Round two of FERC's attempt to create a cost-socialized coast-to-coast electricity trading market has begun. On May 28, a motley collection of strange bedfellows filed a petition for review of Order No. 1000 in the D.C. Circuit of the U.S. Court of Appeals. To make it even more fun, a whole bunch of parties intervened in the matter, in support of either the petitioners or FERC, depending on where their interests lie.
The petitioners include publicly owned power providers and co-ops, investor owned utilities, states, an ISO, trade associations, and an informal "coalition" of utility interests.
Intervenors include ISOs, states, investor owned utilities, public power and co-ops, well-meaning but sadly misguided environmental groups, and trade associations.
Objections to Order 1000 have finally been boiled down to three basic arguments (although the briefs go on and on and throw in all sorts of supporting arguments).
1. Whether FERC has the authority to mandate transmission planning and take other actions to force what it characterizes as “facilitating the development of more efficient and effective transmission expansion plans.”
2. Whether FERC has the authority to order broad socialization of cost responsibility for the building of new transmission lines.
3. Whether FERC can dispose of a utility's right of first refusal to build new transmission in its service territory.
The petitioners include publicly owned power providers and co-ops, investor owned utilities, states, an ISO, trade associations, and an informal "coalition" of utility interests.
Intervenors include ISOs, states, investor owned utilities, public power and co-ops, well-meaning but sadly misguided environmental groups, and trade associations.
Objections to Order 1000 have finally been boiled down to three basic arguments (although the briefs go on and on and throw in all sorts of supporting arguments).
1. Whether FERC has the authority to mandate transmission planning and take other actions to force what it characterizes as “facilitating the development of more efficient and effective transmission expansion plans.”
2. Whether FERC has the authority to order broad socialization of cost responsibility for the building of new transmission lines.
3. Whether FERC can dispose of a utility's right of first refusal to build new transmission in its service territory.
Signatories to this brief raise a number of challenges to the Orders. Several object that the transmission-planning mandate exceeds FERC’s statutory authority, which they argue is limited to encouraging, not requiring, coordinated planning. Various petitioners argue that FERC’s Orders are arbitrary and capricious because they are aimed, not at correcting specific abuses or unreasonable existing rates, but at addressing what FERC describes as the “theoretical threat” that existing planning arrangements might not produce a “more efficient and cost-effective” transmission system. Several petitioners object that mandating consideration in planning processes of transmission needs driven by myriad federal, state, and local public-policy requirements violates the FPA by making the needs of load-serving entities (e.g., public utilities) an optional consideration and is arbitrary and capricious. Some petitioners object that the cost-allocation mandate exceeds FERC’s statutory authority by allowing and directing allocation of transmission costs to entities having no customer or contractual relationship with the transmission provider.
Several petitioners argue that FERC lacks authority to order public utilities to remove exclusive construction rights from their tariffs and to adopt mechanisms allowing third parties to develop the transmission facilities the utilities need to satisfy their service requirements. These petitioners argue that FERC’s actions reduce the efficiencies inherent in vertical integration and arbitrarily interfere with their public-service obligations to maintain reliable service. Some petitioners also challenge the Orders for infringing upon the authority reserved to the States as the States, not FERC, regulate transmission development. Non-jurisdictional utility customers contest FERC’s authority to expand the reciprocal-service condition on their receipt of transmission service to include the Orders’ planning and cost- allocation mandates. An association of jurisdictional utilities objects that FERC’s refusal to invoke FPA section 211A to impose the Orders’ mandates on non- jurisdictional utilities was arbitrary. These and several other challenges to the Orders are discussed in the issue-specific briefs.
Order 1000 concluded we need “transmission planning and cost allocation processes so that the transmission grid can better support wholesale power markets and thereby ensure that Commission-jurisdictional services are provided at rates, terms and conditions that are just and reasonable and not unduly discriminatory or
preferential.”
FERC got downright silly mincing words to create its authority to do what it did, and the briefs get into some really ridiculous debate of grammatical construction and the meanings of phrases and words. There's also discussion that brings to mind the old "if it ain't broke, don't fix it" idiom. According to petitioners, FERC did not have sufficient reason to "fix" transmission planning and cost allocation because it did not have a compelling reason to conclude that there was anything to "fix," nor that its "fix" would be an improvement.
preferential.”
FERC got downright silly mincing words to create its authority to do what it did, and the briefs get into some really ridiculous debate of grammatical construction and the meanings of phrases and words. There's also discussion that brings to mind the old "if it ain't broke, don't fix it" idiom. According to petitioners, FERC did not have sufficient reason to "fix" transmission planning and cost allocation because it did not have a compelling reason to conclude that there was anything to "fix," nor that its "fix" would be an improvement.
