregional cost allocation method for the cost of certain new transmission facilities that
are located in two or more neighboring transmission planning regions and are jointly
evaluated by the regions in the interregional transmission coordination procedures
required by this Final Rule. Each cost allocation method must satisfy six cost allocation
principles.

FOR FURTHER INFORMATION CONTACT:

Kevin Kelly
Federal Energy Regulatory Commission
Office of Energy Policy and Innovation
888 First Street, NE
Washington, DC 20426
[phone]

Maria Farinella
Federal Energy Regulatory Commission
Office of the General Counsel
888 First Street, NE
Washington, DC 20426
[phone]

SUPPLEMENTARY INFORMATION:
136 FERC ¶ 61,051
UNITED STATES OF AMERICA
FEDERAL ENERGY REGULATORY COMMISSION

Before Commissioners: Jon Wellinghoff, Chairman;
Marc Spitzer, Philip D. Moeller,
John R. Norris, and Cheryl A. LaFleur.

Transmission Planning and Cost Allocation by Docket No. RM10-23-000
Transmission Owning and Operating Public Utilities

ORDER NO. 1000

FINAL RULE

TABLE OF CONTENTS

Paragraph Numbers
I. Introduction............................................................................................................................1.
A. Order Nos. 888 and 890...................................................................................................15.
B. Technical Conferences and Notice of Request for Comments on Transmission
Planning and Cost Allocation ................................................................................................22.
C. Additional Developments Since Issuance of Order No. 890 ..........................................25.
II. The Need for Reform............................................................................................................30.
A. Proposed Rule .................................................................................................................30.
B. Comments ........................................................................................................................32.
C. Commission Determination..............................................................................................42.
D. Use of Terms....................................................................................................................63.
III. Proposed Reforms: Transmission Planning .......................................................................67.
A. Regional Transmission Planning Process........................................................................68.
1. Need for Reform Concerning Regional Transmission Planning..................................70.
a. Commission Proposal...............................................................................................70.
b. Comments.................................................................................................................72.
c. Commission Determination......................................................................................78.
2. Legal Authority for Transmission Planning Reforms..................................................85.
a. Commission Proposal...............................................................................................85.
b. Comments.................................................................................................................86.
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c. Commission Determination......................................................................................99.
3. Regional Transmission Planning Principles ................................................................118.
a. Commission Proposal...............................................................................................118.
b. Comments.................................................................................................................120.
c. Commission Determination......................................................................................146.
4. Consideration of Transmission Needs Driven by Public Policy Requirements...........166.
a. Commission Proposal...............................................................................................166.
b. Comments.................................................................................................................169.
c. Commission Determination......................................................................................203.
B. Nonincumbent Transmission Developers........................................................................225.
1. Need for Reform Concerning Nonincumbent Transmission Developers.....................228.
a. Commission Proposal...............................................................................................228.
b. Comments ................................................................................................................231.
c. Commission Determination......................................................................................253.
2. Legal Authority To Remove a Federal Right of First Refusal.....................................270.
a. Commission Proposal ..............................................................................................270.
b. Comments Regarding the Commission’s Authority To Implement the
Proposal.........................................................................................................................271.
c. Commission Determination .....................................................................................284.
3. Removal of a Federal Right of First Refusal from Commission-Jurisdictional
Tariffs and Agreements.....................................................................................................293.
a. Commission Proposal ..............................................................................................293.
b. Comments Regarding Developer Qualification and Project Identification ............296.
c. Comments Regarding Project Evaluation and Selection .........................................302.
d. Commission Determination ....................................................................................313.
i. Qualification Criteria to Submit a Transmission Project for Selection in the
Regional Transmission Plan for Purposes of Cost Allocation.................................323.
ii. Submission of Proposals for Selection in the Regional Transmission Plan
for Purposes of Cost Allocation................................................................................325.
iii. Evaluation of Proposals for Selection in the Regional Transmission Plan
for Purposes of Cost Allocation................................................................................328.
iv. Cost Allocation for Projects Selected in the Regional Transmission Plan
for Purposes of Cost Allocation................................................................................332.
v. Rights to Construct and Ongoing Sponsorship....................................................338.
4. Reliability Compliance Obligations of Transmission Developers...............................341.
a. Comments Regarding Reliability Obligations.........................................................341.
b. Commission Determination .....................................................................................342.
C. Interregional Transmission Coordination.........................................................................345.
1. Need for Interregional Transmission Coordination Reform ........................................347.
a. Commission Proposal...............................................................................................347.
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b. Comments.................................................................................................................351.
c. Commission Determination......................................................................................368.
2. Interregional Transmission Coordination Requirements..............................................374.
a. Interregional Transmission Coordination Procedures..............................................374.
i. Commission Proposal...........................................................................................374.
ii. Comments............................................................................................................377.
iii. Commission Determination................................................................................393.
b. Geographic Scope of Interregional Transmission Coordination..............................405.
i. Commission Proposal...........................................................................................405.
ii. Comments............................................................................................................406.
iii. Commission Determination................................................................................415.
3. Implementation of the Interregional Transmission Coordination Requirements.........422.
a. Procedure for Joint Evaluation.................................................................................422.
i. Comments.............................................................................................................422.
ii. Commission Determination.................................................................................435.
b. Data Exchange..........................................................................................................451.
i. Comments.............................................................................................................451.
ii. Commission Determination.................................................................................454.
c. Transparency............................................................................................................456.
i. Comments.............................................................................................................456.
ii. Commission Determination.................................................................................458.
d. Stakeholder Participation.........................................................................................459.
i. Commission Proposal...........................................................................................459.
ii. Comments............................................................................................................460.
iii. Commission Determination................................................................................465.
e. Tariff Provisions and Agreements for Interregional Transmission
Coordination..................................................................................................................468.
i. Commission Proposal...........................................................................................468.
ii. Comments............................................................................................................469.
iii. Commission Determination................................................................................475.
IV. Proposed Reforms: Cost Allocation...................................................................................482.
A. Need for Reform Concerning Cost Allocation.................................................................484.
1. Commission Proposal...................................................................................................484.
