Item E-1: Commissioner James Danly Dissent on Building for the Future Through Electric Regional Transmission Planning and Cost Allocation and Generator Interconnection

Commissioner James Danly Statement
April 21, 2022
Docket No. RM21-17-000

I welcome long term transmission planning reform.  I would prefer that Regional Transmission Organizations (RTOs) and other interested public utilities simply file their own proposals under section 205 of the Federal Power Act (FPA).  They are fully capable of proposing rate changes and reforms on their own.[1]

This Notice of Proposed Rulemaking (NOPR) goes far beyond that.  It contemplates a Federal Power Act section 206 finding that existing transmission planning across the nation—in every region, for every utility and market—is so unjust and unreasonable that it must be replaced with mandatory, pervasive, and invasive “reforms.”[2]  But let us be clear.  The NOPR’s primary purpose is to achieve narrow environmental policy objectives, not to address legitimate requirements under the Federal Power Act like ensuring just and reasonable rates or reliability.  After all, as the NOPR itself repeatedly admits, it is “driven by changes in resource mix and demand,”[3] notwithstanding its references to genuine problems with existing transmission planning.[4]

The majority seeks to establish policies designed to encourage the massive transmission build-out that will doubtless be required to transition to an aspirational renewable future.  To do so, they need to socialize the costs of this transmission across as broad a population of ratepayers as possible.  Thus, they seek to use the FPA, a statute that sounds in rate regulation and reliability, as a tool to achieve a particular (and inapposite) policy goal.  In this regard, it is much like the majority’s recent foray into transforming our pipeline certification process into a comprehensive environmental review.[5]  Accordingly, I must dissent.

I normally would not oppose a NOPR.  What is wrong with asking questions and seeking a record to consider reforms?  But this NOPR is a boondoggle.  It seeks to change virtually all aspects of transmission planning, including in non-RTO regions and it does so for the specific, though unstated, purpose of suborning the transmission planning process so it can be wielded as a tool to support the development of a specific set of favored generation resources.  How does it do this?  The NOPR proposes to require regions to factor in any state or even “local” (!) public policy (read, renewable) goals, no matter how far-fetched.[6]  If San Francisco, for example, passes an ordinance that all its energy must be solar no matter the cost, CAISO and perhaps all western regional planning now must take that into account in their transmission plans.  And what if the local policy is unreasonable?  Or what if a state has far more aggressive goals than another state?  No matter: all must plan for the dreams of others.

The Federal Power Act requires just and reasonable rates.  That prohibits the Commission from charging ratepayers for unneeded transmission projects to accommodate someone else’s view of what types of generation might be preferable.  And we are not talking about economic or reliability projects.  The transmission at issue here is that required to accommodate state and local laws establishing the composition of their generation fleets.  Choosing their own generation mix is undoubtedly their right, since such choices are unambiguously reserved to the states under the FPA, but the FPA does not require the Commission to accommodate these policies under either of its core statutory obligations: to ensure just and reasonable rates and to ensure reliability.  In fact, it is quite the opposite, the NOPR risks further undue discrimination.  Nevertheless, the NOPR starts from the premise that such projects must be considered in regional planning.

Even if no transmission projects are ever selected under the new regional planning regime, the process imposed by the NOPR itself will substantially increase customer costs.  As Arizona’s largest utility commented in the record, “[w]hile [Arizona Public Service Company] acknowledges the Commission’s desire to construct transmission for a quicker transition to a clean energy mix, unbound[ed] study work would lengthen timelines, thereby increasing the associated costs, for both the transmission planning process and the generator interconnection process.”[7]

The NOPR not only is too expansive, it also is too specific.  It proposes scores of detailed mandates.  One such mandate, for example, is that four is the minimum number of planning scenarios a public utility must study, and that if one of the scenarios is a “base case,” that one must be “most likely.”[8]  “[A]t least one of the four distinct” scenarios “must account for uncertain operational outcomes . . . during high-impact, low-frequency events” but we do “allow” utilities “to determine which . . . high-impact, low-frequency event should be modeled.”[9]  Woe unto the utility that conducts long term planning by considering a fewer number of scenarios, but you do get to pick your favorite high-impact, low-frequency event.  