The Orders, they noted, were based, not on evidence of specific problems, but on FERC’s determination that “inadequate transmission planning and cost allocation requirements may be impeding the development of beneficial transmission lines,” and that the Orders “could” or “may” identify transmission solutions that “meet the needs of a transmission planning region more efficiently or cost-effectively.”
In justifying its new "beneficiary pays" requirements to more broadly socialize the cost of transmission to ratepayers across multiple regions, FERC failed to define "benefit," which allows very loose interpretation of perceived "benefit" in exchange for cost responsibility. FERC determined that it was preventing "free ridership," whereby some beneficiaries did not pay for new transmission. The petitioners argument hinges on the fact that FERC cannot create cost responsibility between parties who do not have a contract for the service being provided. In addition, FERC may only approve rates proposed by companies it regulates, or fix the same when they are unjust or unreasonable. It cannot create and set rates on its own initiative.
That's all fine and good, however the REAL reason for broader cost socialization is to hide the true cost of this transmission building craze from the billions of electric consumers who will finance it. The broader the cost is spread, the smaller the impact on each individual. Who in West Virginia is going to notice a couple extra cents on their monthly electric bill for new transmission lines in Kansas? However, if the cost is spread over a smaller pool of true "beneficiaries" closer to the actual transmission lines, it would cause greater monthly increases that would definitely be noticed and contested. In this way, federal regulators, and the for-profit generators and transmission owners they serve, are tricking you into failing to notice the immense profits you are paying to these companies in exchange for building new transmission of questionable necessity. It's not supposed to be about continued forced support of a dying, centralized energy paradigm, but about citizens' ability to consciously invest in smart, efficient and reliable energy systems of their own choosing. Long-distance transmission lines will soon be as necessary as land line phones, however we may be stuck with the huge investment we were forced to make in them now for many years after they cease to be useful to us.
But wait... FERC wields the interstate commerce club that they have been quietly swinging behind their back for the past couple of years to trump any naysayers to Order 1000. FERC possesses authority to regulate “the transmission of electric energy in interstate commerce” and “the sale of electric energy at wholesale in interstate commerce.” However, Congress has repeatedly mandated that states retain the authority to permit transmission lines within their borders. This state/federal conflict has been going on for years, and the interstate commerce club makes its first appearance in the 7th Circuit MISO MVP decision I wrote about earlier this week. Will it be enough to club states into submission?
I still can't muster up the energy to care about the investor owned utilities excitement over losing their long standing right of first refusal ("ROFR"), and the arguments petitioners put forward are nothing short of humorous. The IOUs purport that elimination of the ROFR "...would negatively affect reliability, impede planning, and substantially harm consumers." The ROFR that was eliminated allowed utilities to have first dibs on any new transmission lines in their service territory that were determined to be needed by the regional planning authority. In possessing this "right," the IOU was given the ability to determine the cost of the new transmission without competition. I'm not sure how that ever protected the consumers who pay for transmission. It didn't. FERC's elimination of the ROFR now provides that once a need for a transmission upgrade is identified, anyone can submit a bid to build it. Only through this kind of price competition will consumers be assured that needed transmission is built most cost-effectively.
One of the side-shows going on under the authority to mandate transmission planning category involves FERC's determination that "public policy" requirements be considered in regional planning. "Public policy" requirements are individual state or local laws or goals requiring jurisdictions to obtain a certain percentage of their power from renewable resources. In placing regional planners in the position of interpreting and fulfilling the laws of states or localities, FERC seriously oversteps its authority. Only the jurisdiction that enacts a public policy requirement has authority to implement and enforce the requirement. It is not up to FERC or regional planners to decide what a government may have meant by a certain requirement, or how the government will implement and meet it. As well, the cost of regional mandates to build transmission that would satisfy individual "public policy" requirements cannot be socialized among residents of other localities whose laws don't require it, or conflict in some way with the "public policy" being satisfied with the new transmission. But wait... here comes that interstate commerce sledgehammer again! The 7th Circuit ruled that the Commerce Clause of the Constitution trumped state autonomy to reject fees mandated by another state's law over which it has no control.
If you're a geeky freak who enjoys pouring through lengthy legal briefs for occasional giggles, here are links to the ones filed at the D.C. Circuit:
1. Statement of Facts Brief (contains general housekeeping stuff and the most basic summary of the issues you're going to find. If you only read one, make it this one.)