2. Comments on Need for Reform....................................................................................488.
3. Commission Determination..........................................................................................495.
B. Legal Authority for Cost Allocation Reforms..................................................................504.
1. Commission Proposal...................................................................................................504.
2. Comments on Legal Authority.....................................................................................509.
3. Commission Determination..........................................................................................530.
C. Cost Allocation Method for Regional Transmission Facilities........................................550.
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1. Commission Proposal...................................................................................................550.
2. Comments on Cost Allocation Method in Regional Transmission Planning...............553.
3. Commission Determination..........................................................................................558.
D. Cost Allocation Method for Interregional Transmission Facilities ................................566.
1. Commission Proposal...................................................................................................566.
2. Comments on Interregional Cost Allocation Reforms.................................................568.
3. Commission Determination..........................................................................................578.
E. Principles for Regional and Interregional Cost Allocation..............................................585.
1. Use of a Principles-Based Approach............................................................................585.
a. Commission Proposal...............................................................................................585.
b. Comments on Use of Principles-Based Approach...................................................589.
c. Commission Determination......................................................................................603.
2. Cost Allocation Principle 1—costs allocated in a way that is roughly
commensurate with benefits..............................................................................................612.
a. Comments ................................................................................................................612.
b. Commission Determination .....................................................................................622.
3. Cost Allocation Principle 2—no involuntary allocation of costs to non-
beneficiaries.......................................................................................................................630.
a. Comments ................................................................................................................630.
b. Commission Determination .....................................................................................637.
4. Cost Allocation Principle 3—benefit to cost threshold ratio........................................642.
a. Comments ................................................................................................................642.
b. Commission Determination .....................................................................................646.
5. Cost Allocation Principle 4—allocation to be solely within transmission
planning region(s) unless those outside voluntarily assume costs....................................651.
a. Comments ................................................................................................................651.
b. Commission Determination .....................................................................................657.
6. Cost Allocation Principle 5—transparent method for determining benefits and
identifying beneficiaries....................................................................................................665.
a. Comments ................................................................................................................665.
b. Commission Determination .....................................................................................668.
7. Cost Allocation Principle 6—different methods for different types of facilities.........673.
a. Comments ................................................................................................................673.
b. Commission Determination .....................................................................................685.
8. Whether To Establish Other Cost Allocation Principles..............................................694.
a. Commission Proposal...............................................................................................694.
b. Comments.................................................................................................................695.
c. Commission Determination......................................................................................704.
F. Application of the Cost Allocation Principles..................................................................706.
1. Whether To Have Broad Regional Cost Allocation for Extra-High Voltage
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Facilities.............................................................................................................................707.
a. Commission Proposal...............................................................................................707.
b. Comments on Cost Allocation for Extra-High Voltage Facilities...........................708.
c. Commission Determination......................................................................................713.
2. Whether To Limit the Use of Participant Funding.......................................................715.
a. Commission Proposal...............................................................................................715.
b. Comments on Limiting Participant Funding............................................................716.
c. Commission Determination......................................................................................723.
3. Whether Regional and Interregional Cost Allocation Methods May Differ................730.
a. Commission Proposal...............................................................................................730.
b. Comments.................................................................................................................731.
c. Commission Determination......................................................................................733.
4. Recommendations for Additional Commission Guidance on the Application of
the Transmission Cost Allocation Principles.....................................................................736.
a. Comments ................................................................................................................737.
b. Commission Determination .....................................................................................745.
G. Cost Allocation Matters Related to Other Commission Rules, Joint Ownership, and
Non-Transmission Alternatives.............................................................................................751.
1. Whether To Reform Cost Allocation for Generator Interconnections.........................752.
a. Comments.................................................................................................................753.
b. Commission Determination .....................................................................................760.
2. Pancaked Rates.............................................................................................................761.
a. Comments.................................................................................................................761.
b. Commission Determination .....................................................................................764.
3. Transmission Rate Incentives.......................................................................................765.
a. Comments.................................................................................................................766.
b. Commission Determination .....................................................................................771.
4. Relationship of This Proceeding to the Proceeding on Variable Energy
Resources...........................................................................................................................772.
a. Comments.................................................................................................................772.
b. Commission Determination .....................................................................................774.
5. Joint Ownership............................................................................................................775.
a. Comments.................................................................................................................775.
b. Commission Determination .....................................................................................776.
6. Cost Recovery for Non-Transmission Alternatives .....................................................777.
a. Comment Summary..................................................................................................777.
b. Commission Determination .....................................................................................779.
V. Compliance and Reciprocity Requirements.........................................................................780.
A. Compliance.......................................................................................................................780.
1. Commission Proposal...................................................................................................780.
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2. Comments.....................................................................................................................781.
3. Commission Determination..........................................................................................792.
B. Reciprocity .......................................................................................................................799.
1. Commission Proposal...................................................................................................799.
2. Comments.....................................................................................................................800.
3. Commission Determination..........................................................................................815.
VI. Information Collection Statement.......................................................................................823.
VII. Environmental Analysis.....................................................................................................831.
VIII. Regulatory Flexibility Act Analysis.................................................................................832.
IX. Document Availability........................................................................................................833.
X. Effective Date and Congressional Notification....................................................................836.

