FERC defended Order 1920 against appeals in a brief filed Jan. 5, saying the transmission planning and cost allocation rule is firmly within its authority and builds on previous pathbreaking rulemakings like Orders 888 and 1000.

“The rule responds to an extensively documented, pervasive problem left unsolved by prior efforts: In recent years, FERC-jurisdictional transmission utilities have too often pursued inefficient and unnecessarily costly expansions to the nation’s electric grid that are short-term and parochial,” the commission said.

The 4th U.S. Circuit Court of Appeals is considering challenges to the rule that were filed by different groups including states and transmission owners who argued the commission went too far and other parties who argued it did not go far enough. (See Parties Argue for Appeal of Order 1920’s Tx Reforms in First Set of Briefs.)

“While these challenges variously claim that the rule did too much, too little or simply the wrong thing, the rule itself answered all these concerns,” FERC said.

Despite the previous round of transmission planning changes in Order 1000, the past decade has seen utilities focus on “piecemeal” grid-expansion projects focused on the immediate needs of their own service territories, the commission said. In the rulemaking process that led to Order 1920, FERC determined that such a “disjointed approach to transmission planning is woefully inadequate” to meet the grid’s rapidly evolving needs.

Even where regional needs were being met, as much as 80% of investment was concentrated in resolving local needs, FERC said, citing figures from MISO and PJM. All that meant customers were likely paying more than needed, forgoing benefits that outweigh their costs, or some combination, which could render rates unjust and unreasonable.

“Energy-hungry data centers and electrification (think gasoline to electric cars) have proliferated in recent years and are driving accelerating increases in energy demand, whose overall growth will likely necessitate scores of new power plants and billions of dollars in new investments by the year 2050,” FERC said. “For their part, states have directed their utilities to procure power for their residents from particular sources, which could be within the state or farther away and require transmission lines to transport that power to consumers. And extreme weather events have — and will continue to — stress an aging electric grid.”

If states are mandating the construction of new nuclear facilities, new gas plants or new “zero-emitting sources,” then it is not just and reasonable to ignore those trends in transmission planning, the commission argued. FERC-jurisdictional utilities have to ensure that power flows to market at a reasonable cost, and that requires understanding the drivers of future transmission needs.

The rule requires transmission providers to assess several factors influencing the grid’s needs over a long-term, two-decade time frame, and in doing so, it reacts to, but does not dictate, government and utility policies and market factors that impact regional transmission, FERC said. Planners need to assess proposed facilities against a set of reliability and economic benefits, which ensures just and reasonable costs for consumers and a reliable grid, it said.

Order 1920 directs costs to be assigned in a manner roughly commensurate with benefits. The rule requires transmission planners to consult with them on cost allocation and to file any competing cost proposals developed by a region’s state regulators for FERC’s consideration on compliance.

The requirement to file any state cost allocation proposal faced arguments that it infringed on utilities’ First Amendment rights by forcing them to file proposals they do not agree with. But FERC argued that the filing requirement does not constitute expressive activity warranting First Amendment protection.

“The commission adopted the inclusion and consultation requirements to ensure that it has sufficient information to determine a ‘just and reasonable’ rate under the Federal Power Act,” FERC said. “Such regulatory compliance requirements do not implicate protected speech.”

FERC and other federal agencies can direct disclosures from companies when they fall under their jurisdiction. The commission noted the utility challengers did not extend their First Amendment argument to a requirement that firms publicly disclose the transmission links they expect to replace in the next decade, instead arguing that requirement is anticompetitive.

The challenged provisions require nothing more than utilities to attach one or more files to their mandatory compliance filings with Order 1920, FERC said. “Transmission providers remain free to advocate for their preferred cost-allocation methods in both their FERC filings and through non-regulatory means.”

Cooperatives have argued that they should get some of the same rights because they set retail rates, but they lack the ability to site and permit transmission infrastructure. But FERC gave state regulatory commissions a special role in the hope that their buy-in might motivate states to approve transmission lines from the regional plans, it said.

Some states appealed Order 1920 on the grounds that it infringes on their power to regulate electric generation, but FERC argued that it steers clear of regulating any state decisions on generation.

“That the rule accounts for, or might even impact, state generation policies does not divest FERC of its exclusive authority over interstate transmission and practices that directly affect rates for such transmission,” the commission said. “Put another way, that FERC’s actions taken within its jurisdictional field might affect matters within the states’ own is of no legal consequence.”

States opposing the rule also argued that Order 1920 violates the “major questions doctrine,” but FERC pushed back by saying Congress granted clear authority over interstate transmission and that the Supreme Court has repeatedly recognized its broad authority in that area.

The states in opposition to the rule argue it will subsidize certain states’ generation policies at the expense of others.

“But the rule’s transmission planning provisions — which require only that transmission providers consider how states’ policies might affect transmission needs — include no subsidies at all,” FERC said. “Nor do they otherwise preference some states’ generation choices; the rule is resource neutral.”