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Daily Rules, Proposed Rules, and Notices of the Federal Government

DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 35

[Docket No. RM10-23-002; Order No. 1000-B]

Transmission Planning and Cost Allocation by Transmission Owning and Operating Public Utilities

AGENCY: Federal Energy Regulatory Commission, DOE.
ACTION: Order on rehearing and clarification.
SUMMARY: The Federal Energy Regulatory Commission affirms its basic determinations in Order Nos. 1000 and 1000-A, amending the transmission planning and cost allocation requirements established in Order No. 890 to ensure that Commission-jurisdictional services are provided at just and reasonable rates and on a basis that is just and reasonable and not unduly discriminatory or preferential. This order affirms the Order No. 1000 transmission planning reforms that: Require that each public utility transmission provider participate in a regional transmission planning process that produces a regional transmission plan; provide that local and regional transmission planning processes must provide an opportunity to identify and evaluate transmission needs driven by public policy requirements established by state or federal laws or regulations; improve coordination between neighboring transmission planning regions for new interregional transmission facilities; and remove from Commission-approved tariffs and agreements a federal right of first refusal. This order also affirms the Order No. 1000 requirements that each public utility transmission provider must participate in a regional transmission planning process that has: A regional cost allocation method for the cost of new transmission facilities selected in a regional transmission plan for purposes of cost allocation and an interregional cost allocation method for the cost of new transmission facilities that are located in two neighboring transmission planning regions and are jointly evaluated by the two regions in the interregional transmission coordination process required by this Final Rule. Additionally, this order affirms the Order No. 1000 requirement that each cost allocation method must satisfy six cost allocation principles.
DATES: Effective November 23, 2012.
FOR FURTHER INFORMATION CONTACT:

Melissa Nimit, Federal Energy Regulatory Commission, Office of the General Counsel, 888 First Street NE., Washington, DC 20426, (202) 502-6638. Shiv Mani, Federal Energy Regulatory Commission, Office of Energy Policy and Innovation, 888 First Street NE., Washington, DC 20426, (202) 502-8240.

SUPPLEMENTARY INFORMATION:

Before Commissioners:Jon Wellinghoff, Chairman; Philip D. Moeller, John R. Norris, and Cheryl A. LaFleur. Issued October 18, 2012 Table of Contents Paragraph

  • No.
  • I. Introduction 1 II. Transmission Planning 5 A. Regional Transmission Planning 5 1. Role of Section 217(b)(4) of the Federal Power Act 6 2. Regional Transmission Planning Requirements 12 3. Consideration of Transmission Needs Driven by Public Policy Requirements 28 B. Nonincumbent Transmission Developers 32 1. Legal Authority 33 2. Requirement To Remove a Federal Right of First Refusal from Commission-Jurisdictional Tariffs and Agreements, and Limits on the Applicability of That Requirement 41 3. Framework To Evaluate Transmission Projects Submitted for Selection in the Regional Transmission Plan for Purposes of Cost Allocation 56 C. Interregional Transmission Coordination 60 1. Implementation of the Interregional Transmission Coordination Requirements 61 III. Cost Allocation 65 1. Cost Allocation Principle 2—No Involuntary Allocation of Costs to Non-beneficiaries 67 IV. Information Collection Statement 73 V. Document Availability 74 VI. Effective Date 77 Appendix A: Abbreviated Names of Petitioners I. Introduction

    1. In Order No. 1000,1 the Commission amended the transmission planning and cost allocation requirements established in Order No. 8902 to ensure that the rates, terms and conditions of service provided by public utility providers are just and reasonable and not unduly discriminatory or preferential. Order No. 1000's transmission planning reforms require: (1) Each public utility transmission provider to participate in a regional transmission planning process that produces a regional transmission plan; (2) that local and regional transmission planning processes must provide an opportunity to identify and evaluate transmission needs driven by public policy requirements established by state or federal laws or regulations; (3) improved coordination between neighboring transmission planning regions for new interregional transmission facilities; and (4) the removal from Commission-approved tariffs and agreements of a federal right of first refusal.

    1 Transmission Planning and Cost Allocation by Transmission Owning and Operating Public Utilities,Order No. 1000, 76 FR 49842 (Aug. 11, 2011), FERC Stats. & Regs. ¶ 31,323 (2011),order on reh'g,Order No. 1000-A, 139 FERC ¶ 61,132 (2012).

    2 Preventing Undue Discrimination and Preference in Transmission Service,Order No. 890, 72 FR 12266 (Mar. 15, 2007), FERC Stats. & Regs. ¶ 31,241,order on reh'g,Order No. 890-A, 73 FR 2984 (Jan. 16, 2008), FERC Stats. & Regs. ¶ 31,261 (2007),order on reh'g and clarification,Order No. 890-B, 73 FR 39092 (July 8, 2008), 123 FERC ¶ 61,299 (2008),order on reh'g,Order No. 890-C, 74 FR 12540 (Mar. 25, 2009), 126 FERC ¶ 61,228 (2009),order on clarification,Order No. 890-D, 74 FR 61511 (Nov. 25 2009), 129 FERC ¶ 61,126 (2009).

    2. Order No. 1000 also requires that each public utility transmission provider must participate in a regional transmission planning process that has: (1) A regional cost allocation method for the cost of new transmission facilities selected in a regional transmission plan for purposes of cost allocation and (2) an interregional cost allocation method for the cost of new transmission facilities that are located in two neighboring transmission planning regions and are jointly evaluated by the two regions in the interregional transmission coordination process required by this Final Rule. Order No. 1000 also requires that each cost allocation method must satisfy six cost allocation principles.

