The Federal Energy Regulatory Commission approved a draft proposed rule April 21 addressing two of the biggest obstacles to U.S. electric grid expansion: long-range electric transmission planning and cost allocation.

The proposed rule (RM21-17) is part of a broader advanced notice of proposed rulemaking launched in July 2021 that sought comment on hundreds of questions related to FERC's transmission planning, cost allocation and generator interconnection policies.

All three issues are central to the nation's struggle to site, pay for and build enough power lines to accommodate the ongoing transition to a cleaner energy mix increasingly dominated by variable renewable energy resources. Researchers have estimated the U.S. will need to double or even triple its transmission capacity to completely decarbonize its economy by midcentury.

While FERC's proposed rule did not address interconnection policies, Chairman Richard Glick expressed hope that the five-member commission will still tackle that issue, along with interregional transmission planning and transmission incentives, in the months ahead.

"I wouldn't at all take the fact that we did a [notice of proposed rulemaking] today on transmission planning and cost allocation to suggest there wasn't enough support for any of those other issues," Glick told reporters after the agency's monthly open meeting.

The April 21 notice of proposed rulemaking, or NOPR, will advance as FERC continues to meet with a 10-member task force of state utility regulators formed in connection with the agency's broader transmission rulemaking.

Proposal focuses on regional transmission planning, cost allocation

The NOPR would build on the commission's last major transmission planning rule, Order 1000, by requiring regional grid operators and public utility transmission providers throughout the country to plan at least 20 years ahead of the estimated in-service date of new transmission facilities. The plans would need to include multiple long-term scenarios that account for various federal and state policies as well as market trends, expected changes in electricity generation and demand, and extreme weather.

FERC Commissioner Mark Christie, who previously was chairman of the Virginia State Corporation Commission, singled out the elevated role the proposal would create for state regulators. Under the proposal, transmission providers in each U.S. planning region would need to seek agreement among relevant state entities regarding the cost allocation methodology used in long-range transmission planning.

"What this NOPR does, for the first time, is it puts states formally at the heart of the planning for these types of projects," Christie said. "That's extremely important."

Christie highlighted a proposed provision that would prohibit transmission developers from taking advantage of a construction-work-in-progress incentive that allows developers to start recovering costs "before a single ounce of steel is put in the ground."

For long-range transmission projects, preconstruction and pre-service costs would instead be booked under an "allowance for funds used during construction" utility accounting mechanism in which those costs are recovered after a project is placed in service.

FERC's proposal would also partially amend Order 1000's competitive bidding provisions by allowing incumbent transmission owners to exercise a federal right of first refusal for long-range projects selected for cost allocation in cases where incumbents establish joint ownership of those facilities.

Glick noted on the press call that the NOPR would not limit joint ownership to agreements between investor-owned utilities and competitive transmission developers. Rural electric cooperatives and municipal utilities could participate in joint ownership as well.

Commissioner James Danly, who wrote a lone dissent to the proposal, said it "is designed to encourage the build-out of transmission specifically for the purpose of encouraging the development of certain types of resources."

"It does so by socializing costs through putting public policy choices — that is state and, if you can believe it, even local public policy choices — front and center in the transmission planning process," Danly said during the meeting.

Commissioner Allison Clements pushed back on that reasoning, citing measures in the proposal designed to control costs and improve transparency.

"It is not a plan to foist the cost of one state's policies onto another. It is also not a policy action to advance renewable energy interests," Clements said. "To so frame the proposed long-term transmission planning reforms, or to portray transmission planning as a zero-sum game, misses the point."

In addition to cost control measures, the NOPR would require transmission providers to consider grid-enhancing technologies such as dynamic line ratings and power flow converters. Those technologies can squeeze more capacity out of existing power lines, potentially avoiding the need for far costlier new transmission facilities altogether.

To further address cost concerns, FERC announced it will hold an Oct. 6 technical conference on the issue of transmission management and cost allocation.

The full text of the proposal was not immediately available April 21.

Next steps

On the post-meeting press call, Glick said the commission could still act on interconnection reforms "in the very near future."

"As we know, the queues are getting increasingly clogged across the country, and that's inhibiting the development of new generation," Glick said.

For example, PJM Interconnection LLC stakeholders recently threw overwhelming support behind a two-year pause in processing interconnection requests from new generators to help the 13-state grid operator clear a backlog of about 2,500 proposed projects.

"I think the reason why you've seen the commission break it up this way, in part, is because the commission is well aware of ongoing efforts," Jeff Dennis, general counsel for the clean energy trade group Advanced Energy Economy, said in an interview. "That nearly completed proposal in PJM has remarkably broad stakeholder support, so it's understandable that the commission would not want to issue something that might inadvertently disrupt that kind of progress."

Various reform efforts already underway at regional grid operators such as the Southwest Power Pool and Midcontinent ISO could also help inform a generic proposed rule on interconnection, Dennis added.

Comments on FERC's April 21 notice of proposed rulemaking are due 75 days after its publication in the Federal Register.

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