2. Cost Allocation Brief (enough detail of the cost allocation arguments to lull you to sleep even after an entire pot of coffee!)
3. Threshold Issues Brief (why FERC has no authority to do what it did - ad nauseam).
Well, haven't they all created a fine mess for consumers when left unsupervised? This is going to drag on for years, but ultimately will determine how your electricity is generated, how it gets to you, and how much you're going to pay for it. Obviously your best interests are not being represented by any of these parties. You're going to have to speak up and let your elected representatives know what you want.
That's all fine and good, however the REAL reason for broader cost socialization is to hide the true cost of this transmission building craze from the billions of electric consumers who will finance it. The broader the cost is spread, the smaller the impact on each individual. Who in West Virginia is going to notice a couple extra cents on their monthly electric bill for new transmission lines in Kansas? However, if the cost is spread over a smaller pool of true "beneficiaries" closer to the actual transmission lines, it would cause greater monthly increases that would definitely be noticed and contested. In this way, federal regulators, and the for-profit generators and transmission owners they serve, are tricking you into failing to notice the immense profits you are paying to these companies in exchange for building new transmission of questionable necessity. It's not supposed to be about continued forced support of a dying, centralized energy paradigm, but about citizens' ability to consciously invest in smart, efficient and reliable energy systems of their own choosing. Long-distance transmission lines will soon be as necessary as land line phones, however we may be stuck with the huge investment we were forced to make in them now for many years after they cease to be useful to us.
But wait... FERC wields the interstate commerce club that they have been quietly swinging behind their back for the past couple of years to trump any naysayers to Order 1000. FERC possesses authority to regulate “the transmission of electric energy in interstate commerce” and “the sale of electric energy at wholesale in interstate commerce.” However, Congress has repeatedly mandated that states retain the authority to permit transmission lines within their borders. This state/federal conflict has been going on for years, and the interstate commerce club makes its first appearance in the 7th Circuit MISO MVP decision I wrote about earlier this week. Will it be enough to club states into submission?
I still can't muster up the energy to care about the investor owned utilities excitement over losing their long standing right of first refusal ("ROFR"), and the arguments petitioners put forward are nothing short of humorous. The IOUs purport that elimination of the ROFR "...would negatively affect reliability, impede planning, and substantially harm consumers." The ROFR that was eliminated allowed utilities to have first dibs on any new transmission lines in their service territory that were determined to be needed by the regional planning authority. In possessing this "right," the IOU was given the ability to determine the cost of the new transmission without competition. I'm not sure how that ever protected the consumers who pay for transmission. It didn't. FERC's elimination of the ROFR now provides that once a need for a transmission upgrade is identified, anyone can submit a bid to build it. Only through this kind of price competition will consumers be assured that needed transmission is built most cost-effectively.
One of the side-shows going on under the authority to mandate transmission planning category involves FERC's determination that "public policy" requirements be considered in regional planning. "Public policy" requirements are individual state or local laws or goals requiring jurisdictions to obtain a certain percentage of their power from renewable resources. In placing regional planners in the position of interpreting and fulfilling the laws of states or localities, FERC seriously oversteps its authority. Only the jurisdiction that enacts a public policy requirement has authority to implement and enforce the requirement. It is not up to FERC or regional planners to decide what a government may have meant by a certain requirement, or how the government will implement and meet it. As well, the cost of regional mandates to build transmission that would satisfy individual "public policy" requirements cannot be socialized among residents of other localities whose laws don't require it, or conflict in some way with the "public policy" being satisfied with the new transmission. But wait... here comes that interstate commerce sledgehammer again! The 7th Circuit ruled that the Commerce Clause of the Constitution trumped state autonomy to reject fees mandated by another state's law over which it has no control.
If you're a geeky freak who enjoys pouring through lengthy legal briefs for occasional giggles, here are links to the ones filed at the D.C. Circuit:
1. Statement of Facts Brief (contains general housekeeping stuff and the most basic summary of the issues you're going to find. If you only read one, make it this one.)
2. Cost Allocation Brief (enough detail of the cost allocation arguments to lull you to sleep even after an entire pot of coffee!)
3. Threshold Issues Brief (why FERC has no authority to do what it did - ad nauseam).
Well, haven't they all created a fine mess for consumers when left unsupervised? This is going to drag on for years, but ultimately will determine how your electricity is generated, how it gets to you, and how much you're going to pay for it. Obviously your best interests are not being represented by any of these parties. You're going to have to speak up and let your elected representatives know what you want.
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