Unless the regulatory paradigm fairly balances the interests of both load and generation, the utility industry will be condemned to continued upheaval.
Order 1000, the RTOs, and the power of incumbency.
The Federal Energy Regulatory Commission issued Order 1000 to do many things, not the least of which was to open up the transmission construction business to private developers. So it’s worth noting that the RTOs, having now filed their compliance plans, are very much refusing to go along.
So much so, in fact, that this column perhaps should’ve been less critical of utilities in non-RTO areas, and their own respective compliance plans, in covering that topic last month ( See, “ Very Roughly Commensurate: Analyzing the Order 1000 comply filings from non-RTO regions ,” Fortnightly, January 2013, p.16 ).
What we’re seeing now invokes FERC’s fears more than its hopes. To put it bluntly, the RTOs appear to be backing away a bit from full regional cost sharing, and at the same time they’re raising barriers to entry for non-incumbents in the grid construction sector.
Consider these items, gathered from some of the RTO compliance filings:
• The MISO Case: On October 25, the Midwest ISO coupled its Order 1000 comply filing (FERC Dkt. ER13-186) with a companion proposal submitted the same day (Dkt. ER13-186) to eliminate its prior policy of 20-percent regional cost sharing for high-voltage “baseline reliability projects” (345 kV and up). Instead, MISO proposed to assign costs for all BRPs, regardless of voltage, to the transmission pricing zone in which the project lies.
This change, if allowed to stand, would leave all reliability projects classified as “local” under Order 1000, meaning that MISO’s incumbent transmission-owning members (TO) would enjoy a monopoly right over the building of almost all new grid facilities designed for the purpose of maintaining reliability standards. That’s because “local” grid projects fall outside FERC’s new rules, under Order 1000, that outlaw any federally approved ROFR (“right of first refusal”) for projects qualifying for regional cost allocation.
• The SPP Case: With its Order 1000 compliance plan, filed on November 12 (FERC Dkt. ER13-366), the Southwest Power Pool retained its well-regarded Highway-Byway grid cost allocation regime, which allows 100-percent regional cost sharing for high-voltage lines (300 kV and up), and 33-percent regional cost sharing for lesser-voltage lines (down to 100 kV). However, SPP claimed nonetheless that it could preserve ROFRs for these lesser-voltage lines for its incumbent TOs.
According to SPP, FERC’s June 2010 decision approving the Highway-Byway scheme had found that lower-voltage lines served more of a local than a regional function. Moreover, SPP claimed that FERC’s Highway-Byway order had reflected agreement among a broad swath of regional stakeholders—including SPP’s regional state committee—that only incumbents could build such lesser-voltage lines. SPP argues, in effect, that its ROFR for lower-voltage lines (100 kV up to 300 kV) is grandfathered under the June 2010 order.
• The PJM Case: Back East, PJM’s incumbent member TOs—but not the RTO itself—claim the Mobile-Sierra legal doctrine bars FERC from forcing any amendment to their transmission owner agreements (TOA) that might diminish any ROFRs enjoyed