FERC Order 1000 & Public Policy Transmission Projects

05 March 2012
By Sandra Ringelstetter Ennis et al.

This paper examines the US Federal Energy Regulatory Commission's (FERC) Order 1000, which addresses a wide range of policy issues, including provisions that may prove beneficial to advance transmission projects for renewable energy and other merchant power projects. These provisions relate to limitations on incumbent utilities' right of first refusal to develop transmission projects, the requirement for regional transmission organizations to file tariff provisions related to policies and procedures for addressing cost allocation, and the inclusion of public policy considerations in the cost benefit analysis for transmission projects. The order extends the framework for cost allocation defined in Order 890, introduces public policy as a new component of the benefits assessment, and has new pro forma tariff requirements related to regional cooperation and cost allocation. The authors note that the FERC Order is widely viewed as an opportunity to approve and fund more transmission projects associated with renewable resources (siting issues aside). As a result of Order 1000, the evaluation of a transmission project’s benefits can extend beyond the traditional calculations of reliability, congestion reduction, and power price reductions. However, the authors note, the inclusion of public policy may result in a large number of proposed projects claiming either unrealistically high benefit-to-cost ratios, or benefits disproportionate to traditional reliability projects. The implications of including this new category of benefits is uncertain and will be influenced by the actual compliance tariff filings and the inevitable law suits. This paper provides a high-level summary of FERC Order 1000 as it relates to the issues of public policy benefits and cost allocation.