Report of the Electricity Regulation Committee

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Report of the Electricity Regulation Committee


This report covers significant calendar 2012 electric regulatory orders of the Federal Energy Regulatory Commission (FERC) and the Electric Reliability Council of Texas (ERCOT).*

I. INTRODUCTION

The Electricity Regulation Committee has a broad focus with a jurisdiction that overlaps that of several more tightly focused Energy Bar Association committees. Thus, this report generally does not address transmission reliability and planning (System Reliability, Planning, and Compliance Committee), wholesale market-based rates (Power Generation and Marketing Committee), enforcement (Compliance and Enforcement Committee), renewable energy and demand-side management (Renewable Energy Committee and Demand-Side Resources and Smart Grid Committee), or court appeals (Judicial Review Committee).

II. RULEMAKINGS AND POLICY STATEMENTS

A. Order Nos. 1000-A and B

On May 17, 2012, Order No. 1000-A1 denied all Order No. 1000 rehearing requests but provided clarifications, including: (1) Local transmission projects do not require approval at regional or inter-regional level unless the provider seeks to have their costs allocated in those plans;2 (2) Regional plans must specify that enrolled parties are subject to project cost allocations if they receive benefits from the project;3 (3) Public utility provider tariffs must describe how stakeholders may provide input on inter-regional facilities and cost allocation;4 (4) Rights of first refusal (ROFRs) are not obviated where project costs are allocated solely to a retail distribution service;5 (5) Non-incumbent qualification cannot require state approval to operate in the state or registration with the North American Electric Reliability Corporation (NERC);6 (6) The same evaluation process must be used for non-incumbent and incumbent developer projects;7 and (7) Non-public utility providers may choose whether to obtain FERC-jurisdictional transmission service.8 Order No. 1000 cost-of-service principles were retained with clarifications, including the finding that postage stamp rate design can sometimes meet the requirement that costs be allocated commensurate with benefits received.9

Order 1000-B, issued October 18, 2012, granted clarifications.10 The Order No. 681 allowance of preferences to load-serving entities in allocations of firm transmission rights remains.11 A Federal Power Act (FPA) section 205 filing is not required for project specific application of a regional cost allocation policy.12 The FERC has authority to eliminate incumbent transmission provider ROFRs for projects selected for cost allocation in a regional plan,13 and incumbent ROFRs are eliminated for any new project selected for regional cost allocation.14 Whether ROFRs could be maintained for smaller provider projects where all costs are allocated to a single zone with more than one transmission owner is leftfor the compliance stage.15 To permit regional flexibility, clarification of how a benefit-cost evaluation should apply to regional or inter-regional projects was not provided. 16

B. Policy Statement on Promoting Transmission Investment Through Pricing Reform

The November 15, 2012 Policy Statement "provide[s] guidance regarding [the FERC's] evaluation of applications for electric transmission incentives under section 219 of the [FPA]."17 First, under the nexus test, "applicants [must] demonstrate a connection between the incentive(s) requested under Order No. 679 and the proposed investment, and that the incentive(s) requested address the risks and challenges that a project faces."18 The FERC "will no longer rely on the routine/non-routine analysis . . . as a proxy for the nexus test."19 Instead, it is "necessary to analyze the need for each individual incentive, and the total package of incentives . . . ."20 Second, the Policy Statement reaffirmed that certain rate incentives, including recovery of construction work in progress, "pre-commercial costs as an expense or as a regulatory asset," and costs of projects "that are abandoned for reasons beyond the applicant's control, .

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