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Open Access on Trial

The old rules don’t always fit with new commercial realities.

Fortnightly Magazine - December 2011

Planning and Financing

Whereas many projects have been proposed, surprisingly few new long-line, high-voltage transmission lines have actually been built, and most of those that have been successful are somewhat traditional utility-type projects that address economic and reliability concerns (such as Trans Bay Cable, a product of the California Independent System Operator’s planning process) 3 or increase interconnectivity between different regions of the country (for example, the Cross Sound Cable and Neptune projects). 4 Many new transmission lines—particularly those proposed by independents that are designed to connect new sources of electric generation to the grid—continue to be bogged down in regulatory, financial, siting and environmental hurdles. So FERC has found over the last several years that attracting incumbent and independent investors with a series of financial incentives is only the first step to achieving its goal of encouraging successful new transmission construction.

Among other things, FERC also has focused on the need for an open and coordinated planning process within and between regions of the country for new transmission projects. In Order Nos. 890, et seq., FERC required transmission providers to publicly file their planning processes, and in July 2011 FERC issued Order No. 1000, which, for the first time, required each electric planning region in the U.S. to develop a region-wide transmission plan, to coordinate and share planning information with interconnected regions, and to develop cost allocation methodologies for the new facilities to be constructed under those plans. 5 The order explicitly requires transmission providers, including independent system operators and regional transmission organizations, to include independent transmission developers and their proposed projects as an integral part of the planning process. In a controversial move, Order No. 1000 also eliminated, with some exceptions, federal rights of first refusal in FERC-jurisdictional tariffs and agreements that had given priority to incumbent transmission providers to build new transmission within their franchised territories. With the adoption of Order No. 1000, FERC hopes to improve the flow of information among market participants and policymakers, making benefits and policy goals more transparent in the regional or interregional plans, and thus potentially reducing local siting concerns and cost allocation disputes within and between regions.

FERC has also taken steps to address the ability of transmission customers to gain rights to transmission service over new lines, or, stated from a different perspective, the ability of independent transmission developers to enter into the long-term contracts with creditworthy and reliable customers that will allow them to finance a new line. Although nondiscriminatory access to transmission, as an essential facility, remains the centerpiece of FERC’s policy initiatives, FERC is finding that a rigid application of the open access rules developed initially for incumbents doesn’t always accommodate the practical and financial needs of an independent transmission developer. As FERC considers whether to loosen these requirements for independents, the commission is finding that it must test the edges of its legislative mandate to prevent “undue discrimination” in its regulated open access program with its desire to rely as much as possible on market solutions to grow the nation’s transmission infrastructure.

In pursuit of its open