PJM’s transmission planning process may exclude consideration of non-incumbent proposals on projects subject to state rights of first refusal (ROFR), the Federal Energy Regulatory Commission ruled last week.

FERC had previously required PJM to remove language designating an incumbent transmission owner as the “Designated Entity” to build a transmission project, “when required by state law, regulation or administrative agency order with regard to enhancements or expansions or portions of such enhancements or expansions located within the state,” and when a transmission project is “proposed to be located on a Transmission Owner’s existing right of way and the project would alter the Transmission Owner’s use and control of its existing right of way under state law.”

But the commission ruled 3-1 Thursday that its previous position would require planners to evaluate nonincumbent proposals that had no chance of getting built because of state rules assigning them to incumbent utilities. The commission said it was persuaded by the arguments of North Carolina Utilities Commission, the Indiana Utility Regulatory Commission and others that the language merely acknowledged state jurisdiction and did not create a federal right of first refusal.

The commission made the change in Order 1000 compliance rulings for PJM (ER13-198, ER13-195, ER13-90), MISO and South Carolina Electric & Gas Co. (SCE&G).

Norris Dissents

In a dissent, Commissioner John Norris said the reversal undercuts Order 1000’s requirement eliminating federal rights of first refusal from FERC-jurisdictional tariffs or agreements.

Norris cited Order 1000-A, in which the commission said “[I]t would be an impermissible barrier to entry to require, as part of the qualification criteria, that a transmission developer demonstrate that it either has, or can obtain, state approvals necessary … to be eligible to propose a transmission facility.

“By excluding proposals from non-incumbents when the proposals are being evaluated based on a consideration of state law, we are effectively excluding non-incumbents from participating in the transmission planning process,” Norris wrote. “This is a fundamental change in direction that I cannot support. I simply cannot reconcile the language in the final rule with the approach taken in today’s orders.

“Clearly, incumbents already are well-positioned through their knowledge of the system, including issues related to reliability and congestion,” he continued. “Today’s orders give incumbents a further advantage over non-incumbents by limiting non-incumbents’ participation in the planning process.

“In my view, allowing non-incumbents to participate in the regional transmission planning process without consideration of potential state law restrictions does not infringe upon the state’s authority,” Norris said. “Using this language to exclude non-incumbents denies states and other stakeholders the opportunity to have all essential information regarding the more cost-effective and efficient transmission solutions.”

‘Coercive Pressure’

The Indiana Commission said that allowing a transmission provider to select a transmission developer that is ineligible to construct a transmission facility under state law would lead to increased litigation and “coercive pressure on state commissions.”

The North Carolina Utility Commission and its public staff agencies said the commission was acting inconsistently in requiring that PJM consider state renewable portfolio standards in its transmission planning process while insisting it ignore state rules restricting transmission development to state franchised utilities.

Other Challenges Rejected

While the commission reversed its position on acknowledging state rules, it largely rejected challenges to its previous orders regarding PJM.

It did, however, order PJM to make some additional Tariff changes and compliance filings, including one describing how local transmission owners incorporate public policy requirements into their transmission plans.

It also ordered PJM Transmission Owners to submit a compliance filing ensuring comparable treatment of AC and DC facilities.