Six Challenges and Four Recommendations for New Transmission Rules
Sept 7, 2022
This post continues Gridworks effort to build understanding and agreement among stakeholders in the West toward needed transmission development. For background on the concepts and challenges articulated in this post we recommend “In Support of Western Regional Resource and Planning Coordination.”
In July of 2021 the Federal Energy Regulatory Commission (FERC) embarked on a comprehensive transmission planning rulemaking to require Long-Term Regional Transmission Planning (LTRTP). The rulemaking aims to meet transmission needs driven by changes in the resource mix and demand.
FERC issued a Notice of Proposed Rulemaking (NOPR) in May of 2022. The NOPR’s scope ranges from high level policy to specific details on how to conduct regional transmission planning. It recognizes the importance of the transmission system of the Western Interconnect in meeting regional needs. The NOPR provides an opportunity to further coordinate state policy, regulatory activities and local utility planning with federal level regional transmission planning and development. Such coordination will be key to development of the least cost generation and storage, assuring reliability and resource adequacy.
Parties responded to the NOPR with comments on August 17, 2022. With their comments, parties have illuminated the transmission planning issues facing the Western region. Gridworks has reviewed parties’ comments to provide this overview of some of the critical issues facing NOPR implementation. With this post, we provide a short review of 6 issues that will require concerted effort and coordination among states, utilities and stakeholders:
- Long-term Regional Transmission Planning- 20-year Horizon
- Frequency of Long-term Regional Transmission Plans
- Long-term Regional Transmission Planning- Public Policy, Reliability and Economics
- Conditional Right of First Refusal
- Planning Scenario for Low-frequency, High-impact Events
- Stakeholder Input and Best Available Data
For each we highlight the coordination states, utilities and stakeholders can engage in to resolve the issues and help make the rules’ implementation successful for their region. We offer FERC four recommendations to kick-start this coordination and speed implementation.
Long-term Regional Transmission Planning- 20-year Horizon
The anchor component of the NOPR is the LTRTP with its 20-year transmission planning horizon and three-year planning cycle. Commenters widely support extending the required planning horizon to 20 years. Several commenters argue that such a requirement should not preclude the inclusion of planning done on a shorter time horizon. Commenters caution that as the length of the planning horizon grows so does the uncertainty of the results with the risk that relying solely on the results of a 20-year planning horizon may drive speculative transmission development. As a result of this concern and others, commenters request that the requirement for the 20-year LTRTP horizon be added to, rather than replace the regional transmission planning organizations’ current planning practices.
Accommodating this request will require a well balanced rule and stakeholder participation to implement under the rule after its adoption. The balancing of the results of different transmission plans with different horizons in resource selection is more art than science. Even weighting the results of the first ten years of a transmission plan with those in the second ten years is challenging. After the rule is enacted, states, stakeholders, and utilities will need to wade into the art of balancing results from different transmission planning horizons. To promote the success of that collaborative process, the FERC rule can require the regional transmission planner to conduct a stakeholder process culminating in a written explanation of how the transmission plans with different horizons will be used to determine resource choices. If their combined use is successfully articulated, the use of transmission plans with more than one planning horizon can greatly aid efforts to meet resource targets in 2030s and 2040s.
Frequency of Long-term Regional Transmission Plans
The frequency of conducting the LTRTP, currently proposed as a 3-year planning cycle, is another challenge of conforming and coordinating state and utility planning with federal level planning. The NOPR proposes 3-year planning cycles to assure that inputs are on pace with changes and innovations in the industry. Many commenters support the need for required planning cycles but caution that a one size fits all approach will be disruptive to existing coordination between states and the regional planning entities. The NOPR also seeks to establish an opportunity for stakeholders and states to provide timely input on the data used in the planning.
To accomplish this goal, synchronizing state and utility level planning with the LTRTP will be essential. It may not be realistic for the FERC to articulate in rule tailored schedules between each of the regional planning organizations and the various affected states. Instead the rule could provide flexibility while requiring the regional transmission planner to work with relevant entities in their region to develop a written coordination agreement on the timing of planning related work.
Long-term Regional Transmission Planning- Public Policy, Reliability and Economics
Turning from the timing issues to the purpose of the LTRTP, the NOPR only requires the LTRTP to fulfill public policy planning requirements and does not include planning requirements for reliability and economic projects. Multiple commenters state that their regional transmission planning processes currently include all three in one planning study and are concerned with isolating public policy in a separate study.
It is unclear what direction the NOPR will take on this issue. Great efforts and progress have been made in the West to integrate public policy considerations and reliability and economic project analysis into a single transmission plan. Weighing analysis from two different plans to incorporate public policy considerations into a single resource portfolio will require the development of a methodology. Stakeholders can expect that additional process will be necessary to define and understand how the tradeoffs between the different transmission plans are made to reach the final resource portfolio selection.
