On May 13, 2024, at a special transmission reform meeting, the Federal Energy Regulatory Commission (FERC or Commission) issued Order No. 1920 “Building for the Future Through Electric Regional Transmission Planning and Cost Allocation” (Final Rule).[1] The Final Rule builds upon Order No. 888, Order No. 890, and Order No. 1000, which developed the requirements for regional transmission planning and cost allocation processes today. The reforms adopted in Order No. 1920 require transmission providers in each transmission planning region to participate in a regional long-term transmission planning process, to measure and use at least seven specified benefits to evaluate transmission facilities, to calculate the benefits of transmission facilities over a minimum 20-year time horizon, to include in their Open Access Transmission Tariffs (OATT) an evaluation process with selection criteria to address long-term transmission needs, to consider specific alternative transmission technologies in evaluations, and to file one or more ex ante long-term regional transmission cost allocation methods. The Commission declined to adopt proposals from the Notice of Proposed Rulemaking (NOPR) regarding eligibility for the construction work in progress (CWIP) incentive and allowances for the federal right of first refusal (ROFR). Transmission providers are required to submit compliance filings within ten months of the effective date of the Final Rule, for most provisions. Our summary below highlights some of the key requirements in this extensive order.
Long-Term Planning Processes
Order No. 1920 requires transmission providers in transmission planning regions to participate in long-term regional transmission planning to identify transmission facilities that meet long-term transmission needs, measure the benefits of those transmission facilities, and evaluate those transmission facilities for potential selection in the regional transmission plan for purposes of cost allocation. The Final Rule defines a long-term regional transmission facility as a regional transmission facility, as defined in Order No. 1000, that is identified in the long-term regional transmission planning process to address long-term transmission needs. Order No. 1920 extends the existing Order Nos. 890 and 1000 transmission planning principles of: (1) coordination; (2) openness; (3) transparency; (4) information exchange; (5) comparability; and (6) dispute resolution to long-term regional planning.
The Commission directs transmission providers to develop long-term planning scenarios and provides requirements for these scenarios related to: the planning horizon, frequency of long-term scenario revisions, specific categories of factors that must be considered, the number and types of long-term scenarios, sensitivities for high-impact low frequency events, specificity of data inputs, and identification of geographic zones. The Commission requires transmission providers to reassess and revise their long-term scenarios at least once every five years using at least three scenarios. Consistent with Order No. 890, Order No. 1920 requires transmission providers to make the methodology, criteria, assumptions, and data used to develop each long-term scenario transparent.
Evaluation of Benefits of Regional Transmission Planning
The Commission requires transmission providers to utilize seven benefits to identify long-term transmission needs. These benefits are: (1) avoided or deferred reliability transmission facilities and aging transmission infrastructure replacement, (2) 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. The Commission declined to adopt the following benefits that were also proposed in the NOPR: mitigation of weather and load uncertainty, deferred generation capacity investments, access to lower cost generation, increased competition, and increased market liquidity. According to the Commission, the evaluation of projects that result in these benefits may indicate a long-term transmission need. The Final Rule requires the utilization of a minimum 20-year horizon starting from the estimated in-service date of the transmission facilities for the evaluation and selection of long-term regional transmission facilities in the regional transmission plan.
Evaluation and Selection Process
The Final Rule requires transmission providers in each transmission planning region to include in their OATTs an evaluation process, including selection criteria, that they will use to identify and evaluate long-term regional transmission facilities for potential selection to address long-term transmission needs. To meet the requirements of the Final Rule, transmission providers in each transmission planning region must establish a long-term regional transmission planning evaluation process that: (1) identifies long-term regional transmission facilities that address long-term transmission needs; (2) measures the benefits of the identified long-term regional transmission facilities consistent with the Final Rule requirements; and (3) designates a point in the evaluation process at which transmission providers will determine whether to select or not select identified long-term regional transmission facilities in the regional transmission plan for purposes of cost allocation.