    3. In Order No. 1000-A, the Commission largely affirmed the reforms adopted in Order No. 1000. The Commission concluded that taken together, the reforms adopted in Order No. 1000 will ensure that Commission-jurisdictional services are provided at just and reasonable rates and on a basis that is just and reasonable and not unduly discriminatory or preferential. The Commission therefore rejected requests to eliminate, or substantially modify, the various reforms adopted in Order No. 1000. The Commission did however, make a number of clarifications.

    4. Several petitioners have sought further rehearing and clarification of the Commission's determinations in Order No. 1000-A.3 The Commission largely affirms the determinations reached in Order No. 1000-A, making clarifications to address matters raised by petitioners.

    3A list of petitioners filing requests for rehearing and/or clarification is provided in Appendix A. Southwest Power Pool (SPP) filed a request for clarification and/or reconsideration of Order No. 1000-A. While SPP denominates its pleading as a request for clarification, it is, in fact, a late-filed request for rehearing. Pursuant to section 313(a) of the Federal Power Act (FPA), 16 U.S.C. 825l(a) (2006), an aggrieved party must file a request for rehearing within thirty days after the issuance of the Commission's order. Because the 30-day rehearing deadline is statutory, it cannot be extended, and SPP's request for rehearing must be rejected as untimely. Moreover, the courts have repeatedly recognized that the time period within which a party may file an application for rehearing of a Commission order is statutorily established at 30 days by section 313(a) of the FPA and that the Commission has no discretion to extend that deadline.See, e.g., City of Campbellv.FERC,770 F.2d 1180, 1183 (D.C. Cir. 1985);Boston Gas Co.v.FERC,575 F.2d 975, 977-79 (1st Cir. 1978). Furthermore, we note that the issues raised by SPP are similar to those raised by other petitioners, which are summarized and addressed below in section II.B.2 of this order.

    II. Transmission Planning A. Regional Transmission Planning

    5. Order No. 1000 built on the reforms adopted in Order No. 890 to improve regional transmission planning. First, Order No. 1000 required each public utility transmission provider to participate in a regional transmission planning process that produces a regional transmission plan and complies with existing Order No. 890 transmission planning principles.4 Second, Order No. 1000 adopted reforms under which transmission needs driven by Public Policy Requirements are considered in local and regional transmission planning processes.5 The Commission explained that these reforms work together to ensure that public utility transmission providers in every transmission planning region, in consultation with stakeholders, evaluate proposed alternative solutions at the regional level that may resolve the region's needs more efficiently or cost-effectively than solutions identified in the local transmission plans of individual public utility transmission providers.6 The Commission noted that, as in Order No. 890, the transmission planning requirements in Order No. 1000 do not address or dictate which transmission facilities should be either in the regional transmission plan or actually constructed, and that such decisions are left in the first instance to the judgment of public utility transmission providers, in consultation with stakeholders participating in the regional transmission planning process.7

    4Order No. 1000, FERC Stats. & Regs. ¶ 31,323 at P 68.

    5 Id.The Commission explained that Public Policy Requirements are those established by state or federal laws or regulations, meaning enacted statutes (i.e., passed by the legislature and signed by the executive) and regulations promulgated by a relevant jurisdiction, whether within a state or at the federal level.Id.P 2. Order No. 1000-A clarified that this included transmission needs driven by local laws or regulations. Order No. 1000-A, 139 FERC ¶ 61,132 at P 319.

    6 Id.

    7 Id.P 68 n.57.

    1. Role of Section 217(b)(4) of the Federal Power Act a. Order No. 1000-A

    6. In Order No. 1000-A, the Commission affirmed Order No. 1000's conclusion that the Commission has ample legal authority under the Federal Power Act (FPA) to undertake its regional transmission planning reforms. Among other things, Order No. 1000-A rejected arguments that FPA section 217(b)(4)8 prohibits or otherwise limits the Commission's ability to undertake these reforms.9 Order No. 1000-A

    816 U.S.C. 824s (2006).

    9Order No. 1000-A, 139 FERC ¶ 61,132 at PP 168-179.

    acknowledgedclaims by some petitioners that Order No. 681,10 which requires transmission organizations that are public utilities with organized electricity markets to make available long-term firm transmission rights that satisfy certain guidelines, expressly notes a preference for load-serving entities.11 Order No. 1000-A found that Order No. 681's priority for load-serving entities in the allocation of long-term firm transmission rights supported by existing transmission capacity is not inconsistent with Order No. 1000, which addresses planning and cost allocation for new transmission.12 Order No. 1000-A also found that the transmission planning reforms will aid, and not hinder, load-serving entities in meeting their reasonable transmission needs.13

    10 Long-Term Firm Transmission Rights in Organized Electricity Markets,Order No. 681, FERC Stats. & Regs. ¶ 31,226,order on reh'g,Order No. 681-A, 117 FERC ¶ 61,201 (2006),order on reh'g,Order No. 681-B, 126 FERC ¶ 61,254 (2009).

    11Order No. 1000-A, 139 FERC ¶ 61,132 at P 171.

