The Federal Energy Regulatory Commission (FERC) recently finalized two rules for the country’s electricity grids that represent the most significant paradigm shift towards expansion in over a decade. Marking a renewed focus on long-neglected transmission policy, the rules fundamentally alter and begin to standardize the thicket of existing approaches to regional transmission planning by codifying principles of longevity, transparency, and engagement. FERC, the independent agency responsible for regulating interstate energy transmission and wholesale electricity markets, issued Orders 1920 and 1977 at a time of growing policymaker and consumer concern over the state of U.S. electricity infrastructure, which is managing a complex transition through the rise of more frequent extreme weather events, a shifting generation mix, and growing demand from end-use electrification, new manufacturing facilities, and data centers. Although more will be needed on the legislative front — particularly on permitting reform, something PPI has adamantly pushed for — FERC has made commendable progress on the planning side of transmission with these new rules.
The orders underscore the need for increased transmission capacity in our nation’s grid. As demand for electricity balloons, there is growing concern that the country’s transmission networks are hard-pressed to meet household and industry needs, and woefully underdeveloped to reach Biden’s electrification and clean generation goals in the next decade. Growing investment in clean energy generation across the United States faces a bottlenecked grid system caused in no small part by a convoluted set of planning processes. More broadly, the regulatory regime governing the electricity sector comprises an antiquated patchwork of utilities, commissions, and state and federal agencies, ill-suited to accommodate the rapid integration of new technologies or a coordinated, long-term approach to transmission planning.
The rules attempt to address these concerns by providing frameworks for a more collaborative and transparent regional approach to planning that encourages forward thinking and clears unnecessary siting holdups. Order 1920, which was approved 2-1 on a partisan basis with Democrat-appointed commissioners in the majority, contains a number of planning requirements, notably for transmission operators to produce scenario-based regional transmission plans with outlooks of at least 20 years, and to conduct this planning every five years using the best available data. The order also requires that operators determine how projects might achieve seven outlined economic and reliability benefits in the evaluation and selection of long-term regional transmission facilities, further ensuring that long-term transmission needs are considered and addressed cost-effectively. To encourage innovative approaches to transmission planning, Order 1920 obliges operators to consider grid-enhancing technologies (GETs) such as dynamic line ratings and advanced conductors, though without directly mandating their use — likely to avoid overreach, constitutional challenge, and to ensure these technologies are only deployed where doing so has explicit operational and financial advantages.
Another significant new policy included in the order is a requirement to identify opportunities for in-kind replacements of existing facilities to be “right-sized” and thus increase their capacity in a cost-effective manner. Incumbent utilities will be offered federal rights of first refusal (ROFRs) to develop these “right-sized” facilities to avoid the construction of redundant transmission projects. The cost allocation provisions of Order 1920 mandate six-month engagement periods with predefined Relevant State Entities along with plans for a default cost allocation method for selected long-term transmission facilities. They also encourage loosely defined state agreements between providers and Relevant State Entities for selected participants to determine how project costs will be shared among stakeholders. These provisions, in tandem with a mandated process inviting states and consumers to fund some or all of facilities that would otherwise not meet operators’ selection criteria, enable consumers to only pay for projects that benefit them and highlight a renewed emphasis on transparency and state involvement in transmission planning.
Order 1977, which was approved with unanimous consent, complements the new planning framework by adding a backstop measure to prevent proposed projects from fading into obscurity when states fail to act. Specifically, it establishes a process for FERC to exercise its limited authority over siting transmission lines in accordance with amendments to Sec. 216 of the Federal Power Act enacted via the Bipartisan Infrastructure Law. The amendments clarified FERC’s authority to issue permits when state commissions have (i) not made siting determinations by one year following application submission or National Corridor designation, (ii) conditioned approval such that projects are no longer feasible or inadequately reduce capacity constraints, or (iii) denied an application. While affirming states’ primary role in the siting of transmission lines, the rule promotes timely review of siting applications and leaves room for FERC to preclude individual states from inhibiting projects that would be beneficial at the regional or national level.
The rule also introduces a Landowner Bill of Rights which ensures that landowners are notified of potential transmission line projects and permitted to intervene in open Commission proceedings, and codifies an Applicant Code of Conduct to facilitate good-faith engagement between applicants and landowners during the permitting process. To drive home the engagement imperative, transmission line applicants are further required to conduct outreach to environmental justice and Tribal communities. Mandated Environmental Justice Public Engagement Plans will be used to create Environmental Justice Resource Reports to identify impacted communities and detail the effects of projects, and similarly, Tribal Engagement Plans will feed into Tribal Engagement Resource Reports for the same purpose. These stakeholder engagement requirements will hopefully break the cycle of inadequate notification and litigation by residents and quicken project approval through a more proactive and transparent input process. But they must take into account a project’s broader dispersed benefits and avoid granting landowners and local communities an undue veto when entire regions stand to gain.
Taken together, the new rules lay down a much-needed groundwork for the future of transmission in the United States. They provide for a set of processes that bring together state, federal, and private entities to assess and develop long-term transmission projects to meet the needs of Americans in a more holistic and cost-sensitive way. Yet to a certain extent, these changes seem so obvious that many Americans might be surprised that such planning practices were not already in place. In reality, they represent only a fraction of the reforms needed to boost transmission development to the pace needed in order to restore reliability, meet growing demand, and enable the clean energy transition. These new planning mechanisms for enhanced project longevity and regional engagement are crucial in their own right, but as FERC Commissioner Allison Clements notes, more is needed than just the “raw ingredients” for states and transmission providers to build out the grid at a scale consistent with demand.
To keep this momentum, Congress needs to step in. There have been promising attempts at using legislation to speed up the environmental review and permitting process, but outside of the small changes included in the Fiscal Responsibility Act, Congress has not yet been able to hammer out an agreement on comprehensive permitting reform. With existing proposals such as the 2022 Manchin-Schumer deal and a range of transmission-specific bills including the SITE Act, FASTER Act, and SPEED and Reliability Act, there is ample opportunity to do so. And despite recent disagreements over a comprehensive permitting deal, the issue itself remains a bipartisan concern.
Without comprehensive permitting reform and steps to improve interregional planning on top of these regional transmission changes, these new FERC rules alone will not solve the transmission gridlock. Facilities connecting transmission regions are the most difficult type to plan, pay for, and permit under the current regime, despite their crucial role in limiting the impact of local extreme weather events and serving as the most important type of transmission line for connecting remote wind and solar resources to large cities and manufacturing hubs. Further executive and legislative action will be necessary to expedite energy projects like these, and while FERC has undoubtedly taken important steps toward optimizing the U.S. transmission infrastructure, building out a sufficient network will take leaps and bounds.