Building for the Future Through Electric Regional Transmission Planning and Cost Allocation and Generator Interconnection, Docket No. RM21-17-000
On April 21, 2022, the Federal Energy Regulatory Commission (FERC or Commission) issued a Notice of Proposed Rulemaking (NOPR) with a goal of improving regional electric transmission planning and cost allocation. FERC Issues Transmission NOPR Addressing Planning, Cost Allocation | Federal Energy Regulatory Commission
The proposed rules would require longer-term approaches to regional transmission planning that will facilitate the development of more efficient and cost-effective energy infrastructure to meet transmission needs driven by changes in the resource mix and demand. In the NOPR, FERC preliminarily found that requiring such long-term transmission planning is necessary for it to meet its legal obligation to ensure just and reasonable rates for transmission service. As FERC stated in the NOPR, “[a] robust, well-planned transmission system is foundational to ensuring an affordable, reliable supply of electricity.” In addition, the NOPR proposes a new approach for allocation of transmission costs in a transmission planning region that provides a larger role for state entities.
In this document, the Office of Public Participation explains why this NOPR is important and how you can participate and comment in the Commission’s rulemaking process.
Q. What is electricity transmission?
A. For electricity to get from power plants to users, it needs to travel through wires. “Transmission” and “distribution” refer to the different stages of carrying electricity through wires from power plants to a home or a business. Transmission is the “interstate highway” of electricity delivery and moves electricity over long distances, often on tall towers, so that it reaches areas of demand like cities and towns. In contrast, moving electricity around a city and town on familiar neighborhood utility poles (or sometimes through underground conduits) is referred to as the distribution of electricity. Below is a depiction of the difference between transmission and distribution.
One key difference between transmission and distribution is voltage, which can be described as the difference in “pressure” that pushes electricity from one point to another. The North American Electric Reliability Corporation (NERC), which FERC has designated as the entity responsible for establishing and enforcing reliability standards for the “bulk power system,” generally uses 100 kilovolts (kV, equivalent to 100,000 volts) as the minimum threshold for transmission lines, while distribution lines often operate at lower voltages. The bulk power system refers to the generating resources and high-voltage transmission equipment that make up the electric system networks and components that generate and deliver electricity to customers across North America.
Collectively, transmission and distribution lines make up the system that is commonly called “the grid.” Transmission and distribution are two separate stages or systems on the grid.
Q. What is FERC’s role in regulating electricity transmission and distribution?
A. In most parts of the United States, FERC is responsible for ensuring that the rates, terms, and conditions that apply to the transmission of electricity in interstate commerce are just, reasonable, and not unduly discriminatory or preferential. This responsibility is outlined in the Federal Power Act. In some areas of the country, however, such as Alaska, Hawaii, and much of Texas (which has a separate transmission grid), transmission of electricity is not in “interstate commerce” and thus for the most part does not come under FERC electric jurisdiction. In addition, FERC’s jurisdiction generally does not extend to the rates, terms, and conditions for the distribution of electricity, which is instead typically regulated by a state or local agency (such as a state public utility commission) with jurisdiction over retail electric rates (in other words, the rates individual consumers pay each month in their electricity bills).
Q. What is a Notice of Proposed Rulemaking or NOPR?
A. A NOPR is a document issued by FERC describing proposed changes to its current rules and regulations that are under consideration. In this case, the proposed rules relate to regional electric transmission planning and cost allocation. The NOPR contains the proposed rules (or proposed changes to existing rules) and detailed explanations of the reasons for the proposal.
A NOPR invites comments on the proposed rules and related issues that are discussed in the document, but it is not a final determination of whether FERC will ultimately adopt any of those proposed rules. FERC will consider comments prior to making any decision on what, if any, of the changes it proposed in the NOPR are finalized through a subsequent publication of a final rule.
Q. Can the public comment on a NOPR? What are the dates?
A. Yes, the Commission encourages commenters to provide their views on the proposed rules and associated issues discussed in the NOPR. This could include, for example, the impact the proposed rules might have on individuals and improvements that will support development of more efficient and cost-effective transmission facilities. In this case, comments are due on August 17, 2022, with reply comments due September 19, 2022. Reply comments give commenters a chance to respond to each other, including the opportunity to emphasize, refute, or otherwise address the comments of others. If you have questions regarding the NOPR process or if you need assistance with filing comments or accessing the record, please contact the OPP by e-mail at OPP@ferc.gov or by phone at (202)502-6595.
Q. What, specifically, is this NOPR seeking to address?
A. Much of the NOPR is focused on exploring possible ways to conduct more effective and longer-term regional transmission planning. Regional transmission planning is the process that certain FERC-regulated entities (called “public utility transmission providers”) use to identify transmission needs and the transmission facilities that can meet those needs in an efficient and cost-effective manner.
