All indications are that FERC is working to complete its transmission planning and cost allocation rulemaking in the next few months, with public statements from commissioners saying it’s a priority and those familiar with the agency placing bets on which month’s open meeting a final rule will be announced (RM21-17). 

With three nominees awaiting confirmation for the two open seats and that of Commissioner Allison Clements, whose term expires in June, sources said in recent interviews it might be best for FERC to act on the Notice of Proposed Rulemaking (NOPR) before its composition changes. (See Phillips: FERC to Issue Transmission Rule in ‘Very Near Future’.) 

“I think Commissioner Clements very much wants to be part of this,” former FERC Chair Jon Wellinghoff said. “So, I’m sure she’s doing everything she can to work with staff and work with the other two commissioners, to move this forward as quickly as possible.” 

The rulemaking could face a delay if it is not completed before the composition of the commission changes, said WIRES Executive Director Larry Gasteiger, a former FERC staffer. 

“This is an extremely complicated rulemaking effort that the commission is doing,” Gasteiger said. “And just for [the new members] to get up to speed on it, in order to knowledgeably vote on it, is inevitably going to take a couple of months minimum. That will be added time on the timeline for getting the rule out.” 

Another issue is uncertainty around November’s elections, with the House, Senate and White House up for grabs.  

Republicans could use the Congressional Review Act (CRA) to overturn a rule that is filed late in the Biden administration, said former FERC Chair Neil Chatterjee, now a senior adviser at law firm Hogan Lovells. Rejecting a rule requires votes of disapproval by both the House and Senate but can be blocked by the president unless his veto is overridden.  

“I don’t know if it’s constituted as a major rule, but I think the White House and FERC don’t want to take that risk,” Chatterjee said. “And I think that, certainly, there are steps the commission could take, if you had Republican majority control, that would try to change course on some of these rulemakings.” 

The commission currently has two Democrats, Clements and Chair Willie Phillips, and one Republican, Mark Christie. The three candidates nominated by President Biden last month would give Democrats a 3-2 edge. But if Donald Trump retakes the White House, he could replace Phillips, whose term expires in 2026, with a Republican. (See Biden Names 3 Nominees to Give FERC 5 Members Again.)  

Negotiations on the 11th Floor

FERC observers expect the three commissioners’ offices are exchanging ideas on what should be in the final rule — and that can take some time. (See related story, Groups Urge Inclusion of Cost Containment in FERC Tx Planning Rule.) 

Christina Hayes, executive director of Americans for a Clean Energy Grid, was a FERC staffer in 2011, the last time it made major changes to its transmission planning and cost allocation rules with Order 1000. 

“There was something like 40 hours where the commissioners’ advisers were talking and negotiating, before they were able to issue Order 1000,” Hayes said. “That’s something like two months of negotiation among commissioners’ offices on the 11th floor. So, I imagine they’re probably well into that process at this point.” 

The transmission rule came out of an advanced NOPR issued nearly three years ago, so the commissioners have been talking about the issues for some time, said Philip Moeller, executive vice president of regulatory affairs for the Edison Electric Institute. 

“Each commissioner is going to have their own set of priorities,” said Moeller, who was on FERC when it passed Order 1000. “And those are probably going to be negotiated and probably have been negotiated to some extent for at least the last couple of years.” 

To the extent that commissioners support the rule’s overall thrust — that the grid needs to expand to meet future needs —they will be working on compromises because the more consensus there is, the more robust the rule will be in the face of inevitable litigation, Moeller added. 

Impact of Dissents

In 2011, Moeller dissented on Order 745 over its compensation method for demand response (DR). Litigation over the rule wound up at the Supreme Court, which ruled against appeals that claimed FERC had overstepped its jurisdiction. (See Supreme Court Upholds FERC Jurisdiction over DR.) 

“It was kind of fun to have my dissent mentioned there during arguments,” Moeller said. “But I think ultimately the problem with that litigation, specific to 745, was that the main attack was on the jurisdiction. And that was really never an issue for me. For me, it was the level of compensation and how it was done. And unfortunately, the court focused solely on the jurisdiction and ruled that FERC had it.” 

The more complex issue of compensation — Moeller would have preferred a somewhat smaller payment for DR in energy markets — was largely ignored by the courts because litigants focused on jurisdictional questions over how DR is treated in state-regulated retail markets and federally regulated wholesale markets. 