    12 Id.P 172.

    13 Id.

    b. Request for Rehearing

    7. Transmission Access Policy Study Group argues that in Order No. 1000-A, the Commission suggested for the first time that the preference for load-serving entity long-term rights established in Order No. 681 applies only to existing transmission capacity “but not in the broader context of planning new transmission capacity.”14 Transmission Access Policy Study Group contends that the Commission erred in suggesting that Order No. 681 does not apply to new transmission facilities, contending that Order No. 681 extended the preference to be afforded load-serving entities to long-term rights from existing capacity to new capacity by providing that “[w]hen * * * transmission upgrades [that are rolled into transmission rates] come into service, the transmission rights that result from such investmentswill be made available as rights from `existing capacity.' ” 15 Transmission Access Policy Study Group states that this provision had one limited exception—where a transmission upgrade is participant-funded.16 It contends that this exception is inapplicable to the new transmission facilities at issue in this proceeding, as Order No. 1000 specifically ruled that participant funding will not comply with the regional or interregional cost allocation principles adopted by the Final Rule.17 Transmission Access Policy Study Group urges the Commission to clarify that Order Nos. 1000 and 1000-A do not alter the scope or applicability of Order No. 681.18 In the alternative, it argues that Order No. 1000 should be reversed to the extent that it modifies the load-serving entity long-term rights preference established by Order No. 681, by limiting that preference to “existing” transmission facilities, rather than extending it to new transmission that is not participant-funded.19

    14Transmission Access Policy Study Group at 12 (quoting Order No. 1000-A, 139 FERC ¶ 61,132 at P 171).

    15 Id.at 13 (quoting Order No. 681, FERC Stats. & Regs. ¶ 31,226 at P 211 (emphasis added)).

    16 Id.

    17 Id.

    18 Id.

    19 Id.

    c. Commission Determination

    8. In response to Transmission Access Policy Study Group, we clarify that nothing in either Order No. 1000 or Order No. 1000-A is intended in any way to undermine or alter the guidelines the Commission instituted in Order No. 681. Order No. 1000's transmission planning reforms are distinct from the Commission's rulemaking in Order No. 681, as we explain below.

    9. Section 1233(a) of the Energy Policy Act of 2005 enacted FPA section 217(b)(4), in which the Commission is directed to exercise its authority under the FPA in a manner that facilitates the planning and expansion of transmission facilities to meet the reasonable needs of load-serving entities to satisfy the service obligations of the load-serving entities, and enables load-serving entities to secure firm transmission rights (or equivalent tradable or financial rights) on a long-term basis for long-term power supply arrangements made, or planned, to meet such needs.20

    2016 U.S.C. 824q(b)(4) (2006).

    10. Section 1233(b) of the Energy Policy Act of 2005 further directed the Commission to promulgate a rule on long-term transmission rights in organized markets.21 The Commission consequently issued Order No. 681, which adopted guidelines that independent system operators (ISOs) and regional transmission organizations (RTOs) are required to follow regarding the availability of long-term firm transmission rights, including a guideline providing that load-serving entities “must have a priority over non-load serving entities in the allocation of long-term firm transmission rights that are supported by existing capacity.”22

    21EPAct 2005, Public Law 109-58, section 1233, 119 Stat. 594, 960 (2005); 16 U.S.C. 824q (2006)). Section 1233 provides that within 1 year after the date of enactment of that section and after notice and an opportunity for comment, the Commission shall by rule or order, implement section 217(b)(4) of the Federal Power Act in Transmission Organizations, as defined by that Act with organized electricity markets.

    22Order No. 681, FERC Stats. & Regs. ¶ 31,226 at P 325.

    11. As Order No. 1000-A explained, we do not find any inconsistency between Order No. 1000 and section 217(b)(4).23 Nor do we find any inconsistency between Order No. 1000 and Order No. 681. The requirements adopted by the Commission in Order Nos. 1000 and 1000-A are focused on the planning and cost allocation of new transmission facilities, as defined therein. The Commission did not intend its statements in Order No. 1000-A regarding the planning and cost allocation of certain new transmission facilities to alter the requirement in Order No. 681 that “when [transmission upgrades that are rolled into transmission rates] * * * come into service, the transmission rights that result from such investments will be made available as rights from `existing capacity' * * * . Prevailing cost allocation rules will apply.”24 Thus, we clarify for Transmission Access Policy Study Group that nothing in Order Nos. 1000 or 1000-A changes the requirements of Order No. 681, including the Order No. 681 established preference for load-serving entities in the allocation of long-term firm transmission rights, and that the Commission did not alter the application of Order No. 681 to new transmission facilities that are subject to the requirements of Order No. 1000.

    23 SeeOrder No. 1000-A, 139 FERC ¶ 61,132 at PP 168-179 (addressing requests for rehearing and clarification of Order No. 1000 with respect to the role of section 217(b)(4)).

    24 SeeOrder No. 681, FERC Stats. & Regs. ¶ 31,226 at P 211.

    2. Regional Transmission Planning Requirements a. Order No. 1000-A

    12. Order No. 1000-A affirmed Order No. 1000's conclusion that public utility transmission providers must revise their OATTs to provide for a regional transmission planning process that produces a regional transmission plan and satisfies Order No. 890's transmission planning principles.25 The Commission explained that Order No. 1000 requires neither the filing of the regional transmission plan resulting from the regional transmission planning process nor the filing of specific applications of cost allocation determinations.26 With respect to this latter point, Order No. 1000-A statedthat such a requirement would be unnecessary to comply with Order No. 1000, noting that Order No. 1000 requires that public utility transmission providers have anex antecost allocation method on file with and approved by the Commission. Order No. 1000-A also noted that this cost allocation method must explain how the costs of new transmission facilities selected in a regional transmission plan for purposes of cost allocation are to be allocated, consistent with the cost allocation principles set forth in Order No. 1000.27 Consequently, customers, stakeholders, and others will have “notice” at the time the compliance filings are made, when the Commission acts on those filings, and as the regional transmission planning process results in the selection of a transmission facility in the regional transmission plan for purposes of cost allocation.28 However, consistent with the regional flexibility provided in Order No. 1000, Order No. 1000-A also concluded that public utility transmission providers, in consultation with stakeholders, may propose OATT revisions requiring the submission of cost allocations in their Order No. 1000 compliance filings.29

    25Order No. 1000-A, 139 FERC ¶ 61,132 at PP 263-301.