The Final Rule also requires transmission providers to evaluate regional transmission facilities that will address identified interconnection-related transmission needs associated with interconnection-related network upgrades originally identified through the generator interconnection process. This requirement applies to existing Order No. 1000 regional transmission planning and cost allocation processes, rather than long-term regional transmission planning. The Final Rule also requires transmission providers to revise existing interregional transmission coordination processes to reflect the new long-term regional transmission planning reforms.
Cost Allocation
Order No. 1920 requires transmission providers in each transmission planning region to file one or more ex ante long-term regional transmission cost allocation methods to allocate the costs of long-term regional transmission facilities that are selected. The Commission modified the NOPR proposal to require rather than permit the adoption of a cost allocation methodology. Transmission providers must open a six-month engagement period with relevant state entities for purposes of developing cost-allocation provisions. The Final Rule permits, but does not require, transmission providers to adopt a state agreement process. Under a state agreement process, relevant state entities voluntarily agree to a cost allocation method for specific long-term regional transmission facilities within six months after their selection in a regional transmission process. However, the state agreement process cannot be the only cost allocation method for long-term transmission.
Of notable dispute in adoption of the Final Rule, the Commission requires that, if a state agreement process fails to result in a cost allocation method agreed to by relevant state entities and any other authorized entities, or if the Commission finds that the cost allocation method that results from a state agreement process is unjust, unreasonable, or unduly discriminatory or preferential, then the relevant long-term regional transmission cost allocation method on file would apply as a backstop. Commissioner Christie strongly opposed this backstop cost allocation method in the open meeting adopting the Final Rule, and voted against adoption of the Final Rule in large part due to this requirement as discussed in his dissent.
The Final Rule also requires transmission providers to adopt a process to provide relevant state entities and interconnection customers the opportunity to voluntarily fund the cost of, or a portion of the cost of, long-term regional transmission facilities that otherwise would not meet the transmission providers’ selection criteria.
Advanced Transmission Technologies
The Final Rule requires transmission providers to consider specific alternative transmission technologies, sometimes also referred to as grid-enhancing technologies, in both long-term regional transmission planning and existing Order No. 1000 regional transmission planning and cost allocation processes. The Commission identified dynamic line ratings, advanced power flow control devices, advanced conductors, and transmission switching as the alternative transmission technologies that must be evaluated in these processes. The Final Rule requires analysis of whether incorporation of any of the identified technologies would be more efficient or cost-effective than selecting new regional transmission facilities or performing upgrades to existing transmission facilities that do not incorporate these technologies. The analysis must use the same process of evaluation of transmission facilities required by Order No. 1920 for long-term regional planning and Order No. 1000 for regional transmission planning process. Notably, the Final Rule requires consideration of alternative transmission technologies, but does not mandate selection or deployment of any particular technology for specific transmission needs.
Significant NOPR Proposals Not Adopted in the Final Rule
In the NOPR, the Commission proposed to use the discretion afforded by Federal Power Act section 309 to amend Order No. 1000’s findings to permit the exercise of the federal ROFR for select transmission facilities, conditioned on the incumbent transmission provider with the federal ROFR establishing joint ownership of the transmission facilities. The Final Rule does not finalize the NOPR proposal, and the Commission states that it will continue to consider the NOPR proposal and potential federal ROFR issues in other proceedings.
The Final Rule similarly does not adopt the proposal in the NOPR to limit the availability of the CWIP incentive, described below, for long-term regional transmission facilities. The CWIP incentive allows transmission providers to recover 100% of CWIP costs in rate base prior to the commercial operation of transmission facilities, which supports financing transmission development. The Commission stated that it will instead continue to consider transmission incentive issues holistically in other proceedings.
Implementation and Timing
The Final Rule requires transmission providers to submit compliance filings to revise their OATTs and other documents subject to the Commission’s jurisdiction to demonstrate compliance with all requirements (other than the interregional transmission coordination requirements) within ten months of the effective date of the Final Rule. Transmission providers are required to submit compliance filings for the interregional transmission coordination requirements within twelve months of the effective date of the Final Rule. The effective date of the Final Rule is 60 days after publication in the Federal Register.
[1] Bldg. for the Future Through Elec. Reg’l Transmission Planning & Cost Allocation, 187 FERC ¶ 61,068 (May 13, 2024) (Order No. 1920).