Wellinghoff was the driving force behind Order 745 as chair of FERC at the time. While he did not convince Moeller, he did get a Republican vote from then-Commissioner Marc Spitzer. 

“To the extent those dissents are well written, and those dissents have legitimate reasons for objecting to portions of the order, they act as fodder for the appellant,” Wellinghoff said. “Those are things that they use as arguments in court, so they can be compelling in that way.” 

While partial dissents like Moeller’s on Order 745 are less of a threat to a rulemaking than a full dissent, Wellinghoff said judges will rule based on the legal arguments before them rather than counting votes of the commissioners. 

Cost Allocation

Ultimately, the public will see the outcome of all the behind-the-scenes debates when FERC publishes a final rule. When asked what that should look like, Grid Strategies President Rob Gramlich (another former FERC staffer) pointed to a letter Senate Majority Leader Chuck Schumer (D-N.Y.) wrote to the commission last summer. Schumer said the commission should prescribe the benefits that transmission planners must consider to ensure cost-effective transmission is built and costs are properly allocated. 

“Figuring out how they sort out cost allocation will be important — just to make sure that they stick to the beneficiary-pays approach, which is what the courts have said they need to do, and they don’t end up sticking too much of the costs on any one party or group,” Gramlich said. “And then making sure there’s a process to resolve disagreements.” 

FERC likely will give states chances to come to an agreement on cost allocation before the commission considers stepping in, Gramlich said.  

Asked about Clements’ thoughts on the NOPR, her office provided RTO Insider her response to Schumer. She said the commission aimed to develop a “comprehensive and durable approach” that leads to building the kind of infrastructure that has been underdeveloped in recent years. 

“I agree that cost allocation rules should endeavor to involve states, while at the same time creating incentives for collaboration and against free ridership,” Clements wrote. 

Christie has long argued against states paying for the policies of others. In a recent dissent, he argued that states generally should be held above other “stakeholders,” saying most of them are “rent-seeking special interests.” (See FERC Rejects Complaints from IMM, W. Va. PSC Arguing for Access to PJM Liaison Committee.) 

Figuring out how to balance competing policies — with some states seeking rapid progress toward net-zero emissions by midcentury and others wanting nothing to do with it — is a key issue commissioners are wrestling with, Moeller said. 

“If you see what New Jersey is doing with their offshore wind [transmission], they’re willing to pay for it themselves,” Moeller said. “So, it’s certainly doable under the status quo.” 

Chatterjee said the commission is likely to encourage states to take the lead in determining how public policy project costs are regionally allocated. “The fight will be over what is the dispute resolution mechanism,” he said. 

That is where Christie might wind up issuing at least a partial dissent if Chair Phillips can’t bridge any divides among the three members, he added. It will be hard to get states like Chatterjee’s home of Kentucky that have little interest in the energy transition to agree on a transmission plan with states that actively support the transition, he said. 

“I think for a state like Kentucky, the view would be we didn’t ask for these benefits, so we shouldn’t have to pay for them,” Chatterjee said. “And just because FERC is defining these benefits, that doesn’t mean that our ratepayers should bear the costs.” 

Will a Federal ROFR be Reinstated?

Another point of contention as the transmission rule nears the finish line is what to do about competition. Both Moeller at EEI and Gasteiger at WIRES would like to see the federal right of first refusal (ROFR) at least partly reinstated; it’s one of EEI’s priorities. 

WIRES recently released a report based on examples of 29 major projects around the country, arguing that collaboration is key to building out the transmission grid. The competition pushed by Order 1000 has served to discourage that collaboration, WIRES contends. 

“If you’re competing against your neighbor for the ability or the right to build a project, it doesn’t create the same incentives to share information or to work with them on trying to get a project built,” Gasteiger said. 

Wellinghoff, a champion of transmission competition in Order 1000, argued that pulling back on it now would reward bad behavior by incumbents.  

Order 1000 required transmission providers to remove from their FERC tariffs ROFRs on projects selected in a regional transmission plan for cost allocation. It did not affect the right of incumbent transmission providers to upgrade their local facilities. 

“There just needs to be, perhaps, more oversight,” Wellinghoff said. “There needs to be more consideration that perhaps even these smaller lines need to be competitive. I’m not sure that the exemption that we put in the original Order 1000 is appropriate. I believe that these lines can be bid competitively and developed and constructed competitively and we would come out better for it.”