FERC Proposes New Transmission Planning and Cost Allocation Reform and PJM Announces Interconnection Revamp
On April 21, 2022, the Federal Energy Regulatory Commission (“FERC”) approved a draft proposed rule (the “Proposed Rule”) regarding transmission planning and transmission cost allocation. According to a FERC news release issued that day, “[t]he proposed rule addresses the need for our nation’s energy infrastructure to be more resilient and reliable while also achieving cost savings for consumers.” The Proposed Rule is a component of a larger advanced notice of proposed rulemaking announced in July of 2021 (the “Advanced Notice”).
The transmission planning aspect of the Proposed Rule includes timeframe, identification of needs, evaluation of facility benefits, and increased transparency. Transmission providers would be required to identify transmission needs based on changes in resource mix and demand via long-term scenarios that meet the requirements set forth in the Proposed Rule. They would further be required to assess the benefits of regional transmission facilities to meet the identified needs over a minimum timeframe of 20 years from the in-service date of the given facilities. The Proposed Rule would also mandate the establishment of transparent and not unduly discriminatory criteria to select transmission facilities and further coordination between regional and local transmission planning to identify “right-size” replacement transmission facilities. Certain technologies such as dynamic line ratings and advanced power flow control devices would also need to be considered.
The regional transmission cost allocation part of the Proposed Rule emphasizes state involvement. Specifically, public utility transmission providers would be required to seek the agreement of the relevant state entities within the given transmission planning region with respect to the cost allocation methods that would apply to transmission facilities selected in the regional transmission plan. These providers would then revise their open access transmission tariffs to include those methods. Initial comments on the Proposed Rule are due 75 days after its publication in the Federal Register.
The Advanced Notice had also included a request for comments on interconnection queue reform (among other topics), but the Proposed Rule did not address this topic directly. Instead, FERC indicated that it would continue to evaluate the record and would address other possible inadequacies in subsequent proceedings. The need for changes to the interconnection queue process has recently been a major topic of discussion, including PJM’s proposal announced April 28, 2022 (“Interconnection Proposal”), to have a two year transition period to work through backlogged projects submitted before 2021. The Interconnection Proposal also includes plans to address projects on a first-ready, first served basis instead of first come, first served. PJM would further simplify its cost responsibility analysis of individual projects by combining projects within the same cycle. Projects that would not increase network upgrade needs or would not need facilities studies would also be expedited. PJM plans to file the Interconnection Proposal with FERC in May.