FERC Order No. 1000 Enacts New Planning Paradigm for Utilities
As the designated watchdog for the interstate transmission of electricity, natural gas, and oil, the Federal Energy Regulatory Commission (FERC) seeks to “assist consumers in obtaining reliable, efficient and sustainable energy services at a reasonable cost through appropriate regulatory and market means.” Yet with the imposition of FERC Order No. 1000, some industry experts question the extent to which the Agency has remained faithful to its stated mission.
Order No. 1000 calls for the nation’s public utilities to participate in regional planning processes to coordinate investments in our power generation and distribution grid. Each participant must address public policy requirements – e.g., carbon emission reduction, renewable energy sources – when developing proposals to meet future needs. The collective must allocate costs in proportion to the benefits realized from investments. And providers in neighboring transmission planning regions must determine whether it is to their mutual advantage to collaborate on cost-effective solutions for their transmission needs.
In theory, collective planning driven by a call for cost-effective, clean energy appears sound. The National Resources and Defense Council applauds Order No. 1000 for creating the means to satisfy consumer energy needs while paying heed to the environment’s capacity to support future generations. Yet utility companies have not shared their enthusiasm.
The Coalition for Fair Transmission Policy considers Order No. 1000 a threat to consumers who want and deserve just and reasonable rates. It may privilege development of remote power generation facilities with hundreds of miles of transmission lines over more cost-effective local solutions.
Others have taken note of the fact that the cost allocation provisions are not articulated clearly. Public utilities have always found it difficult to align costs with benefits. It will be all the more challenging to develop an equitable economic model in the context of regional and inter-regional investments. Moreover, some fear increased government intervention should they fail to meet FERC’s ill-defined standards.
Finally, several public utilities are already engaged in regional planning forums. The new rule may disrupt processes that have been refined over the years in service to the participants and their constituents.
Despite industry concerns, this new planning paradigm appears to have the weight of law in its favor. The US Court of Appeals for the District of Columbia upheld the provisions of FERC Order No. 1000 in its entirety on August 15, 2014. It remains to be seen whether further judicial or legislative action will alter the course.