Docket No. RM21-17-001
Today’s order makes major changes to Order No. 1920. I am deeply grateful to my colleagues for their willingness to negotiate in good faith and ultimately to agree to these changes.
Order No. 1920 was based on purported authority derived from section 206 of the Federal Power Act (FPA).[1] Section 206 essentially requires that two prongs must be satisfied: First, the complainant, here the Commission, bears the burden to prove that existing rates – in this case, the transmission planning procedures of every transmission provider in the country, both Regional Transmission Organization (RTO)/Independent System Operator (ISO) and non-RTO/ISO – are unjust, unreasonable and/or unduly discriminatory or preferential. If the first prong (burden of proof) is met, in the second prong, the Commission must establish a just and reasonable replacement rate.[2] I concur with this order solely as to specific changes made in Order No. 1920-A to the replacement rate established in Order No. 1920.[3]
In my dissent to Order No. 1920, I made it clear that one of my major areas of disagreement was that it failed to fulfill the promise of a necessary and appropriate role for the states that was established in the Notice of Proposed Rulemaking (NOPR) that preceded Order No. 1920.[4] This promised state role was the primary reason I voted for the NOPR. As I have said repeatedly, state utility regulators are the first line of defense for their consumers and must have the authority to protect their consumers from unwarranted or excessive transmission costs, which are the fastest rising part of most consumers’ monthly power bills and are reaching ever more burdensome levels.[5] The changes made today in Order No. 1920-A to the replacement rate set by Order No. 1920 go a long way towards restoring the state role to what the NOPR promised, and I am pleased to support these changes. Among them are the following positive and fundamental changes:
Submission of State-Agreed Alternative. In contrast to Order No. 1920, Order No. 1920-A requires that, if the states in a region agree to a cost allocation proposal, the transmission provider must include that agreement in its compliance filing. Furthermore, the Commission can choose the state agreement over the transmission provider’s proposal.[6]
Pre-Amendment State Consultation. In addition, states must be consulted before the transmission provider considers any future changes to the cost allocation method or state agreement processes or if the states seek to amend the cost allocation method or state agreement processes.[7]
Cost Allocation Flexibility. In contrast to Order No. 1920, states are given far more flexibility to develop and agree to cost allocation processes and ex ante formulae that will suit their needs in diverse multistate regions such as PJM Interconnection, L.L.C. (PJM), Midcontinent Independent System Operator, Inc., and the Southeastern Regional Transmission Planning region. For example, states in PJM will now have explicit assurance that the PJM State Agreement Approach, in use for more than a decade, is preserved as an option for allocating to the sponsoring states the costs of public policy-driven projects, such as New Jersey’s offshore wind and others that would not be selected for regional cost allocation.[8]
State Input on Factors. As part of the planning process, transmission providers must consult with the states before running the scenarios required by Order No. 1920 and must consider the views of the states as to how to account for and weigh the factors related to, or derived from, state public policies.[9]
State Input on Baseline Scenarios. Order No. 1920-A also clarifies that, for purposes of cost allocation, states in PJM and other diverse multistate regions can now choose a new ex ante process that will enable the states to request that the transmission provider run additional scenarios, including a baseline scenario that contains only optimal reliability or economic projects and excludes public policy-driven projects, so that states can compare the costs of the baseline scenario versus the larger, multi-driver scenarios that include public policy-driven projects. Most importantly, states can agree that the difference in costs between the baseline scenario and the larger, multi-driver scenarios that include projects derived from state policies or other policy goals will be allocated to the states whose policies are the source of the added costs and will not be regionally cost allocated.[10]
Removal of Corporate Power Preferences and Cost-Shifting. The requirement in Order No. 1920 that large corporate power-purchasing preferences must be a factor in planning long-term scenarios is explicitly removed.[11] That was one of the most unconscionable, special-interest driven features of Order No. 1920, directing transmission providers to plan hundreds of billions of dollars of transmission projects to subsidize the power-purchasing preferences of huge multinational corporations and shifting the costs to residential and small-business consumers already struggling to pay their monthly power bills.
