FERC’s transmission rule aims to supersize the grid. Will it?

Federal regulators have overhauled the way managers of U.S. power grids will plan and pay for electricity expansions, giving states a bigger role and lifting efforts to add more wind and solar power.

In a 2-1 partisan split, the Federal Energy Regulatory Commission required utilities and regional grid operators to plan for electricity growth and a changing mix of energy resources decades into the future. The decision is the most consequential policy initiative from FERC in more than a decade explicitly aimed at regional planning.

It also comes at a time of heightened political tensions around President Joe Biden's push to nearly eliminate carbon pollution from the power sector by 2035. A recent EPA power plant rule targeting carbon emissions could speed the integration of carbon-free energy into a grid that's moving swiftly away from coal.

FERC Chair Willie Phillips and Commissioner Allison Clements, both Democrats, voted for the rule Monday. They said the U.S. interstate transmission networks are at a crisis point, aging and stressed by sudden spurts of power growth from data centers and fossil plant retirements while new sources of generation are unable to connect.

Phillips framed the rule around electric reliability — responding to Republican critics threatening litigation who say the independent agency is acting to advance Biden's climate goals. Phillips said Order 1920 aims to build out the grid to ensure greater reliability as it faces more threats from extreme weather.

"Let me be clear, because this is about reliability," Phillips said. "I have complete confidence it will be upheld."

In a statement, White House climate adviser Ali Zaidi characterized the FERC vote as a “huge stride forward.”

Critics of FERC's two-year effort to get a rule in place are expected to take their opposition to court. That could include attorneys general from GOP-led states. It could also include challenges from utilities in the Southeast that tend to reject federal attempts to impose planning requirements and regional transmission organizations that do much of the multistate transmission planning.

FERC's lone Republican, Commissioner Mark Christie, dissented with fiery remarks. He called it “complex, frequently contradictory” and “a blatant violation of the ‘major questions’ doctrine the Supreme Court set forth — one of the worst examples probably any administrative agency ever tried to do.”

Christie said the rule “essentially gutted” states’ role in planning for new transmission and divvying up its costs. And he accused his colleagues of advancing a hidden climate agenda that would favor wind and solar energy and enrich transmission developers and major power-buying companies.

Praise and disappointment

Power providers have concerns, too. Phil Moeller, vice president of regulatory affairs at the Edison Electric Institute, told E&E News that EEI and the U.S. investor-owned electric companies it represents were “generally disappointed” in the rule. There were “missed opportunities,” he said, such as the adoption of a federal right-of-first-refusal policy, which would give incumbent utilities priority when building transmission infrastructure.

Giving preference to utilities that have built most of the grid infrastructure was the surest way to get more lines under construction, according to EEI.

Clean energy advocates like the R Street Institute said in comments to FERC that a critical impediment to transmission construction was the resistance of utilities who, it alleged, have held back competing transmission projects by independent developers to protect their own generation plants from cheaper imported power.

Lining up with the latter argument, FERC’s policy left the right-of-first-refusal policy unchanged, except to give a limited preference to utilities who plan to upgrade the capacity of lines they own.

Broadly, environmental and clean energy groups applauded Order 1920.

Christina Hayes, executive director for Americans for a Clean Energy Grid, in a statement called it “strong and comprehensive,” adding it “will have major impacts on lowering customers’ costs, driving economic development, and bolstering grid reliability.”

Order 1920’s requirements that transmission planners have to plan for multiple scenarios, incorporate a minimum set of seven benefits in determining a project’s value and consider using grid-enhancing technologies and advanced conductoring earned praise from American Council on Renewable Energy President Ray Long.

“This rule brings everyone to the starting line for scaling up the clean energy transition," Cullen Howe, a senior advocate for the Natural Resources Defense Council’s Sustainable FERC Project, said in a statement.

Democratic lawmakers commended the rule. Senate Majority Leader Chuck Schumer (D-N.Y.) in a statement Monday said, “This is exactly what we need to see the clean energy revolution we catalyzed with the Inflation Reduction Act come to fruition."

Reps. Sean Casten (D-Ill.) and Mike Levin (D-Calif.), who have pushed for more transmission lines, in a statement called the rule a “vital step” and said FERC and Congress "must now turn our attention to the same sort of planning and cost barriers that are holding back the buildout of interregional transmission.”

Meanwhile, some GOP lawmakers warned the rule would unfairly raise costs on consumers for progressive policy gains.

“At the behest of radical environmentalists, FERC is diluting the principle of ‘just and reasonable rates’ by socializing the cost of massive transmission projects on ratepayers even if they may not directly benefit," Sen. Kevin Cramer (R-N.D.) said in a statement.

Heated remarks

In Monday’s FERC meeting, Christie lambasted the rule as “a pretext to enact a sweeping policy agenda that Congress never passed.”

“FERC is supposed to be independent of any presidential administration, of any party, and independent of any political timetable for issuing a rule of this magnitude,” he said, also stating: “We are a consumer protection agency. And this rule utterly fails to protect consumers under our duty in the Federal Power Act.”

Christie said the rule inappropriately groups all types of transmission projects as “long-term regional transmission facilities,” regardless of whether their intent is to boost reliability or promote a public policy goal like greening the grid. He also said mandating instead of recommending that states include certain factors and benefits in transmission planning — such as cost savings, local and state public policies, and resilience to extreme weather — would not only reduce state authority but also mean FERC would effectively be picking winners and losers.

Phillips in a question to FERC staff made it a point to illustrate the opportunities that states do have to be involved in Order 1920.

Clements starkly disagreed with Christie, telling reporters after FERC’s meeting: "We're giving states an elevated seat at the table that did not exist before."

She held that FERC’s primary responsibility lay in making sure lights stay on and said building more transmission is crucial to make sure that enough power is able to flow to where it’s needed.

“The commission cannot fulfill its statutory obligation to safeguard grid reliability without reforming transmission planning and cost allocation,” Clements said during Monday’s meeting, adding that “the dissent’s recommended approach that each state gets an individual veto on infrastructure development is a recipe for inaction.”

Both she and Phillips noted in Monday’s meeting that the country is transitioning to clean energy faster than before and said the U.S. will continue to, regardless of Order 1920.

“It is not the commission's job to try and force the genie that is the energy transition back into the bottle,” Clements said.

What’s legal?

Now that Order 1920 is passed, transmission providers will have to turn their attention to crafting plans that comply with the final rule, a process that they have 10 months to complete. But it’s unlikely that the rule will proceed without protest.

Kevin Huyler, EEI’s managing director of federal regulatory affairs, said the group expects to file a hearing request to ask FERC to reconsider the thorniest parts of its new rule.

Christie himself said the rule goes “far beyond FERC's legal authority.”

“There will be legal challenges, no doubt. I'm sure the utilities and some of the states will come in,” Nick Guidi, a senior attorney with the Southern Environmental Law Center, said in an interview.

Clements, however, said that Christie’s preferred approach itself is what doesn’t hold legal muster.

“Even if the dissent’s approach could work, it is illegal,” Clements said, saying the Supreme Court precedent would require customers that benefit from transmission to pay for those benefits under the “beneficiary pays principle.”

“Legally, the rule is a straight down the middle of the fairway shot,” Clements said.