Entire sections of the NOPR read like a think tank’s wish list rather than a rigorous analysis of whether such Nice-to-Have ideas are required for just and reasonable, non-discriminatory ratemaking.  For some reason, the NOPR proposes that dynamic line ratings and advanced power flow control devices must be the default when studying any new transmission or generation solution “in all aspects of the regional transmission planning processes, including the existing regional transmission planning processes for near-term regional transmission needs.”[10]  Never mind that we already have a Notice of Inquiry on dynamic line ratings.[11]  And I thought this proceeding was about long-term planning?  For some other reason, the NOPR has a section on “Specificity of Data Inputs”[12] which defines the “best available data” everyone in the industry must use in their planning, particularly endorsing “the most recent data on renewable energy potential and distributed energy resources developed by national labs.”[13]  The NOPR also considers a mandate to establish a “periodic forum” to study best practices and additional reforms.[14]  Why would this need to be mandated?  Must the Commission control everything?  Is no one in the industry capable of such foresight absent our intervention?  And, by the way, the NOPR also proposes (in the name of “transparency”) to require new levels of “enhancements” and oversight for local transmission planning, by requiring utilities to incorporate detailed tariff amendments to describe their local planning processes.[15]  It also obligates them to consider, among other things, requirements for how utilities should be “right-sizing” transmission facilities, and whether we should mandate information requirements on “estimated in-kind replacements of . . . existing transmission.”[16]  Does this not seem like overly prescriptive regulatory meddling?

And yet—notwithstanding its bulk and granularity—the NOPR fails to clarify the single most critical question confronting individual states and consumers:  Will unwilling states’ ratepayers be required to pay for their neighboring state’s new transmission project which is being built solely for the purpose of achieving that neighboring state’s (or locality’s) public policy goals?  The NOPR leaves open what happens if states cannot voluntarily agree on such issues,[17] but many will seek to have the RTO allocate costs as it sees fit, including to unwilling states.  I oppose forcing the ratepayers in states with different public policy goals to pay for another state’s plans.

According to a 2018 summary by the National Conference of State Legislatures, 24 states either did not have any renewable portfolio standard or it had expired or was set to expire:  Alabama, Alaska, Arkansas, Florida, Georgia, Idaho, Iowa (expired), Kansas (expired), Kentucky, Louisiana, Michigan (expired in 2021), Mississippi, Missouri (expired in 2021), Montana (expired), Nebraska, North Carolina (expired in 2021), North Dakota (expired), Oklahoma (expired), Pennsylvania (expired in 2021), South Dakota (expired), Tennessee, West Virginia, Wisconsin (expired), and Wyoming.[18]  Renewable standards in an additional 3 states were voluntary:  Indiana, South Carolina, and Utah.[19]  That 27 states lack mandatory renewable portfolio standards rather suggests that the country is divided on this issue.

Not surprisingly, states are among the primary opponents of the reforms contemplated in the ANOPR, many of which have survived through to the issuance of today’s NOPR.  The Utah Public Service Commission correctly commented “that FERC seeks to reshape transmission planning and cost allocation for the purpose of expanding the transmission system ‘in areas with high degrees of renewable resources’ that require ‘extensive’ and ‘more expensive’ new transmission facilities.”[20]  The Utah Public Service Commission explained that:

[i]ncreased development and integration of renewable generation is a highly charged political question and a matter of significant political interest.  Different states’ legislatures have made different policy choices.  Some states, like California, have enacted very ambitious laws that require revolutionary changes to their generation mixes.  As the [ANOPR] makes clear, these changes require significant investment in, among other things, new transmission infrastructure to wheel renewable generation.

*   *   *

The [Utah Public Service Commission] is deeply concerned the [ANOPR] advertises an interest in rewriting the rules governing transmission planning and cost allocation to better facilitate policy choices, not of Congress, but of particular state legislatures.  More specifically, the [Utah Public Service Commission] is opposed to any rule change that would allow such preferences to impose costs on ratepayers in other states.[21]

Different policy goals are a critical reason for state opposition to a federal transmission planning regime, but certainly not the only one.  The Louisiana Public Service Commission explained:

the Commission proposes to change transmission planning and cost allocation to support a new fleet of renewable generating resources in preference to other types of generation.  But it is not within the Commission’s FPA authority, or within the ambit of sound transmission planning, to dictate the choice of generating resources and then determine what planning and cost allocation metrics will lead to the appearance of an economic transmission build-out to support those resources.  This approach interferes with the jurisdiction and authority of the states, fails to recognize regional differences, and could stifle innovation and the development of the most reliable and beneficial solutions at the least delivered energy and capacity cost.

Many of the ANOPR’s proposals would not achieve just and reasonable rates, and, in fact, could lead in the opposite direction.  They would dramatically increase costs imposed on consumers while potentially jeopardizing the reliability of the grid.  Renewable resources are inherently intermittent and not dispatchable.  They do not and will not have the same reliability benefits as thermal generation without significant technological investment and/or duplicative back-up power costs.  Consumer costs should not increase without a corresponding benefit, and certainly not in the face of diminished reliability, one of the bedrock principles of electric rate regulation.[22]

I also attended the meetings of the joint federal-state task force on electric transmission in which numerous state commissioners voiced their concern that federal transmission planning regimes would be imposed upon the states, that the Commission would insist on uniformity throughout the country, and most importantly, that the Commission might require their state’s ratepayers to shoulder the costs of another state’s transmission projects.[23]  It should go without saying that the Commission would be wise to proceed with caution before acting in the face of state opposition.