New Required Transparency. Order No. 1920-A also emphasizes transparency and clarifies that the purported benefits of one or more states’ public policies are clearly identified and quantified. This will enable states to determine whether they are being charged for other states’ public policies, which benefits they are paying for, and how much.[12]
Collectively, these changes give the states a much bigger toolbox containing far more effective tools they can use to protect their consumers and the interests of their states. I urge state regulators to use them aggressively. Further, let me emphasize that, if the process of compliance – always complicated and challenging even with rulemakings of far smaller size and less complexity than this one – demonstrates that state flexibility and authority remain materially insufficient, further action by the Commission may become necessary.
And on the issue of compliance, I would add that the broad purpose of these changes is to allow the states sufficient flexibility and authority to protect their consumers from paying unfair or unnecessary costs. That purpose should and must inform the compliance process.
For these reasons, I respectfully concur to these changes established in Order No. 1920-A that are listed specifically in the Appendix. Again, I express my deep appreciation to my colleagues for their willingness to engage in good-faith negotiations leading to these important changes to the replacement rate.
For these reasons I respectfully concur in part.
______________________________
Mark C. Christie
Commissioner
Appendix – Major Changes Incorporated in Order No. 1920-A
1. Require transmission providers to include in their filings state agreements on cost allocation, with enough detail so that any separate proposals can be considered and enable the Commission to adopt the states’ agreement on compliance.
The order directs transmission providers to include in the transmittal of their compliance filings any Long-Term Regional Transmission Cost Allocation Method(s), and/or State Agreement Process(es) agreed to by Relevant State Entities, during the Engagement Period. The order also clarifies that transmission providers must include such cost allocation methods and/or State Agreement Processes in the transmittal of their compliance filings even when transmission providers propose on compliance a separate cost allocation method and/or declined to propose a State Agreement Process.
As part of this requirement, the order clarifies that transmission providers must include any and all supporting evidence and/or justification related to Relevant State Entities’ agreed-upon cost allocation method and/or State Agreement Process that Relevant State Entities request that transmission providers include in their compliance filing. However, the order clarifies that transmission providers are not required to separately characterize Relevant State Entities’ agreement or independently justify Relevant State Entities’ preferred cost allocation.
When acting under FPA section 206, the Commission’s statutory burden is to establish a just and reasonable and not unduly discriminatory replacement rate that is supported by substantial evidence and is the product of reasoned decision making. In satisfying this burden with respect to cost allocation, it is not the case that the Commission necessarily must adopt the transmission provider’s proposal if that proposal complies with the final rule’s requirements; rather, the Commission need only weigh competing views (if they exist), select an approach with adequate support in the record, and then intelligibly explain the reasons for its choice.
To be clear, this means that the Commission will consider the entire record—including the Relevant State Entities’ agreed-upon cost allocation and the transmission provider’s proposal. Specifically, when the Commission reviews transmission providers’ compliance filings, the Commission is not required to accept a cost allocation proposal from a transmission provider simply because it may comply with Order No. 1920. Instead, the Commission may accept any cost allocation method proposed by the Relevant State Entities and submitted on compliance so long as it complies with Order No. 1920.
2. Require transmission providers to revise their OATTs to add a requirement that they consult with Relevant State Entities before making a future filing under FPA section 205 to revise the Long-Term Regional Transmission Cost Allocation Method and/or State Agreement Process(es) that is on file.
The order requires that, as part of transmission providers’ obligations with respect to transmission planning and cost allocation, transmission providers shall consult with Relevant State Entities prior to amending the ex ante Long-Term Regional Transmission Cost Allocation Method and/or State Agreement Process(es) agreed to by Relevant State Entities, or if Relevant State Entities seek to amend that method or process. The order requires transmission providers to document publicly on their website the results of that consultation prior to submitting their amendment. In addition, transmission providers must describe their reasoning for not using the results of the consultation with the Relevant State Entities. As an example, a jumpball framework, such as exists in MISO, SPP, and ISO-NE, could satisfy these requirements.