    26 Id.PP 285-286.

    27 Id.P 286.

    28 Id.

    29 Id.

    13. The Commission further stated in Order No. 1000-A that it will evaluate compliance filings to ensure that they comply with Order No. 1000 and that both stakeholders and the Commission have the right to initiate actions under section 206 of the FPA if they believe that, for example, a Commission-approved regional transmission planning process was not followed or if a cost allocation method was not followed or produced unjust and unreasonable results for a particular new transmission facility or class of new transmission facilities.30

    30 Id.P 287.

    b. Request for Rehearing

    14. Transmission Access Policy Study Group argues that the Commission should not establish a generic rule that, if transmission providers elect not to propose a section 205 filing of specific applications of their regional cost allocation, the only means to challenge such applications is under section 206.31 It states that although Order No. 1000-A nowhere uses the term “formula rate” to describe the rule's treatment of regional cost allocation methodologies, it is creating a filing regimen where the cost allocation methodologies will function as just that.32

    31Transmission Access Policy Study Group at 3.

    32 Id.at 4.

    15. Therefore, Transmission Access Policy Study Group contends that the Commission should require the section 205 filing of project-specific applications of the regional cost allocation methodology, or leave it to the compliance filing process to determine whether such a filing is required.33 If cost allocation methods are treated as formula rates, Transmission Access Policy Study Group maintains that the Commission can have no reasonable assurance that cost allocation methodologies will be sufficiently specific, grounded in objective criteria, and otherwise adequately constrain utility discretion.34 It further asserts that regional cost allocation methodologies, in combination with the process for selecting projects for regional cost allocation, will likely rely on assumptions and other judgments that undermine predictability.35

    33 Id.at 5.

    34 Id.at 6.

    35 Id.at 7.

    16. Transmission Access Policy Study Group argues that sole reliance on section 206 to challenge specific implementation of a Commission-accepted Order No. 1000 methodology when the transmission provider has not made a section 205 filing is unjustified.36 It contends that in the non-RTO context, application of the cost allocation methodology leaves ample room for transmission providers to engage in undue discrimination, and the Commission cannot reasonably assume that the cost allocation methodology, by itself, will in all cases provide customers with “notice” as to how regional facilities will be selected, and their costs allocated, in the future.37 It also contends that transmission providers have the enhanced ability to discriminate, particularly where a cost allocation methodology is unlikely to have the specificity and objectivity to cabin the transmission provider's discretion, and where stakeholders only may have the opportunity to provide input that the transmission providers are free to ignore.38 It argues that, in these cases in particular, treating the cost allocation methodology as a formula rate improperly shifts the burdens imposed by section 205.39

    36 Id.

    37 Id.at 7-8.

    38 Id.at 8.

    39 Id.

    17. Transmission Access Policy Study Group argues that, at minimum, the Commission should defer making a generic finding now that section 206 is the only available recourse to challenge specific applications of regional cost allocation methodologies absent transmission providers electing to propose section 205 filings of those specific applications.40 Instead, it suggests that the Commission should leave for determination on a case-by-case basis the process of evaluating Order No. 1000 compliance filings, in response to requests by transmission providers or other stakeholders or on its own motion, whether in a particular region the filing of specific applications of the regional cost allocations is necessary.41 It maintains that deferral will enable the Commission to consider the specifics of the proposed regional cost allocation methodology in conjunction with the proposed project selection process and associated governance and other safeguards (if any), as well as the views of public utility transmission providers in that region and other stakeholders.42

    40 Id.at 9.

    41 Id.

    42 Id.at 10.

    c. Commission Determination

    18. We deny rehearing. Transmission Access Policy Study Group has not persuaded us that the determination not to require the filing of specific applications of the cost allocation method was in error. Order No. 1000's reforms are intended, in part, to establish an open and transparent transmission planning process and require transmission planning regions to adopt a cost allocation method or methods that provideex antecertainty. Both the Order No. 1000 compliance process and the resulting Commission-approved regional transmission planning process and associated cost allocation method(s) are required to have built-in mechanisms to help ensure that the processes and cost allocation methods are in fact transparent and provide the certainty that Transmission Access Policy Study Group seeks.

    19. First, stakeholders have had the opportunity to participate fully in regional stakeholder meetings to advocate for a cost allocation method that provides theex antecertainty that Order No. 1000 seeks, as well as to advocate that public utility transmission providers include a provision requiring the filing of specific applications of the cost allocation method. We believe that this approach accords with the regional flexibility we provided in Order No. 1000 for public utility transmissionproviders and stakeholders in a transmission planning region to develop rules that meet the transmission needs of that region, consistent with the requirements and principles set forth in Order Nos. 1000 and 1000-A.

    20. Second, the Commission will carefully consider the Order No. 1000 compliance filings once they are submitted, as well as any protests filed by stakeholders, to ensure that proposals satisfy the requirements that regional transmission planning processes be open and transparent and that the cost allocation method or methods satisfy the Order No. 1000 cost allocation principles. If a filing is deficient, the Commission will require public utility transmission providers to file revisions to address those deficiencies.