The NOPR raises another serious issue:  I do not know how most of these proposals are supposed to work in non-RTO regions.  Nor, apparently, does anyone else.  This may explain the repeated entreaties for the Commission to allow regional variation in transmission planning.  For example:

the [Sponsors of the Southeastern Regional Transmission Planning Process (SERTP Sponsors)] are concerned that a one-size-fits-all adoption of some of the items contemplated in the ANOPR could prove counter-productive or unworkable in the SERTP’s expansive, twelve-state, non-RTO footprint. The SERTP Sponsors respectfully submit that the Commission’s rules concerning regional transmission planning should continue to accommodate varying approaches to transmission and system planning in recognition of the inherent variability of existing market structures, state policies and requirements, locally available resources, and customer needs that prevail throughout the country.[24] 

It likewise is doubtful that many of the problems highlighted in the NOPR apply to the entire country or even extend beyond certain RTOs.  In the southeast, at least, where there is no RTO, public utilities added 3,158 miles of new transmission and 6,989 miles of uprates between 2015-2020, representing 12% of all transmission in the region.[25]  This non-RTO region provided detailed record evidence that strongly suggests it is managing transmission expansion and renewable integration as well as or better than any RTO.[26]  Somehow this evidence evaded discussion in the NOPR and the Commission, regardless of the record evidence, seems intent on subjecting all public utilities, even those outside of the RTOs, to the same planning requirements.[27]

Even RTOs are calling for the Commission to recognize regional differences and not to impose uniform federal mandates.  The New England Power Pool, for example, tells us in its ANOPR comments that “[t]he Commission should allow ISO-NE, NEPOOL, the [transmission owners in New England] and the New England States to continue to have the flexibility to develop solutions in planning, cost allocation and generator interconnection that work best for New England . . . .”[28]

I recognize that there are at least some stakeholders, particularly in RTOs, that want guidance or direction from the Commission to address the current or potential lack of stakeholder consensus for transmission planning reforms.  But replacing the stakeholder process with FERC-driven mandates only pleases the subset of stakeholders who agree with the mandates.  It is another way to overrule voices in opposition.

The numerous comments in response to the ANOPR requesting the continued recognition of regional differences underscore one of my primary concerns.  I simply disagree that the record before us supports the scope and profundity of change the Commission seeks to impose.  Other broad Commission rulemakings have had sufficient record support to satisfy our statutory obligations.  Here, I am doubtful.  I agree with the comments of the U.S. Chamber of Commerce which stated that:

the Commission should seriously consider the gravity of this undertaking and its potential significant impacts on both the reliability and the cost of electricity for businesses and consumers across the country. Many of the policies and procedures subject to revaluation in this docket have served their intended purposes.  They should not be abruptly jettisoned without a thorough evaluation of the costs and benefits resulting from any significant transmission planning and interconnection policy changes.[29]

In the same vein, the Large Public Power Council “asks the Commission to be careful not to disrupt planning and cost allocation principles within and outside ISOs/RTO structures that are currently working, and pursuant to which transmission is being planned and developed.”[30]  Again, there is no mention of this argument or the supporting evidence in the NOPR.

The NOPR solicits further comment, but it also plainly anticipates rule changes for which my own review of the record indicates only partial, or lukewarm, or minimal support.  The most common comment I have seen in the record, and at the task force meetings, as I have already highlighted above, is some variation of “regional planning is a good idea, and reform is needed, but please do not tell us what to do.”  Well, here are 450 pages of the Commission proposing to tell you what to do.

I freely acknowledge that the NOPR includes several potentially reasonable ideas for reform.  But that is not the test under section 206 of the FPA.  We are not the Good Ideas Commission.  We must have substantial record evidence that the existing rate is unjust and unreasonable.  We must find that the current planning processes are so unacceptable that the existing system essentially must be scrapped.  We must also have record evidence that the replacement rate—the final rule to follow the NOPR—is just and reasonable.  We owe it to the jurisdictional entities and the ratepayers to assure ourselves that each of the prescriptive requirements we seek to impose are actually necessary to ensure a just and reasonable, non-discriminatory replacement rate.  I certainly do not see the required evidentiary support in the record we have compiled to date and I am skeptical that I will ever see it.