3. If Relevant State Entities request additional scenarios to inform their consideration of cost allocation methods, transmission providers shall develop those additional scenarios.
The order clarifies that transmission providers may develop additional scenarios, beyond the three Long-Term Scenarios that Order No. 1920 requires, to provide Relevant State Entities with information that they can use to inform the development of Long-Term Regional Transmission Cost Allocation Method(s) and/or State Agreement Process(es). The order further clarifies that, when developing these additional scenarios used to inform cost allocation, transmission providers have the flexibility to depart from Order No. 1920’s requirements related to the development of Long-Term Scenarios. For example, transmission providers may develop scenarios that consider the incremental cost of transmission needed to achieve state laws, policies, and regulations beyond the cost of transmission needed in the absence of those laws, policies, and regulations. The order further clarifies that, if the Relevant State Entities wish for the transmission provider to develop a reasonable number of additional scenarios for cost allocation, then the transmission providers will develop these scenarios.
4. Clarify that, while transmission providers have discretion over how to consider the effects of factors, transmission providers must consult with Relevant State Entities regarding factors related to state public policies.
The order clarifies that transmission providers must consult with and consider the positions of the Relevant State Entities as to how to account for factors related to state public policies in transmission planning assumptions. Specifically, the transmission provider shall consult with Relevant State Entities as to how to run the Long-Term Scenarios mandated by the final rule, as they may incorporate planning for state laws, policies, and regulations, including assumptions of transmission needs that may be attributable to, or derived from, state or local policies, such as assumptions about changing generation resources.
5. Allow states six additional months for the engagement period, upon request.
The order clarifies that, if Relevant State Entities, consistent with their chosen method to reach agreement, request additional time to complete cost allocation discussions, the Commission will extend the Engagement Period for up to an additional six months. The order finds that such an extension is warranted in that circumstance to ensure that Relevant State Entities have sufficient time to engage in fulsome discussions. The order also clarifies that the Commission will extend the relevant compliance deadlines, as appropriate, to accommodate an extension to the Engagement Period.
6. Exclude corporate commitments from Factor Category Seven.
The order eliminates the requirement for transmission providers to incorporate corporate commitments in Factor Category Seven when developing Long-Term Scenarios. The order finds that requiring transmission providers to consider corporate commitments when developing Long-Term Scenarios may introduce the risk of one class of transmission users cross-subsidizing another class of transmission users.
7. Expressly permit continued use of both new and/or existing state agreement approaches and similar voluntary measures.
The order clarifies that Order No. 1920 does not require reapproval of PJM’s State Agreement Approach. The order clarifies that the Commission interprets PJM’s State Agreement Approach to be supplemental to PJM’s existing regional transmission cost allocation method. As a result, it is not in any way affected by the final rule. The order further clarifies (see #1 above) that, in their compliance filings, transmission providers shall include any State Agreement Process(es) agreed to by Relevant State Entities.
8. Transmission providers will allocate the costs of a Long-Term Regional Transmission Facility commensurate to its benefits.
The order clarifies that Order No. 1920 does not prevent transmission providers from recognizing different types of benefits and using them to allocate costs in proportion to those benefits. One potential cost allocation method that could be proposed to comply with Order No. 1920 would allocate costs commensurate with reliability and economic benefits region-wide, while allocating costs commensurate with additional benefits to a subset of states that agree to such cost allocation. Under this potential cost allocation method, these costs and benefits could be identified based on one or more additional scenarios run by the transmission planner for the purposes of informing cost allocation, e.g., scenarios that consider the incremental cost of transmission needed to achieve state laws, policies, and regulations beyond the cost of transmission needed in the absence of those laws, policies, and regulations. For example, the cost allocation method agreed to by the Relevant State Entities may allocate those incremental costs to states with those applicable laws, policies, and regulations.
