Federal Energy Regulatory Commission (FERC) Issues Ruling on Transmission Planning and Cost Allocation

Source: NASEO

On May 13, 2024, FERC issued Order 1920, which adopts specific requirements regarding transmission planning and cost allocation. Specifically, this rule addresses how transmission providers must conduct long-term planning for regional transmission facilities and outlines a framework to determine how to pay for that transmission.

Regarding transmission planning, the rule requires a 2-year planning horizon, with updates every five years, and outlines seven economic and reliability benefits that must be considered for the evaluation and selection of long-term regional transmission facilities. The seven economic and reliability benefits include: (1) avoided or deferred reliability transmission facilities and aging infrastructure replacement; (2) either reduced loss of load probability or reduced planning reserve margin; (3) production cost savings; (4) reduced transmission energy losses; (5) reduced congestion due to transmission outages; (6) mitigation of extreme weather events and unexpected system conditions; and (7) capacity cost benefits from reduced peak energy losses. The rule also requires consideration of Grid Enhancing Technologies such as dynamic line ratings, advanced power flow control devices, advanced conductors and transmission switching. Included in this rule are also requirements for transmission providers to be more transparent throughout the planning process and to revise interregional transmission coordination processes.

With respect to the issue of cost allocation – i.e., how transmission is to be paid for – the rule establishes a new framework for decision making and promotes a portfolio approach to distribute costs and benefits across regions and stakeholders. Transmission providers are required to hold a six-month engagement period with relevant state entities (defined as any state entity responsible for utility regulation or siting electric transmission facilities) regarding cost allocation methods and/or a state agreement process prior to compliance. The rule also allows permitting transmission providers to adopt a state agreement process, agreed to by relevant state entities, which could occur before, as well as up to six months after selection, for its participants to determine, and transmission providers to file, a cost allocation method for specific long-term regional transmission facilities.

This rule, which was originally proposed in April 2022, is the result of more than 15,000 pages of comments from nearly 200 stakeholders representing all sectors of the electric power industry; environmental, consumer and other advocacy groups; and state and other government entities. NASEO submitted comments in August of 2022, which can be viewed here. Order No. 1920 takes effect 60 days after publication in the Federal Register. Compliance filings with respect to most of the rule’s requirements are due within 10 months of the effective date, while filings to comply with the interregional transmission coordination requirements are due within 12 months of the effective date.

NASEO staff will continue to provide information on the implications of this rule through the NASEO Electricity Committee and Transmission Working Group.