TRANSMISSION:

Industry hears details of new FERC energy strategy

The Obama administration is briefing industry on a new energy strategy that could create a fast-track approval process for major transmission lines serving renewable energy projects, according to Federal Energy Regulatory Commission staff comments on the plan.

Under the plan, the Energy Department would delegate to FERC the current DOE authority under the 2005 Energy Policy Act to designate corridors in the United States where power line congestion is most severe. Administration officials hope that the handoff would revitalize FERC's authority under the 2005 legislation to approve and site specific high-profile transmission projects if states fail to act on them.

FERC Chairman Jon Wellinghoff briefed Edison Electric Institute members in a conference call Thursday and has spoken of it to Western utility and public interest group representatives (Greenwire, Aug. 22). EEI chief executives were scheduled to discuss the proposal today at a meeting in New York.

DOE has asked EEI members for views on the plan, with a Sept. 9 deadline, and has posted the FERC staff comments on its website. "DOE and FERC wish to be able to resolve the delegation question within a few weeks," DOE said.

The strategy is intended to overcome two Court of Appeals rulings that have undermined the federal transmission siting authority provided in the 2005 Energy Policy Act, according to Wellinghoff and comments by Energy Department special adviser Lauren Azar in an interview (Greenwire, Aug. 25).

The proposed fast-track changes would allow the commission staff to conduct engineering reviews and oversee environmental assessments of transmission project proposals at the same time that these issues are under consideration by state authorities. Under the existing process, FERC begins its review after the state actions conclude.

'Corridors': the road to project approval

Since DOE designated an Eastern and a Western corridor in 2007, only one project has been proposed to FERC, and that was subsequently withdrawn. "Clearly, the backstop transmission procedure established by Congress has not yet been effective," the FERC draft comment says. (Industry experts say there are additional reasons for the lack of interest in the corridor process, including the recent slump in electricity demand growth.)

Azar noted that the new strategy was spearheaded by NextEra Energy, North America's largest wind and solar power developer. NextEra Executive Vice President Joseph Kelliher, a former FERC chairman, is leading the campaign for the new strategy. "I admire Joe and Wellinghoff for trying to take this on," said one attorney for a power company. "Siting is clearly a problem, and legislation is a problem. So what can you come up with that helps?"

In a major departure with current practices, FERC could approve a new proposal whose developer wanted a particular project to be considered as its own "corridor." As NextEra describes the plan, this would particularly help high-profile transmission proposals through several states connecting wind and solar generation to urban centers, some industry officials said.

The opening for this approach is a provision in the 2005 act saying that FERC may issue construction permits directly to a transmission developer whose project does not qualify under state rules because the developer does not serve end-use customers in the state.

Industry sources say this approach would be particularly helpful to independent transmission developers like Clean Line Energy Partners, whose proposed $3.4 billion line would connect mid-continent wind farms with customers in the Southeast, passing through Arkansas and Oklahoma on the way. Because it would be a point-to-point direct-current line, there would be no "off ramps" to serve Oklahoma or Arkansas customers.

Not a power play, FERC says

Clean Line President Michael Skelly told a FERC workshop this year that state rules often throw up barriers to development companies like his "due to the inability to 'fit' regional projects like ours into the existing regulatory framework." Clean Line's project was rejected by Arkansas authorities this year because it didn't provide power to Arkansans and so didn't meet the definition of a transmission utility, the state said.

One of the FERC draft comments says the initiative is not a power grab by Washington.

"Some stakeholders may feel that the delegation represents an attempt to expand federal agency authority and undercut state authority regarding the siting of transmission projects. However, the delegation will not expand federal authority, which was established and limited by EPAct 2005, but rather will simply and consolidate in a single forum federal actions mandated by Congress," the FERC staff comment says.

But power line politics have become even more intense since the 2005 act passed.

A key issue, some industry sources said, is whether the new DOE/FERC strategy would ease tensions over federal versus state transmission jurisdiction by narrowing the "corridor" definitions to the routes of specific projects rather than the multi-state corridors DOE initially created. However, the initiative may also stir up opposition among environmentalists who fear new transmission lines will broaden markets for coal-fired generation and state leaders who want to control their own renewable energy and transmission projects.

"I think this is a gambit for them to try, and it could prod the states," said one power company representative. "But it might end up dividing the industry. These are double-edged swords."

The proposed strategy takes aim at two Court of Appeals decisions that went against the 2005 act's provisions, Wellinghoff said last month in remarks to an energy conference in Reno, Nev.

In the California Wilderness Coalition v. DOE case, a majority on the 9th Circuit ruled in February that DOE failed to consult adequately with states before drawing the national interest corridors in 2006, and should have conducted an impact statement under the National Environmental Policy Act (NEPA).

Overcoming court defeats

Under the new strategy, FERC's would engage states, industry and other interested parties in defining how it would generally define the corridors, and how it would go about designating a specific project as its own "corridor." Decisions would follow a formal comment period, the FERC draft said. No NEPA analysis would be required at that point because detailed environmental reviews would be conducted later on particular projects, thus meeting the 9th Circuit's issues.

In the second case, Piedmont Environmental Council v. FERC, the 4th Circuit struck down FERC's position that the 2005 act allowed it to intervene if state authorities had not approved a project after one year. The court said FERC's authority only covered situations where state regulators took no action at all. If a state rejected a project, FERC could not use its standby authority, the court said.

The Piedmont decision in 2009 may have helped slow down state reviews of new power lines by seemingly removing the pressure of FERC's backstop authority, according to a draft analysis of the strategy by NextEra.

The FERC staff comments adopt NextEra's view that the 4th Circuit's decision is not the law of the land. "[I]t can be correctly noted that the effect of the Piedmont case is limited to the Fourth Circuit, and that other courts might reach a different result," the FERC draft said. By taking that course, FERC may prompt new lawsuits in other circuits that might go FERC's way and lead a favorable resolution in the U.S. Supreme Court, some industry participants said.

"The proposed delegation from DOE to FERC would allow a more rational, expedited federal process for the consideration of transmission projects, could overcome difficulties that have hitherto plagued that process, and would help satisfy the need for a modern and efficient transmission grid in the United States, with increased access to the most cost-effective renewable resources," the FERC draft comment said.