Capacity markets have been a significant source of controversy since the inception of competitive wholesale markets.
Walking the Fuzzy Bright Line
The legality of state ROFR laws under FERC Order 1000.
utility doing business in the state. An outright ban, however, may encounter Commerce Clause issues, not only in discriminating against out-of-state developers, but also in potentially in restricting interstate commerce by preventing construction of a line that would be used for interstate power sales.
On reflection, the strength of both the preemption and commerce clause arguments may depend on whether state ROFR laws are themselves found to fit squarely within a state’s siting and permitting authority, or whether they cross the line into federally regulated transmission areas.
In this sense, the recent Seventh Circuit case is important for several reasons: First, MISO’s MVP proposal was the type of regional cost allocation that FERC was pressing for in Order 1000. The court’s decision in that case bodes well for a similar analysis to uphold Order 1000, including the ROFR elimination provisions, when that appeal is decided by the D.C. Circuit. Second, without much explanation or analysis, the Seventh Circuit concluded that discrimination against out-of-state renewables was a violation of the Commerce Clause. A similar argument could be made that state ROFR laws discriminate against out-of-state transmission developers.
It remains to be seen how solid the ground is for state ROFR laws until we see whether FERC’s Order 1000 is upheld. If so, to the extent a state ROFR law precludes a nonincumbent developer selected in a federally approved competitive bidding process from developing in that state, that state ROFR law would itself be ripe for direct challenge – on grounds that it is preempted or otherwise in violation of the Commerce Clause.
1. Promoting Wholesale Competition Through Open Access Non-Discriminatory Transmission Services by Public Utilities; Recovery of Stranded Costs by Public Utilities and Transmitting Utilities , Order No. 888, 61 FR 21540 (May 10, 1996), FERC Stats. & Regs. ¶ 31,036, at 31,642 (1996), order on reh’g , Order No. 888-A, 62 FR 12274 (Mar. 14, 1997), FERC Stats. & Regs. ¶ 31,048, order on reh’g , Order No. 888-B, 81 FERC ¶ 61,248 (1997), order on reh’g , Order No. 888-C, 82 FERC ¶ 61,046 (1998), aff’d in relevant part sub nom. Transmission Access Policy Study Group v. FERC , 225 F.3d 667 (D.C. Cir. 2000), aff’d sub nom. New York v. FERC , 535 U.S. 1 (2002).
2. Transmission Planning and Cost Allocation by Transmission Owning and Operating Public Utilities , Order No. 1000, 76 FR 49842 (Aug. 11, 2011), FERC Stats. & Regs. ¶ 31,323 (2011), order on reh’g , Order No. 1000-A, 139 FERC ¶ 61,132 (2012), order on reh’g and clarification, Order No. 1000-B, 141 FERC ¶ 61,044 (2012).
4. 535 U.S. at 30 (Justice Thomas, JusticeScalia, and Justice Kennedy concurring in part and dissenting in part: “in order to properly assess FERC’s decision not to apply the OATT to transmission connected to bundled retail sales, we must carefully evaluate the two justifications that the Court points to and relies on. Neither is sufficient.”)