Every single party with an interest should file in this docket.  And many parties will.  The sheer scope of the NOPR means that there is likely to be at least some support in the record for just about anything.  I must therefore underscore that it is critical for parties filing comments in response to the NOPR to be direct and clear.  This can be as simple as styling comments as “Comments in Opposition” when the filing party opposes any significant part of the NOPR.  For example, if you are one of the numerous parties that filed comments in the ANOPR proceeding requesting that “[i]n any final rule that comes out of this rulemaking proceeding the Commission should allow for regional variations and flexibility in compliance for RTO/ISO regions,”[31] or for non-RTO regions, then I strongly suggest that you file “Comments in Opposition” to the NOPR.  The NOPR appears to anticipate only limited regional flexibility.[32]

I further specifically request itemized lists from each commenting party indicating whether it supports, opposes, or abstains as to each of the NOPR’s preliminary findings and proposed reforms.  The Commission’s ultimate findings cannot rest merely on a tally of votes, but the scope of this proceeding would make such basic summaries of the comments immensely helpful and will aid the Commission in its review of the (already) voluminous record.

To the extent possible, every part of a comment should directly respond to a particular preliminary finding or proposal in the NOPR.  The ANOPR comments have been filed and reviewed.  The time for generic comments, “principles” of planning, the voicing of general support and the like is over and such comments will be nearly without value in the face of page after page of detailed, specific preliminary findings and proposed requirements.  Do you support the finding or not?  Do you support the proposal or not?

And in voicing your support or opposition, I also remind commenting parties to submit hard data whenever possible, including in affidavits, to help the Commission meet—or not—both of the required legal showings for this section 206 proposal (that existing rates are unjust and unreasonable, and that the proposed replacement rate is just and reasonable).  I am fully aware that parties have limited resources to comment on the Commission’s generic proceedings.  And while the scope of this NOPR will inevitably make this an expensive and burdensome endeavor for commenters, I urge you not to rest solely on your ANOPR comments.  Support or opposition to the specific proposals in the NOPR is necessary.  It will be worth the effort.  After all, the only thing at stake in this proceeding is nearly everything connected with transmission planning. 

Parties should remember that this is not the final rule.  The Commission can issue a final rule that contains any provision based on substantial evidence and that is a “logical outgrowth”[33] of the provisions in today’s proposed rule.  That gives wide berth for any number of ultimate outcomes.  In other words, this rule, when finalized, could be substantially different.  Given what is at stake, be certain to inform the Commission of your positions on every element of the NOPR that could possibly be of concern to you.

In this regard, I strongly object to our 75- and 30-day comment and reply periods.  Commenting parties presumably do not have hundreds of hours to wade through 450 pages of detailed proposals and to marshal evidence and legal argument for or against every potential change.  I am not sure how the same Commission that just set up an Office of Public Participation thinks anyone can reasonably comment on every detail in this tome in 6 months, let alone 75 days.  In another proceeding today, we provide RTOs with 6 months to file reports on potential “modernizing” reforms to electricity markets, yet here, where no less than the entirety of transmission planning is at stake, we suddenly are in a rush.[34] 

Do not forget that we are also actively considering interconnection queue reforms, albeit separately, which might be an even greater priority.  If we are going to propose comprehensive transmission planning changes in a rulemaking, regional planning and transmission interconnection queue reform should not be considered in silos.

While I think this NOPR is a mistake, I am happy to be convinced that particular reforms are justified by sound legal argument and solid record evidence.  Where reform is needed to ensure just and reasonable rates and reliable service, and the reform itself is just and reasonable, I can be persuaded that it is worthy of support.  I nevertheless reiterate my strong preference that we allow public utilities to file their own transmission planning solutions under FPA section 205.  The Commission does not need to issue rules to change everything.  Sometimes it is better to build incrementally to improve the current system, rather than to scrap everything and start from scratch.  In my view, if an RTO or public utility wants to “enhance” its regional planning, it can figure out how to do so.  And if the Commission really believes that we cannot rely on public utilities to seek more efficient transmission planning of their own volition, my second option would be to issue section 206 orders requiring the RTOs to show cause why their existing transmission planning processes are just and reasonable.  Whether you agree or disagree with these alternative procedural vehicles for change, please say so in your comments. 

I conclude with a note of caution.  A transmission planning revolution opposed by half of the country risks becoming a transmission planning civil war.  The Commission should not cram “reforms” down the throats of opponents on issues of such deep division, such as whether we can force utilities in unwilling states to consider the transmission needs of other states’ policy aspirations.  The result will be protracted proceedings, litigation, and risk.  Who is going to fund a transmission project in such an environment, in the face of the perpetual risk that it might have its costs “reallocated”?

For these reasons, I respectfully dissent.