Compliance with Dodd-Frank might not be as complicated as feared; however, companies must be vigilant in order to maintain the relevant exemptions.
Federal policy trumps state siting authority.
field preemption analysis, state revisitation of RTO need assumptions and conclusions undermines the FPA’s objectives, as set forth in the statute itself and FERC orders and precedent, triggering conflict preemption. As the Fourth Circuit stated when findings preempted a state commission’s revisitation of a cost allocation embodied in a filed transmission- equalization agreement (TEA):
Preemption principles deny state authority to act in a way that would undermine the purposes of federal law. The FPA’s policy statement expresses the Act’s purpose as protection of the public interest affected by the transmission and sale of electric energy in interstate commerce. [See 16 U.S.C. § 824(a)] . The public interest thus protected is, of course, national in scope. The history of the FPA underlines the importance of the broad scope of the public interest the legislation seeks to protect.
Contrasted with this broad public interest protected by federal regulation is the narrower state public interest advanced by PSC regulation. Because the prudence inquiry is inseparable from an inquiry into the TEA’s justness and reasonableness, FERC and the PSC would be making identical, independent inquiries regarding the merits of the TEA but from the perspective of different public interests. It is possible that FERC and the PSC would reach conflicting conclusions regarding the impact of the agreement on their respective publics. Only FERC, as a central regulatory body, can make the comprehensive public-interest determination contemplated by the FPA and achieve the coordinated approach to regulation found necessary in [Public Utilities Comm’n of R. I. v. Attleboro Steam & Electric Co. , 273 U.S. 83 (1927)]. No single state commission has the jurisdiction, and neither can it be expected to have the competence or inclination, to make this broad determination… 22
The same reasoning applies to regional planning assumptions. FERC, NERC and RTOs haven’t been given power under Section 215 to force the state agency to approve a particular transmission project, or to circumvent the state agency and order the project to be built. If a utility wanted to obtain such an order, it would need to seek it from FERC under Section 216. But this doesn’t mean the state agency can ignore or re-examine RTO assumptions in its siting proceeding. FERC’s exclusive control over transmission in interstate commerce and RTO regional planning processes requires a state authority, charged with different, parochial concerns, to respect the reliability determination established through the regional process set forth in a FERC-filed tariff.
Finally, there’s nothing novel about a federal regulatory framework whose preemptive scope limits the justification for, but not the entire sphere of, the state action. This is precisely the delineation used in the Atomic Energy Act when addressing issues relating to the siting of nuclear plants. 23 A federal-state jurisdictional divide in which the federal authority and its regional designee are in charge of setting reliability standards and applying them to determine the scope of need, and state authorities are in charge of determining whether to meet that need through transmission (and where to place the transmission), is thus consistent with other federal legislation. 24
In sum, while