Bridging the Seams

Deck: 

Interregional planning under FERC Order 1000

Interregional planning under FERC Order 1000

Fortnightly Magazine - November 2012

Now that the U.S. regional transmission planning groups have explained how they will comply with the region-internal transmission planning and cost allocation provision of the Federal Energy Regulatory Commission’s Order 1000, their focus has shifted to the order’s interregional requirements. This broader focus provides an opportunity to significantly improve transmission planning near and across regional boundaries, which up to now has lagged region-internal efforts. An effective framework for interregional planning and cost allocation will be flexible enough to accommodate the often significant differences across regions and types of transmission projects.

The current lack of clarity on joint planning and cost allocation for interregional projects has created what some have called a “demilitarized zone” or gap of transmission investments near or across market seams. Because there isn’t a single transmission planning entity that considers all benefits or knows how costs would be recovered from multiple regions, it’s important to clarify up-front in the planning process how neighboring regions will evaluate interregional transmission projects, consider all project-related benefits in the respective regions, and use such benefits to determine cost allocation.

These ideas weren’t lost on FERC when it issued new rules in July 2011. In fact, FERC Order 1000 explicitly recognizes that “the lack of coordinated transmission planning processes across the seams of neighboring transmission planning regions could be needlessly increasing costs for customers of transmission providers, which may result in rates that are unjust and unreasonable and unduly discriminatory or preferential.” In an attempt to avoid such an outcome, the order requires the development of interregional planning processes that identify the transmission needs across regions and a method to allocate costs associated with interregional solutions to meet those needs.

Figure 1 - Building Blocks for an Effective Interregional Planning and Cost Allocation Framework

EES North America
Interregional cost allocation is especially challenging given the barriers associated with the planning and analyses of interregional transmission projects. Planning-related challenges often start with limited staff resources to evaluate and consider interregional projects, which can be exacerbated by a lack of sufficiently detailed and current multi-region planning data and models to conduct joint system analyses. Uncertainty as to how or when a neighboring system will evaluate and consider interregional projects as part of its regular planning processes can cause significant delays in the development of interregional projects. Also a gap between bottom-up and top-down planning studies can lead to an inability to identify beneficial projects. Qualification criteria for an interregional project often are unclear. Transmission benefits and metrics often aren’t articulated with sufficient detail to allow for cost allocation based on clearly identifiable benefits to each entity. Moreover, individual interregional projects might offer a very different mix of benefits ( e.g., reliability,