Conditional Right of First Refusal
In addition to setting out proposed rules on form and substance of transmission planning, the NOPR proposes a conditional right of first refusal (conditional ROFR). Order 1000 issued in 2011 eliminated the incumbent utility’s right of first refusal, allowing competitive transmission development to grow. An incumbent utility may exercise a conditional ROFR for a transmission project if it enters an ownership structure for that transmission project with a non-affiliated incumbent utility or transmission developer. Commenters generally agree that competition in the field of transmission development is beneficial even if to date a low number of projects have been developed under competitive processes. The question raised by the NOPR is what structure should competition have? Utilities argue that their knowledge of their transmission system is useful to the execution of transmission projects on their transmission footprint. Other commenters are concerned that the NOPR lacks any minimum threshold or specification for what constitutes a qualifying joint ownership.
Additional clarification of what constitutes a qualifying joint ownership may be included in the rule but regardless efforts on a regional level to incorporate the role of competitive transmission development into state and federal level planning processes and utility resource acquisition processes will be ongoing.
Planning Scenario for High-impact Low-frequency Events
To reasonably capture probable future conditions, the NOPR would increase the number of scenarios required from one to four. The definition of those scenarios is not prescribed in the NOPR with one significant exception: one scenario “must account for uncertain operational outcomes that determine the benefits of or need for transmission facilities during high-impact, low-frequency events.” Though not clear in the NOPR, commenters request or interpret this proposed requirement to include the effects of climate change.
Whether or not the final rule clarifies the requirement, western states will need to incorporate the effects of climate change into all planning in order to render useful information on the reliability contribution and economics of their resource portfolios. To date efforts to reflect climate change have been limited and crude adjustments to the inputs of studies such as the use of the trailing 20-years of weather data or adjustments to the average historic weather temperatures. Post-rulemaking, utilities and transmission planners will need to work with states and stakeholders to improve the inputs into their modeling to better reflect the effects of climate change.
Stakeholder Input and Best Available Data
The NOPR is explicit in requiring regional planning organizations to provide an opportunity to states and stakeholders to provide input on the best available data for use in the planning process. There is generally wide support for this provision among commenters with few detractors. The NOPR also requires regional planning organizations to put its study methods in writing.
This combination of requirements will provide states and stakeholders an expanded opportunity to submit data for use in the planning studies. While this might at first appear to be another tax on state and stakeholder resources, after the initial effort to solicit and harvest data from existing institutional, state and utility sources, the data sources can be used in each successive planning cycle with little additional effort. To aid in achieving the smooth and timely flow of data, the rule can require the documentation of the process, structure and timing of data collection.
The NOPR also specifies 12 categories of benefits it deems useful in evaluating transmission facilities in transmission planning and cost allocation but stops short of mandating their use. While some commenters push back on the relevance of some of the benefit categories, other commenters support making the categories a requirement. Addressing the relevancy question, some commenters state the metric used for measuring the category and the method of calculating the metric should be left to the regional transmission planning organization. The CPUC goes further suggesting that the determination should be subject to input from the stakeholders and be included in a compliance filing at the FERC.
Whether required or not, the presence of the 12 categories in the NOPR opens an opportunity for stakeholders to work for a more comprehensive evaluation standard. Much of the development of the details of these categories and the method of their calculation will occur at the start of the first planning cycle after the final rule is issued. Bringing life and transparency to the calculation of these benefit categories will require the engagement of states and stakeholders in at least one planning cycle. More detailed metrics and measurements for the categories will also help square the cost allocation methods used by the regional planning organizations by creating more transparency for comparing their methods. To speed implementation, the rule can explicitly add the development of benefit metrics and measurements to the requirements of the regional transmission planning organization’s stakeholder process and require the methodology be included in writing as part of the organization’s planning practices.
As shown in this summary, stakeholders are actively engaged in helping to shape the proposed rule. We expect positive progress from those efforts. We also see from the issues raised in the NOPR to date that much of the success of the rule will ultimately be determined by the level of engagement by states, utilities and stakeholders during the implementation phase. To speed this stakeholder engagement, Gridworks suggests the rule include the following requirements:
- a stakeholder process for integrating the newly required 20-year plan with existing plans to produce a written explanation of their combined use.
- development of a written plan for coordinating the timing of regional transmission planning and state and utility planning.
- a stakeholder process for developing benefit metrics and measurement methods and require the methods be in writing as part of the regional planning organization’s planning practices.
- documentation of the process, structure and timing of data collection.