9. Clarify that states and/or transmission providers may define additional benefits to those enumerated in Order No. 1920.
Further, the order clarifies that costs borne by ratepayers must be roughly commensurate with benefits received. Transmission providers can consider additional benefits for cost allocation purposes, including as agreed to by Relevant State Entities and described elsewhere in this rule, provided that costs are allocated in a way that is at least roughly commensurate with estimated benefits.
10. Clarify that, for a selected project or tranche of projects, transmission providers shall, for each pricing zone, quantify the benefits and costs associated with such project or tranche.
The order clarifies that, for each selected project or tranche of projects, each transmission provider is required to make publicly available, on OASIS or other password-protected website, a breakdown of the allocated costs, by transmission pricing zone, and a quantification of the benefits imputed to each zone, as such benefits can be reasonably estimated.
11. Include, as an example of an approach that could be proposed to comply with Order No. 1920, the below ex ante cost allocation method language for Relevant State Entities. The inclusion of this example does not foreclose states from agreeing to other cost allocation approaches, each of which shall be evaluated on its own merits.
At the request of the Relevant State Entities in a multistate region, the following ex ante method for cost allocation may be proposed. In providing this example, the order is not foreclosing other approaches for allocating the costs of Long-Term Regional Transmission Facilities on either an ex ante or project-specific basis. Nor is the order suggesting that cost allocation methodologies must adopt a similar approach to this framework in order to comply with the requirements of this final rule:
(1) For purposes of cost allocation, the transmission providers shall run a scenario that otherwise complies with the Long-Term Regional Transmission Planning requirements of Order No. 1920 but does not include state laws, policies, and regulations and quantify the costs of the projects that would be selected from this scenario.
(2) The costs identified in (1) could be cost allocated according to an alternative ex ante formula filed by the transmission owners for the region.
(3) The amount representing the cost difference between the costs of projects selected pursuant to the Long-Term Regional Transmission Planning process and (1) shall be allocated as follows:
a. The transmission provider shall identify by state the specific state laws, policies, and regulations that were used to plan and select the facilities and shall quantify by state the specific costs of such facilities.
b. The costs identified in 3(a) shall be allocated solely to the state or states that are the sources of the policies used in planning and selection. The total difference between the costs of projects selected pursuant to the Long-Term Regional Transmission Planning process and (1) would be fully accounted for using this method of allocating costs among the states. The costs by zone within a state (Intrastate Costs) would be developed and filed by the applicable Transmission Owner(s).
[1] 16 U.S.C. § 824e.
[2] Id. (“Whenever the Commission, after a hearing held upon its own motion or upon complaint, shall find that any rate, charge, or classification, demanded, observed, charged, or collected by any public utility for any transmission or sale subject to the jurisdiction of the Commission, or that any rule, regulation, practice, or contract affecting such rate, charge, or classification is unjust, unreasonable, unduly discriminatory or preferential, the Commission shall determine the just and reasonable rate, charge, classification, rule, regulation, practice, or contract to be thereafter observed and in force, and shall fix the same by order. . . .” (emphasis added)).
[3] The specific changes which I support and to which I concur are described in the Appendix to this statement.
[4] Bldg. for the Future Through Elec. Reg’l Transmission Planning & Cost Allocation & Generator Interconnection, NOPR, 179 FERC ¶ 61,028 (2022) (Christie, Comm’r, concurring at PP 5, 11, 14).
[5] Bldg. for the Future Through Elec. Reg’l Transmission Planning & Cost Allocation, Order No. 1920, 187 FERC ¶ 61,068 (2024) (Christie, Comm’r, dissenting at P 15 & nn.49-54).
[6] See Appendix at P 1.
[7] Id. P 2.
[8] Id. at P 7.
[9] Id. P 4.
[10] Id. PP 3, 8-11.
[11] Id. P 6.
[12] Id. P 10.