    21. Third, once the regional transmission planning process is approved by the Commission and becomes effective, the Order No. 890 transmission planning principles, as incorporated into a regional transmission planning process in compliance with Order No. 1000, will help mitigate concerns about the transparency of the process and the application of the cost allocation method. These principles address, among other things, stakeholder participation, information exchange, and dispute resolution.43 By incorporating these principles into the regional transmission planning process, the Commission's expectation is that there will be increased openness and certainty concerning how beneficiaries of transmission facilities selected in the regional transmission plan for purposes of cost allocation will be determined, as well as internal processes to resolve any questions that might arise as part of this process. And as noted in Order No. 1000-A, in identifying the benefits and beneficiaries for a new transmission facility, the regional transmission planning process must provide entities who will receive regional or interregional cost allocation an understanding of the identified benefits on which the cost allocation is based, all of which would occur prior to the recovery of such costs through a formula rate.44

    43Order No. 890 requires transmission providers to disclose to all customers and other stakeholders the basic criteria, assumptions, and data that underlie their transmission system plans. In addition, transmission providers will be required to reduce to writing and make available the basic methodology, criteria, and processes they use to develop their transmission plans, including how they treat retail native loads, in order to ensure that standards are consistently applied.Preventing Under Discrimination and Preference in Transmission Service,Order No. 890, FERC Stats. & Regs. ¶ 31,241 at P 471 (2007).

    44Order No. 1000-A, 139 FERC ¶ 61,132 at P 746.

    22. Moreover, as we explained in Order No. 1000-A, stakeholders always have the option of filing a section 206 complaint if they believe that, notwithstanding these protections, there was an incorrect application of the cost allocation method in a particular instance.45 Finally, if stakeholders believe that the previously approved cost allocation method itself is no longer just and reasonable, they also have the option of filing a section 206 complaint with respect to the cost allocation method.

    45 Id.P 231.

    23. Transmission Access Policy Study Group suggests that application of theex antecost allocation to, or in, particular instance(s) should require a section 205 filing with the Commission. Order No. 1000 establishes no new requirement with respect to this issue. As we note above, Order No. 1000-A stated that we would consider proposals that would require public utility transmission providers to file specific applications of the cost allocation method. Therefore, Order No. 1000 provides flexibility in this regard and the Commission stated that it will not prejudge any method before the compliance filings are filed, so long as they satisfied the cost allocation principles articulated in Order No. 1000 (with the exception that participant funding may not be the regional or interregional cost allocation method). We will carefully evaluate compliance filings to ensure that they satisfy these principles.

    24. Transmission Access Policy Study Group asserts that if the cost allocation method is thought of as a formula rate, it would improperly shift the burdens under section 205 of the FPA, especially where a cost allocation method is unlikely to have specificity or objectivity to cabin transmission providers' discretion and where they can ignore stakeholder input. We disagree with this argument. As we discuss above, Order No. 1000 provides forex antecertainty. In Order No. 1000, the Commission stated that it required the development of regional and interregional cost allocation methods to provide greater certainty as to the cost allocation implications of a potential transmission project.46 The Commission also stated that under the regional transmission planning and interregional transmission coordination requirements, public utility transmission providers with stakeholders will identify, evaluate, and determine which transmission facilities meet the region's needs, and apply the cost allocation method or methods associated with those transmission facilities.47 In Order No. 1000-A, the Commission clarified that public utility transmission providers must consult with stakeholders in developing both regional and interregional cost allocation methods.48 Therefore, the Commission specifically requires public utility transmission providers to provide the opportunity for stakeholder input in the development of the regional and interregional cost allocation methods. If a stakeholder believes that its input is being ignored, it has the right to raise its issues with the cost allocation method or methods when the relevant Order No. 1000 compliance filing is made, or in a separate section 206 filing.

    46Order No. 1000, FERC Stats. & Regs. ¶ 31,323 at PP 559, 579.

    47 Id.P 499.

    48 Id.PP 559, 579.

    25. We also disagree with Transmission Access Policy Study Group's argument that the use of a cost allocation method could result in burden shifting under section 205. Order No. 1000-A acknowledged that stakeholder participation is an important aspect of the development of compliance filings to meet the requirements of Order No. 1000, and should ensure that the cost allocation method or methods ultimately agreed upon is balanced and does not favor any particular entity.49 Additionally, the Commission clarified that the Commission's cost allocation requirements do not interfere with section 205 rights or otherwise impose an undue burden on parties to participate in a new and costly process, but rather build on the reforms to the transmission planning process required by Order No. 890, in which all interested parties should already be participating.50 As noted above, the regional transmission planning process must provide entities who will receive regional or interregional cost allocation an understanding of the identified benefits on which the cost allocation will be based.51 Compliance proposals submitted by transmission providers will be reviewed by the Commission to ensure they provide the upfront certainty required by Order No. 1000.52 To the extent that Transmission Access Policy Study Group is concerned about cost recovery issues rather than cost allocation, Order No. 1000 explained that such questions are beyond the scope of the generic rulemaking proceeding, and Order No. 1000-A affirmed this, but clarified that public utility transmission providers, in consultation with stakeholders, may choose to address this cost recovery matter in their compliance filings.53

    49Order No. 1000-A, 139 FERC ¶ 61,132 at P 637.