Regulatory Text

Appendix A: Summary of Compliance Requirements
Appendix B: Abbreviated Names of Commenters
Appendix C: Pro Forma Open Access Transmission Tariff Attachment K
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I. Introduction
1. In this Final Rule, the Commission acts under section 206 of the Federal Power
Act (FPA) to adopt reforms to its electric transmission planning and cost allocation
requirements for public utility transmission providers.1 The reforms herein are intended
to improve transmission planning processes and cost allocation mechanisms under the
pro forma Open Access Transmission Tariff (OATT) to ensure that the rates, terms and
conditions of service provided by public utility transmission providers are just and
reasonable and not unduly discriminatory or preferential. This Final Rule builds on
Order No. 890,2 in which the Commission, among other things, reformed the pro forma
OATT to require each public utility transmission provider to have a coordinated, open,
and transparent regional transmission planning process. After careful review of the
voluminous record in this proceeding, the Commission concludes that the additional
reforms adopted herein are necessary at this time to ensure that rates for Commission-
jurisdictional service are just and reasonable in light of changing conditions in the

1 16 U.S.C. 824e (2006).
2 Preventing Undue Discrimination and Preference in Transmission Service,
Order No. 890, 72 FR 12266 (Mar. 15, 2007), FERC Stats. & Regs. ¶ 31,241, order on
reh’g, Order No. 890-A, 73 FR 2984 (Jan. 16, 2008), FERC Stats. & Regs. ¶ 31,261
(2007), order on reh’g and clarification, Order No. 890-B, 73 FR 39092 (July 8, 2008),
123 FERC ¶ 61,299 (2008), order on reh’g, Order No. 890-C, 74 FR 12540 (Mar. 25,
2009), 126 FERC ¶ 61,228 (2009), order on clarification, Order No. 890-D, 74 FR 61511
(Nov. 25, 2009), 129 FERC ¶ 61,126 (2009).
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industry. In addition, the Commission believes that these reforms address opportunities
for undue discrimination by public utility transmission providers.
2. The Commission acknowledges that significant work has been done in recent
years to enhance regional transmission planning processes. The Commission appreciates
the diversity of opinions expressed by commenters in response to the Notice of Proposed
Rulemaking3 as to whether, in light of the progress being made in many regions, further
reforms to transmission planning processes and cost allocation mechanisms are necessary
at this time. On balance, the Commission concludes that the reforms adopted herein are
necessary for more efficient and cost-effective regional transmission planning. As
discussed further below, the electric industry is currently facing the possibility of
substantial investment in future transmission facilities to meet the challenge of
maintaining reliable service at a reasonable cost. The Commission concludes that it is
appropriate to act now to ensure that its transmission planning processes and cost
allocation requirements are adequate to allow public utility transmission providers to
address these challenges more efficiently and cost-effectively. In reaching this
conclusion, the Commission has balanced competing interests of various segments of the
industry and designed a package of reforms that, in our view, will support the

3 Transmission Planning and Cost Allocation by Transmission Owning and
Operating Public Utilities, Notice of Proposed Rulemaking, FERC Stats. & Regs.
¶ 32,660 (2010) (Proposed Rule).