Update on FERC Order No. 1000 – Hill Hearings

by Carolyn Elefant on October 19, 2011

in FERC Order 1000

On October 13, 2011 the House Energy and Commerce Committee held a hearing to focus on federal transmission issues and the impact of FERC Order No. 1000 . Originally, the hearing was to have included an inquiry into the controversial DOE/FERC proposal to expedite transmission siting, but the topic was never addressed in light of DOE’s decision to retain its authority to perform congestion studies and designate transmission corridors instead of ceding it to FERC in the hopes of hurrying the siting process along.

The Committee heard testimony from two panels of witnesses, the first consisting of testimony from FERC Chairman Jon Wellinghoff and DOE Senior Advisor Lauren Azar, and the second comprised of state regulators and private and publicly owned utilies and transmission companies.

The Committee’s questions to the first panel were directed almost exclusively at Chair Wellinghoff and reflected either confusion over the definition of “region” for planning purposes or concern about the potential to raise costs. Several times in response to questions, Chairman Wellinghoff explained that a region reflect existing planning regions such as RTOs or ISOs, which are considered planning regions for purposes of the rule. Wellinghoff added that in parts of the country such as the West (except California) or Southeast where there are no RTOs, utilities may already participate in planning regions (such as WestConnect) or may have entered into an agreement to create a region (as in the Southeast). Even with this explanation, the confusion over the definition of a region persists.

Committee members also asked whether transmission planning was driven by a need for “green power” and could result in a rate increase. Energy and Power Subcommittee Chairman Ed Whitfield (R-KY) set the tone for this line of questioning with his opening statement that “I’m concerned that the rule could result in cost allocation formulas that spread the costs of new transmission broadly to customers without an appropriate connection to benefits received, if there are any.” Chair Wellinghoff remained firm that Order No. 1000 is technology neutral, that transmission development will be driven by market forces (though here Chair Wellinghoff also noted that public policy represents a type of market force), that regions will retain sufficient flexibility over planning and cost allocation to enable them to craft their own solutions and that ultimately, consumers will see a decrease in prices as a result of the Final Rule.

Views from the second panel varied. The two state regulators (Commissioner Philip Jones from Washington Utilities and Transportation Commission and Commissioner Greg White from the Michigan PSC)  acknowledged that while FERC Order No. 1000 appropriately acknowledges the importance of transmission planning, they worried that its implementation might result in imprudent decisions (such as construction of costly transmission rather than siting generation close to load) or interfere with ongoing state or regional initiatives. Both the public and investor owned utility witnesses expressed similar concerns. The remaining two witnesses from the Southwest Power Pool and ITC, a merchant transmission company, generally supported Order No. 1000 but argued that FERC should have permitted allocation of costs outside a region where that region receives benefits. Currently, FERC Order No. 1000 prohibits interregional cost allocation, irrespective of benefits conferred, if the region does not voluntarily agree to assume the costs.

So what happens next? The Committee asked Chair Wellinghoff to submit additional responses, and it will likely follow up with questions to other witnesses as well. Though most of the Committee’s questions reflected skepticism that Order No. 1000 will produce savings or won’t socialize transmission costs, I’m not confident that the Committee members are up to the task of figuring out how to reverse FERC’s actions or neutralize the effect of the order. Several members joked about the size of FERC’s 620-page order, but the complexity really isn’t a joke because in order to take action, already overburdened Committee members and their staff will need to devote significant resources to get up to speed. At this point, the Committee may spend just as much time on evaluating the chances of FERC modifying Order No. 1000 on rehearing, or losing in the courts as it will on familiarizing itself with the nitty-gritty detail of the Final Rule itself. My sense is that Congress may decide to sit this one out and wait for the rehearing and judicial review process for Order No. 1000 run their course.

What do you think?

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