Public Utilities Reports

PUR Guide 2012 Fully Updated Version

Available NOW!
PUR Guide

This comprehensive self-study certification course is designed to teach the novice or pro everything they need to understand and succeed in every phase of the public utilities business.

Order Now

Transmission Preemption

Federal policy trumps state siting authority.

Fortnightly Magazine - November 2010

of FERC, the D.C. Circuit noted that while ICRs encouraged generation, which isn’t within FERC’s jurisdiction under FPA Section 201(b), they don’t require construction: The state can control how an LSE meets its capacity obligation by limiting the amount or type of generation built in the state, and making the LSE use demand response or buy capacity contracts. 18

Second, it’s irrelevant that the assumption decision was delegated to the RTO and not made by FERC. In applying the filed-rate doctrine to reject a state’s imprudence ruling relating to a provider’s cost allocation set pursuant to a FERC-filed service agreement, the Supreme Court found it immaterial that the agreement left discretion to the provider’s operating committee to decide, stating: “We see no reason to create an exception to the filed-rate doctrine for tariffs of this type that would substantially limit FERC’s flexibility in approving cost allocation arrangements.” 19 If the RTO’s filed tariff dictates who will make the needs-assessment determination, and how, a state authority can’t revisit the same issue.

Third, the filed-rate doctrine also precludes a state authority from interpreting and applying a federal tariff itself—hence the state can’t substitute its own assumptions based on its conclusion that the RTO misapplied NERC reliability standards. The Fifth Circuit held that a state commission couldn’t set retail rates based on its own determination that a utility failed to comply with its FERC tariff, further noting that the filed-rate doctrine didn’t just apply to the allocation formula in the filed tariff per se , but to the entire system integration agreement filed as a part of the tariff. “If each state could enforce its own findings as to the meaning of a filed tariff, in opposition to the conclusions of a FERC-approved agent, the conflicting interpretations would undermine FERC’s ability to ensure that a filed rate is uniform across different states, and intrude upon its exclusive jurisdiction over interstate power transactions.” 20

Federal Preemption

The general preemption principles applied under the Supremacy Clause of the Constitution confirm that the federal framework precludes states from revisiting need determinations.

Preemption occurs when Congress shows an intent to occupy a field, or when state action conflicts with federal law. The latter conflict preemption arises either when it’s impossible to comply with both the state and federal law or “where the state law stands as an obstacle to the accomplishment of the full purposes and objectives of Congress…” 21 While Section 215’s language that nothing therein shall be construed to preempt any authority of any state to take action to ensure “the safety, adequacy, and reliability of electric service within that State, as long as such action is not inconsistent with any Reliability Standard” tends to suggest only a conflict, not field preemptive scope, an equally plausible reading of this language is that a state may regulate as it chooses on its side of the bright-line jurisdictional divide between transmission and local retail service. If something relates to transmission, or interstate, reliability, then it lies within FERC’s exclusive jurisdiction.

Regardless of whether FERC’s exclusive control over transmission triggers