In May 2024, the Federal Energy Regulatory Commission issued Order No. 1920, the long-awaited rule requiring regional transmission planning and who should pay for it. This is the first time in over a decade that FERC has revised its rules for regional transmission planning, and it is one of the longest and most complex rules that FERC has ever issued.
The rule comes at a time of immense change: increasing demand, a rapidly changing resource mix, and growing threats from extreme weather and cyber and physical attacks, all while individuals face a growing affordability crisis. FERC perceives its new order as an essential step in getting new transmission planned, built, and paid for, which it sees as key to addressing these challenges.
How We Got Here
In 2007, FERC issued Order No. 890, which required transmission providers to implement local transmission planning processes for new projects that satisfy nine principles, including coordination, transparency, comparability, regional participation, and cost allocation. By 2011, FERC found that these requirements were inadequate in spurring the transmission investment needed to maintain reliable service at a reasonable cost.
FERC then issued Order No. 1000, which required transmission providers to engage in regional and interregional planning processes. As part of this process, transmission providers were required to jointly identify regional projects that would be more efficient or cost-effective than local solutions. This regional process was to consider transmission needs (and define cost allocation principles) across three categories: reliability, economics, and public policy. Further, Order No. 1000 introduced competition into transmission development by largely eliminating the federal right of first refusal for transmission facilities selected in a regional transmission plan for purposes of cost allocation.
Although heralded at the time as a landmark rule that would spur new investment in cost-effective regional transmission, Order No. 1000 did not produce all its expected benefits. A decade after its implementation, there had been limited investments in regional transmission projects. Outside of RTO/ISO regions, no projects had been selected for regional cost allocation; and even within RTO/ISO regions, most investment was in transmission projects that addressed immediate reliability needs rather than longer-term needs. Over the same time, it became increasingly time-consuming and expensive to interconnect new generation to the transmission grid.
This led FERC to its latest set of changes, which includes Order No. 1920 and Order No. 2023, which focuses on improving the generation interconnection process.
The American Public Power Association has advocated for public power’s interests throughout FERC’s long effort to reform transmission planning. By submitting multiple rounds of public comments, participating in technical conferences, and meeting directly with FERC commissioners and staff, APPA has consistently urged FERC to focus on reforms that will result in the most efficient and cost-effective solutions.
What’s Included
Order No. 1920’s main innovation is to require transmission providers to engage in a long-term, forward-looking, comprehensive transmission planning process at least once every five years. This long-term regional transmission plan must: (1) develop at least three long-term scenarios to identify transmission needs over the next 20 years, (2) identify potential transmission facilities that meet such needs and measure the benefits of those transmission facilities, (3) evaluate those facilities for selection in the regional transmission plan, and (4) allocate the costs of those facilities within the planning region.
The order includes two requirements for these plans that may help contain costs: reevaluation and right-sizing of projects. The reevaluation requirement states that transmission providers must reevaluate projects if circumstances change such that the project might no longer satisfy the selection criteria, such as from delays in development, changes in actual or projected costs, and significant changes in laws or regulations. The right-sizing requirement aims to address the problem of transmission owners rebuilding old lines instead of regional lines that might be subject to competition by requiring owners to evaluate whether transmission facilities anticipated to be replaced within the next decade can be “right-sized” to better address a long-term transmission need.
Order No. 1920 also requires transmission providers to improve the transparency of local transmission planning, for which the public power community strongly advocated. This includes a requirement to hold at least three publicly noticed stakeholder meetings at least 25 calendar days apart and provide a suite of materials at least five days before each meeting. Transmission providers must also respond to questions or comments in a manner that allows stakeholders to meaningfully participate, but the order does not necessarily require written responses to all comments, nor an explanation of why alternative solutions were not selected.
These reforms are a step in the right direction but fall short of creating meaningful opportunity for stakeholder engagement. For example, the timelines will not allow stakeholders enough time to meaningfully analyze and comment on materials. And FERC declined to adopt local planning reforms that would affirmatively protect customers’ interests, increase oversight and monitoring, require cost estimates, or require coordination with load-serving entities.
Still to Come
Despite its length, Order No. 1920 leaves many important issues unresolved. APPA, along with other public power entities, argued that FERC should include strong cost-containment measures in its final rule, including eliminating unnecessary incentives and encouraging joint ownership. Order No. 1920 defers consideration of those mechanisms.
Giving load-serving entities within a transmission provider’s footprint an opportunity to own their share of a new transmission line has significant benefits for consumers. FERC initially proposed reinstating the federal right of first refusal for any project that included joint ownership between almost any two entities. APPA and many others strongly opposed that proposal, instead advocating for a narrower provision focused on joint ownership with load-serving entities. Order No. 1920 fortunately does not adopt the overbroad joint ownership proposal but unfortunately also does not adopt the narrower joint ownership concept that APPA advocated. Despite not adopting a joint ownership provision, some of the commissioners encouraged transmission providers to facilitate joint ownership structures and indicated that joint ownership will be considered in a future proceeding.
FERC originally proposed to eliminate the Construction Work in Progress incentive, which allows utilities to start collecting money from ratepayers even before a project is placed in-service, for projects selected through the new long-term planning process. APPA supports eliminating this incentive, as it can pose more risk to ratepayers in losing the expected benefit they paid for if the project doesn’t get built. FERC declined to adopt the proposal in Order No. 1920, stating that it would be more appropriate to allow for a holistic approach to transmission incentives in a separate proceeding.
In short, while Order No. 1920 fails to deliver on most of public power’s biggest policy priorities, it has the potential to spur on regional transmission projects that could benefit public power by providing economic and reliable service in a more cost-effective way than existing transmission planning processes.
Whether Order No. 1920 succeeds in its objectives — and whether it ultimately benefits consumers — will depend heavily on further proceedings before FERC and the federal courts.