FERC is seeking to address through the proposed rules in the NOPR some perceived shortcomings in current regional transmission planning processes. In particular, the NOPR seeks to address concerns that current transmission planning approaches in use around the country may not include a sufficiently long-term assessment of transmission needs. In other words, public utility transmission providers may not be looking far enough into the future when conducting regional transmission planning. Transmission needs are expected to grow very rapidly in response to anticipated changes in the power generation resource mix and demand. Specifically, older generation resources are retiring in many parts of the country, and new resources, including energy storage and renewable resources, are increasingly expected to seek to connect with the transmission grid in the future due to a variety of factors. In addition, there may be a shift toward greater electrification in buildings and transportation (electric cars, for example). Transmission planning will need to keep pace, and FERC is proposing that public utility transmission providers develop long-term regional transmission plans that look at least 20 years into the future and that those plans be updated every three years. Under the proposed rules, public utility transmission providers would also have to incorporate multiple scenarios into their long-term regional transmission plans. Different scenarios may use different assumptions, which may change what transmission projects will be identified in the regional transmission planning process in terms of size, location, and timeframe.
The NOPR also proposes rules with respect to cost allocation methods for transmission facilities that are identified through long-term regional transmission planning. Essentially, the cost allocation method determines which entities (and thus whose customers) are assigned the costs of – and will ultimately pay for – new regional transmission facilities if they are constructed and placed into service. The Commission’s existing rules require that only those that benefit from a transmission facility (or set of transmission facilities) be assigned costs of the transmission facility. To better allocate the costs of regional transmission facilities, the NOPR proposes to require that public utility transmission providers consider a broader set of transmission benefits when identifying efficient or cost-effective transmission facilities in the regional transmission planning process. The NOPR also proposes to require that public utility transmission providers seek the agreement of relevant state entities (such as a state’s energy department or public utility commission) regarding the cost allocation for transmission facilities selected as part of long-term regional transmission planning. More specifically, the NOPR proposes state entity involvement in the process to develop cost allocation methods that would either be negotiated in advance and applied to all or some set of transmission facilities that are identified as part of long-term regional transmission planning, or be negotiated on a case-by-case basis after transmission facilities are identified, or a combination of these methods.
Q. Why does the Commission think these proposed changes in transmission planning requirements are important?
A. The NOPR proposes rules to address concerns that current regional transmission planning may be resulting in piecemeal and inefficient development of new regional transmission facilities. The Commission is considering whether more long-term transmission planning is needed to ensure that the transmission system will develop efficiently and cost-effectively, particularly given the anticipated changes in the generation resource mix and in demand. Absent reform to require potentially more and better regional transmission planning, regional transmission planning processes may not properly identify transmission needs and the best transmission facilities to meet those needs, which could in turn increase costs and potentially render FERC-jurisdictional transmission rates unjust and unreasonable.
Per the NOPR, more efficient and cost-effective long-term regional transmission planning will also require a broad look at the potential benefits of transmission facilities and regional cost allocation approaches that reflect state input. Regional agreements on cost allocation informed by a broad view of transmission facility benefits can also lead to more efficient or cost-effective development of transmission facilities.
Q. Why should I consider this NOPR to be important to me? Who pays for electric transmission rates?
A. Each electricity customer relies, to some extent, on transmission service over regional transmission facilities to ensure that electricity can reach the distribution system and ultimately be delivered to each customer’s home or business. Therefore, a portion of each customer’s electricity rates reflects some costs for regional transmission facilities. Some electric bills have a specific line item for “transmission charges,” but many do not. Instead, part of the transmission rates approved by FERC for transmission service that a customer’s electric supplier uses are likely included in other portions of the bill, such as energy usage charges.
The NOPR is important to the public because it seeks to ensure more cost-effective transmission development in the long-term through better transmission planning. Such planning would also help to address transmission needs driven by changes in the resource mix and in demand, including those changes required or necessitated by laws, policies, and utility commitments.
Q. What public participation opportunities could be created through the NOPR?
A. In the short run, the public participation opportunities are the comment periods referred to above (comments due August 17, 2022 and reply comments due September 19, 2022). Since these are proposed rules, none of the revised transmission planning or cost allocation processes addressed in the NOPR have yet been approved. FERC will consider filed comments before taking any final action, so it is important for the public to weigh in with their ideas, areas of emphasis, concerns, support, expertise, or other comments.
If the rules described in the NOPR are ultimately adopted, there may be opportunities for the public to participate in the revised regional transmission planning processes through comments or attendance at meetings. Such public participation opportunities would likely vary by region, but the Commission’s existing transmission planning rules require that public utility transmission providers conduct their transmission planning in an open and transparent manner, with opportunities for any interested party, including members of the public, to participate in that process, including through open meetings that are generally listed on public utility transmission provider’s websites.
To facilitate understanding and discussion, this document simplifies and summarizes some of the reforms proposed in the NOPR issued on April 21, 2022 in Docket No. RM21-17-000. Please read the proposed reforms in the full NOPR itself for specific details.