    50 Id.P 649.

    51 Id.P 746.

    52As Transmission Access Policy Study Group also recognizes, not all RTOs make section 205 filings for the application of an existing filed cost allocation methodology.SeeTransmission Access Policy Study Group at n.14. Transmission Access Policy Study Group has not justified its positionthat this will be an issue in non-ISO/RTO regions at this time. Again, the Commission will carefully evaluate compliance filings, as well as protests thereto, to ensure that they satisfy Order No. 1000's requirements, and the Commission will require changes if they fail to do so.

    53Order No. 1000-A, 139 FERC ¶ 61,132 at P 616.

    26. We do not believe that Transmission Access Policy Study Group has justified at this time its position that public utility transmission providers in non-RTO regions, at least, should be required to file specific applications of the cost allocation method. Again, as discussed above, our expectation is that the open and transparent transmission planning process and principle-based cost allocation method will provide stakeholders with clarity as to why and how costs are being allocated for any specific transmission facility selected in the regional transmission plan for purposes of cost allocation. This is true regardless of whether or not the transmission planning region is an ISO/RTO. As we also discuss above, the Commission will carefully evaluate compliance proposals and any resulting protests to ensure that the proposals meet the requirements of Order No. 1000.

    27. Finally, with respect to Transmission Access Policy Study Group's request that we defer a determination on using section 206 as the default mechanism to challenge a cost allocation proposal, references to section 206 in Order No. 1000-A were to remind stakeholders of their right under that provision to file complaints. In any event, as we have previously explained, Order No. 1000-A provides that public utility transmission providers in a transmission planning region, in consultation with stakeholders, could agree to require the filing of specific applications of the cost allocation method. The Commission will review any such requirement during the Order No. 1000 compliance filings process and make a decision based on the record before us.

    3. Consideration of Transmission Needs Driven by Public Policy Requirements a. Order No. 1000-A

    28. Order No. 1000-A affirmed Order No. 1000's requirement that public utility transmission providers amend their OATTs to provide for the consideration of transmission needs driven by Public Policy Requirements.54 In affirming this requirement, Order No. 1000-A provided clarifications regarding the definition of the term “Public Policy Requirements”55 and what it means to “consider” transmission needs driven by such requirements.56 Order No. 1000-A explained that the Commission intends that public utility transmission providers consider transmission needs driven by Public Policy Requirements just as they consider transmission needs driven by reliability or economic concerns.57 Further, the Commission stated that it does not intend public utility transmission providers to substitute their policy judgments for those of legislatures and regulators.58 Order No. 1000-A also explained that the Commission does not require that regional transmission plans support multiple likely power supply scenarios, although such a requirement could be proposed in Order No. 1000 compliance filings and the Commission would consider such a proposal.59

    54Order No. 1000-A, 139 FERC ¶ 61,132 at PP 317-339.See also id.PP 203-216 (affirming legal basis of requirement to consider transmission needs driven by Public Policy Requirements).

    55Order No. 1000 defined “Public Policy Requirements” as public policy requirements established by state or federal laws and regulations. Order No. 1000, FERC Stats. & Regs. ¶ 31,323 at P 2. Order No. 1000-A clarified that this term included duly enacted laws or regulations passed by a local governmental entity, such as a municipal or county government. Order No. 1000-A, 139 FERC ¶ 61,132 at P 319.

    56Order No. 1000-A, 139 FERC ¶ 61,132 at PP 320-325.

    57 Id.P 205.

    58 Id.PP 326-29.

    59 Id.P 331.

    b. Request for Clarification

    29. AEP requests clarification that an appropriate method for a region to consider transmission needs driven by Public Policy Requirements is to expressly include consideration of changes in resources and load driven by public policies as part of its baseline projection of changes in resources and load expected over the planning horizon, and then conduct reliability and congestion analyses to determine what transmission investments are optimal given those expected changes in resources and load.60 AEP argues that Public Policy Requirements should not be considered solely on a stand-alone basis in the planning process.61 It contends that generation or load changes driven by public policies should be factored into the scenarios, along with other anticipated resource and load changes, for which reliability and economic benefits analyses are performed.62

    60AEP at 5.

    61 Id.at 2.

    62 Id.

    30. AEP states that it is concerned that some transmission providers may seek to satisfy the Commission's public policy requirement by employing only a stand-alone process or procedures that are specifically designed to evaluate transmission needs driven by Public Policy Requirements.63 It argues that regional planning processes should consider reliability, economic, and policy-driven transmission needs together.64 In particular, AEP asserts that a region should consider what changes in generation resources and load it expects over the planning horizon, including consideration of changes driven by public policies (such as renewable portfolio standards, new environmental regulations, and demand side management programs), and then conduct reliability and congestion analyses to determine what transmission investments are optimal given these anticipated changes.65 It contends that this approach enables transmission providers to build upon existing planning processes for the reliability and economic analyses used to identify baseline reliability and economic projects.66 AEP argues that integrated consideration of public policy-driven requirements can factor into efficient decisions to accelerate a needed baseline reliability upgrade or increase the capacity of a baseline reliability upgrade or baseline economic upgrade.67

