FERC approves long-awaited transmission planning and cost allocation reforms

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After years of debate on how to pay for sorely needed improvements to the country's transmission and distribution system, the Federal Energy Regulatory Commission (FERC) on Thursday okayed a rule it says removes some of the barriers. It promises developers of proposed transmission projects a faster approval process and requires that the costs of these projects should be allocated commensurate with benefits received.  

A FERC press release says that the reforms to its transmission planning and cost allocation requirements "benefit consumers by enhancing the grid’s ability to support wholesale power markets and ensuring transmission services are provided at just and reasonable rates."

“Our action today promotes efficient and cost-effective transmission planning and the fair allocation of costs for new transmission facilities," suggested FERC Chairman Jon Wellinghoff, who also said the changes will provide consumers with greater access to efficient, low-cost energy. Improvements to the nation's ailing transmission infrastructure are needed to ensure grid reliability and the transformation to an intelligent grid, which includes the integration of renewable energy.

In terms of transmission planning, the new rule establishes three requirements:

·         Each public utility transmission provider must participate in a regional transmission planning process that satisfies the transmission planning principles of Order No. 890 and produces a regional transmission plan.

·         Local and regional transmission planning processes must consider transmission needs driven by public policy requirements established by state or federal laws or regulations. Each public utility transmission provider must establish procedures to identify transmission needs driven by public policy requirements and evaluate proposed solutions to those transmission needs.

·         Public utility transmission providers in each pair of neighboring transmission planning regions must coordinate to determine if there are more efficient or cost-effective solutions to their mutual transmission needs.

For cost allocation, these are the requirements:

·         Each public utility transmission provider must participate in a regional transmission planning process that has a regional cost allocation method for new transmission facilities selected in the regional transmission plan for purposes of cost allocation. The method must satisfy six regional cost allocation principles.

·         Public utility transmission providers in neighboring transmission planning regions must have a common interregional cost allocation method for new interregional transmission facilities that the regions determine to be efficient or cost-effective. The method must satisfy six similar interregional cost allocation principles.

·         Participant-funding of new transmission facilities is permitted, but is not allowed as the regional or interregional cost allocation method.

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