FERC ‘Gift’ Broadcast Order for Solar and Wind

The Federal Energy Regulatory Commission (FERC) issued a “transmission planning breakthrough” order last week that would impose the costs of state renewable energy mandates on consumers in other states. While couched in language related to grid reliability and affordability, the rule will instead push utilities toward intermittent and unreliable wind and solar power plants.

FERC is an independent federal agency that regulates the sale of electricity between utilities and utilities, as well as the interstate transmission of electricity. For wind turbines and solar panels to deliver electricity to consumers, they must be connected to the grid. However, because wind and solar projects are typically located in remote areas with large land areas, heavy-duty transmission lines are needed to transmit electricity to urban areas. Hence the call for greater transmission options, sometimes in the face of opposition from environmental groups and residents.

This provision obliges transmission system operators to develop regional transmission plans for at least 20 years. Operators must assume that federal, state or local regulations requiring resource blending, decarbonization and electrification will be met. This means transmission utilities must assume that the costly and unfeasible net zero public policies proposed in states will be implemented as written.

FERC simultaneously passed a 1977 regulation that “gives it authority to authorize electric transmission lines in certain cases where states do not act first.” This is a departure from the current practice in which states have authority over transmission and location permits.

How to pay for projects gets tricky, but stick with me. Order 1920 combines policy-driven transmission projects (read: projects based on clean energy mandates) with transmission that is necessary for economic or reliability reasons. The final rule requires providers to submit an application ex ante (“pre-event”) default cost allocation methods that apply to all types of projects – even if specific countries in the region have not agreed to bear the costs of mandates in other countries. Of course, providers are supposed to “consult with states and seek support,” but they are not required to take any action on this data. In the proposed rule, FERC would allow states to voluntarily agree to different cost sharing.

In a separate statement on the final rule, FERC Commissioner Mark Christie, the only Republican on FERC’s three-member board, wrote:

But it is not everything; Here comes the worst part of the shell game. The final rule therefore requires each U.S. transmission service provider to submit an ex ante cost allocation formula applicable to its entire set of projects, which currently includes public policy and corporate projects, in order to socialize the costs of these projects around the world. the entire region, even if countries in the region have never agreed to allow their consumers to bear the costs of such projects.

Travis Fisher, director of energy and environmental research at the Cato Institute, explains some of the challenges of this rule:

Despite some sugarcoating from FERC, this plan: (1) requires regional transmission plans to socialize the costs of the most aggressive climate and renewable energy targets of certain states and corporate customers at the expense of consumers and taxpayers around the world, (2) stems from the lack of express authority granted by Congress, and (3) haste to avoid further scrutiny under the Congressional Review Act.

It is likely that the final rule will be challenged under the principal questions doctrine, which requires explicit congressional approval on issues of “tremendous economic and political importance.”

FERC would be blind if it didn’t realize that its transmission rules would increase costs for consumers who must now bear the burden of other states’ emissions mandates. Let’s hope this provision gets the scrutiny it deserves.