    63 Id.at 4.

    64 Id.

    65 Id.

    66 Id.

    67 Id.

    c. Commission Determination

    31. We grant AEP's request for clarification to the extent discussed below. Order No. 1000 requires public utility transmission providers to revise their OATTs to provide for the consideration of transmission needs driven by Public Policy Requirements.68 In Order No. 1000, the Commissionprovides for regional flexibility so that public utility transmission providers, in consultation with stakeholders, can design proposals addressing this requirement that they believe best meet the needs of their respective transmission planning regions, so long as those proposals satisfy the essential requirement that public utility transmission providers, in consultation with stakeholders, consider transmission needs driven by Public Policy Requirements as set forth in Order No. 1000 and clarified in Order No. 1000-A.69 The Commission anticipates that a variety of approaches could satisfy the Commission's requirements and we expect that stakeholders supporting such proposals would have the opportunity to advocate for them in the stakeholder processes leading to the Order No. 1000 compliance filings. The Commission will consider any such approaches in the compliance filings when they are submitted for review.70

    68The requirement to consider transmission needs driven by Public Policy Requirements is described in more detail in Order No. 1000, FERC Stats. & Regs. ¶ 31,323 at PP 203-222 and Order No. 1000-A, 139 FERC ¶ 61,132 at PP 317-339.

    69 See, e.g.,Order No. 1000-A, 139 FERC ¶ 61,132 at P 331 (“It may well be the case that evaluating different power supply scenarios will be an effective way to identify more efficient or cost-effective transmission solutions; however, we will not prescribe any such requirements here, consistent with our preference for regional flexibility in designing regional transmission planning processes.”).

    70 See id.

    B. Nonincumbent Transmission Developers

    32. In Order No. 1000, the Commission addressed the removal from Commission-jurisdictional tariffs and agreements of provisions that contain a federal right of first refusal to construct transmission facilities selected in a regional transmission plan for purposes of cost allocation. The Commission also adopted a framework that requires the development of qualification criteria and protocols to govern the submission and evaluation of proposals for transmission facilities by public utility transmission providers in the regional transmission planning process. The Commission further required that a nonincumbent transmission developer of a transmission facility selected in the regional transmission plan for purposes of cost allocation have an opportunity comparable to that of an incumbent transmission developer to allocate the cost of such transmission facility through a regional cost allocation method or methods.71

    71Order No. 1000, FERC Stats. & Regs. ¶ 31,323 at P 225.

    1. Legal Authority a. Order No. 1000-A

    33. In Order No. 1000-A, the Commission affirmed its conclusion in Order No. 1000 that it has the legal authority under section 206 of the FPA to require the elimination of federal rights of first refusal as practices that have the potential to lead to Commission-jurisdictional rates that are unjust and unreasonable or unduly discriminatory or preferential.72 The Commission stated that, consistent with its authority under section 206, the Commission acted to remedy an unjust and unreasonable or unduly discriminatory or preferential practice by requiring public utility transmission providers to eliminate a federal right of first refusal from Commission-jurisdictional tariffs and agreements and adopt the nonincumbent reforms. The Commission explained that in Order No. 1000, it had found that a federal right of first refusal applicable to transmission facilities selected in a regional transmission plan for purposes of cost allocation can lead to rates for Commission-jurisdictional services that are unjust and unreasonable or otherwise result in undue discrimination by public utility transmission providers.73

    72Order No. 1000-A, 139 FERC ¶ 61,132 at P 357.

    73 Id.P 360.

    34. Finally, the Commission affirmed its decision in Order No. 1000 to address arguments that an individual contract contains a federal right of first refusal that is protected by aMobile-Sierraprovision when it reviews the compliance filings made by public utility transmission providers.74 Consistent with Order No. 1000, the Commission explained that a public utility transmission provider that considers its contract to be protected by aMobile-Sierraprovision may present its arguments as part of its compliance filing. However, the Commission also clarified that any such compliance filing must include the revisions to any Commission-jurisdictional tariffs and agreements necessary to comply with Order No. 1000 as well as theMobile-Sierraprovision arguments.75 The Commission concluded that this approach ensures that public utility transmission providers would not be required to eliminate a federal right of first refusal before the Commission makes a determination regarding whether an agreement is protected by aMobile-Sierraprovision and whether the Commission has met the applicable standard of review, while at the same time ensuring that the Order No. 1000 compliance process proceeds expeditiously and efficiently.

    74 Id.P 388.

    75 Id.P 389.

    b. Requests for Rehearing and Clarification

    35. Oklahoma Gas and Electric Company argues that the Commission failed to support its assertion that provisions that designate incumbent utilities to construct new transmission facilities are unduly discriminatory or preferential, or cause rates to be unreasonably high.76 Oklahoma Gas and Electric Company further argues that the Commission cannot support a finding that the current transmission rules in the Southwest Power Pool result in rates that are unjust or unreasonable.77

    76Oklahoma Gas and Electric Company at 4.

    77 Id.

    36. Oklahoma Gas and Electric Company also argues that the Commission ignores that theMobile-Sierrastandard is a threshold question and that the Commission cannot shift the burden of proof to the contracting parties to propose an alternative until the Commission has answered.78 Oklahoma Gas and Electric Company asserts that, under section 206 of the Federal Power Act, the Commission must first prove that the existing rates or practices are unjust, unreasonable, unduly discriminatory or preferential, and that courts have repeatedly held that the Commission has no power to force public utilities to file particular rates unless it first finds the existing filed rates unlawful.79 Oklahoma Gas and Electric Company asserts that this two-step process is even more vital in the context of applying theMobile-Sierradoctrine because the Commission must presume that the rate set out in a freely negotiated wholesale-energy contract meets the just and reasonable requirement imposed by law.80 Accordingly, Oklahoma Gas and Electric Company argues that the Commission has no power to require parties to renegotiate and revise existing agreements unless it finds harm to the public interest.81

    78 Id.at 8.

    79 Id.at 8-9 (citing Atlantic City Elec. Co.v.FERC,295 F.3d 1, 10 (D.C. Cir. 2002);Complex Consol. Edison Co. of New York, Inc.v.FERC,165 F.3d 992, 1001 (D.C. Cir. 1999);Transmission Access Policy Study Groupv.FERC,225 F.3d 667, 688 (D.C. Cir. 2005)).

    80 Id.at 9 (citingNRG Power Marketing, LLCv.Maine Public Utilities Commission,130 S. Ct. 693, 700 (2010)).

    81 Id.at 9-10.

    c. Commission Determination

    37. We disagree with Oklahoma Gas and Electric Company that theCommission failed to support its determination that a federal right of first refusal for transmission facilities selected in a regional transmission plan for purposes of cost allocation may lead to Commission-jurisdictional rates that are unjust and unreasonable or unduly discriminatory or preferential. Specifically, the Commission found that a federal right of first refusal has “the potential to undermine the identification and evaluation of more efficient or cost-effective solutions to regional transmission needs, which in turn can result in rates for Commission-jurisdictional services that are unjust and unreasonable or otherwise result in undue discrimination by public utility transmission providers.”82 The Commission further explained the direct effect that a federal right of first refusal can have on Commission-jurisdictional rates in Order No. 1000-A, stating that:

    82Order No. 1000, FERC Stats. & Regs. ¶ 31,323 at P 253.

    the selection of transmission facilities in a regional transmission plan for purposes of cost allocation is directly related to costs that will be allocated to jurisdictional ratepayers. The ability of an incumbent transmission provider to discourage or preclude participation of new transmission developers through discriminatory rules in a regional transmission planning process, and in particular, the inclusion of a federal right of first refusal, can have the effect of limiting the identification and evaluation of potential solutions to regional transmission needs. This in turn can directly increase the cost of new transmission development that is recovered from jurisdictional customers through rates.83

    83Order No. 1000-A, 139 FERC ¶ 61,132 at P 358 (citations omitted).

    38. The Commission put forth several rationales to support its determination.84 In particular, the Commission noted that the Federal Trade Commission supported the Commission's conclusion that a federal right of first refusal can create a barrier to entry that discourages nonincumbent transmission developers from proposing alternative solutions for consideration at the regional level.85 In addition, the Commission stated that it is not in the economic self-interest of incumbent transmission providers to permit new entrants to develop transmission facilities, even if proposals submitted by new entrants would result in a more efficient or cost-effective solution to the region's needs.86 Thus, the Commission concluded that it has a reasonable expectation that expanding the universe of transmission developers offering potential solutions to regional needs can lead to the identification and evaluation of potential solutions that are more efficient or cost-effective.87

    84 Id.P 76.

    85Order No. 1000, FERC Stats. & Regs. ¶ 31,323 at P 257;seeOrder No. 1000-A, 139 FERC ¶ 61,132 at P 76.

    86Order No. 1000, FERC Stats. & Regs. ¶ 31,323 at P 256.

    87Order No. 1000-A, 139 FERC ¶ 61,132 at PP 77, 83.

    39. Furthermore, as the Commission explained in the Need for Reform section of Order No. 1000-A, the Commission is not required to make individual findings concerning the rates of individual public utility transmission providers when proceeding under FPA section 206 by means of a generic rule.88 Rather, the Commission can proceed by identifying a “theoretical threat” that would materialize and cause rates to be unjust and unreasonable, or unduly discriminatory or preferential.89 As discussed in the preceding paragraph, the Commission found that a federal right of first refusal has the potential to lead to rates for Commission-jurisdictional services that are unjust and unreasonable or otherwise unduly discriminatory.

    88 Id.P 56.

    89 Id.P 57.

    40. In response to Oklahoma Gas and Electric Company's arguments regarding theMobile-Sierradoctrine, we reiterate that the Commission is not requiring public utility transmission providers to eliminate a federal right of first refusal before the Commission makes a determination regarding whether an agreement is protected by theMobile-Sierradoctrine and whether the Commission has met the applicable standard of review. As the Commission clarified in Order No. 1000-A, the Commission will first decide, based on a more complete record, including viewpoints of other interested parties, whether an agreement is protected by theMobile-Sierradoctrine, and if so, whether the Commission has met the applicable standard of review such that it can require the modification of the particular agreement.90 If the Commission determines based on the record submitted in the compliance filing that an agreement is protected by theMobile-Sierradoctrine and that it cannot meet the applicable standard of review, then the Commission will not consider whether the revisions to the Commission-jurisdictional tariffs and agreements submitted by a public utility transmission provider that considers its agreement to be protected by theMobile-Sierradoctrine comply with Order No. 1000.91

    90 Id.P 389.

    91 Id.

    2. Requirement To Remove a Federal Right of First Refusal From Commission-Jurisdictional Tariffs and Agreements, and Limits on the Applicability of That Requirement a. Order No. 1000-A

    41. In Order No. 1000-A, the Commission affirmed its decision in Order No. 1000 to require the elimination of a federal right of first refusal from Commission-jurisdictional tariffs and agreements for transmission facilities selected in a regional transmission plan for purposes of cost allocation.92 The Commission also clarified certain terms used in Order No. 1000. For instance, the Commission clarified that the term “selected in a regional transmission plan for purposes of cost allocation” excludes a new transmission facility if the costs of that facility are borne entirely by the public utility transmission provider in whose retail distribution service territory or footprint that new transmiss