Does new legislation that seeks to curb the Federal Energy Regulatory Commission's reach on transmission cost allocation go too far? During today's OnPoint, Sue Sheridan, president and chief counsel at the Coalition for Fair Transmission Policy, discusses legislation recently introduced by a bipartisan group of senators that would limit FERC's proposal on cost allocation. She also explains how regulation and legislation may converge on this issue.
Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. With me today is Sue Sheridan, president and chief counsel at the Coalition for Fair Transmission Policy. Sue, thanks for coming back on the show.
Sue Sheridan: Monica, thank you for having me again.
Monica Trauzzi: Sue, a bipartisan group of senators recently introduced legislation that would curb FERC's reach on transmission cost to allocation. The senators say they're concerned about how the agency may interpret the word "benefit" when it comes to who will be benefiting from new transmission. Is there any clear indication that FERC's proposal would socialize the costs of new transmission?
Sue Sheridan: Well, Monica, the members of the Coalition for Fair Transmission Policy are very happy and very supportive of the policy that is behind this bill. So I want to say that we're very appreciative of the senators introducing it. Like the Corker amendment during the last Congress, it would help make sure that FERC only assigns costs, allocates costs for new transmission to those who benefit from the transmission directly. So the question is, really, we're pro-transmission, we're pro-renewables, and we're pro-FERC trying to find new solutions as the electricity markets evolve. But we are concerned about whether or not FERC is staying within its authority and whether it directly will assign costs to those who benefit.
Monica Trauzzi: But doesn't the language that's proposed by FERC clearly state that they would only allocate the cost to those who benefit?
Sue Sheridan: Yes.
Monica Trauzzi: Isn't that the language?
Sue Sheridan: The broad language suggests that in terms of the way the rule is styled, and it's a very well presented rule, it's very broad, as you know it's drawn perhaps 18,000 comments, but our concern is that the word "benefits" could be defined so broadly as to practically wipe out the need to find a connection between those who benefit from the cost and those to whom they are assigned. In other words, benefits is not a word that appears in the Federal Power Act. It's a new concept for FERC to be dealing with in this context. FERC has always allocated costs, but we're concerned that FERC may define benefits so broadly that some consumers will pay who don't receive any benefit.
Monica Trauzzi: So then is the only response then to propose legislation like this piece? I mean it seems like these senators are going pretty far with proposing this type of legislation.
Sue Sheridan: Well, I think that it's part of the normal inter-branch conversation between agencies from whom whose authority stems from congressional authorization and Congress performing oversight in the many ways it can. Certainly, moving a bill and enacting it would be would be a good thing from our point of view and we support that. But I think there's also a general debate about what cost allocation should be and whether or not FERC is on the right path.
Monica Trauzzi: How does this new legislation differ from last year's Corker amendment?
Sue Sheridan: Well, the Corker amendment, obviously, was styled as an amendment to an underlying bill. In this case, it was Senator Bingham's energy bill, the ACELA bill, and this is a freestanding bill to the Power Act that directly amends the existing provisions of the Power Act. So some of the words are a bit different, I think it we'll be looking at those, but we're certainly supportive of the general policy thrust, which is, again, to make sure that consumers benefit from anything they're charged for.
Monica Trauzzi: There's been so much talk recently in Washington about scaling back regulation. So, is FERC's proposal then what you would consider an example of regulatory overreach?
Sue Sheridan: I don't think we can say that. First of all, it is a proposal and they've taken lots and lots of comments and they're doing what they normally do, which is study it and work toward a final rule. So we have things happening on two paths, the discussion in Congress and what FERC is doing. But, until we have the final rule, we won't be certain of course where they come out and perhaps it will be something that our members are very pleased with. There are a lot of comments for FERC to consider and it may turn out to well. In the meantime, I think it's normal for Congress to hold oversight hearings and one way to do that is on the substance and the debate and asking FERC questions or others questions. Another way to do it is for the Senators to introduce bills and say here's what we think FERC should do.
Monica Trauzzi: Are you anticipating that this legislation will sort of spur discussion in Congress about FERC's authority on this and how to best move forward?
Sue Sheridan: I think it will. I think it builds on the conversation that obviously occurred during the debate over the ACELA bill during the summer of 2009. So it's a continuation of that conversation. And, course, we don't take positions within our coalition on specific rules or specific orders, but FERC has been issuing orders recently which cause some of our members to be concerned about what the tea leaves may say with respect to the final order.
Monica Trauzzi: How would you rate how FERC is handling this issue? Are they communicating with all sides effectively?
Sue Sheridan: They have been wonderful about meeting with us before the rule came out and I think a broad swath of others and explaining the proposal to us, so they have been perfect about that. I think our coalition has met with every member of the commission and they've been very open.
Monica Trauzzi: Moving forward, what do you anticipate will happen as regulatory and legislative deadlines converge?
Sue Sheridan: That's a very interesting question. Our best guess and sort of a general feel, Monica, is that FERC may act within the next couple of months, in April or May, when they have their regular commission meetings. But of course we don't know, that's up to them. Certainly, it would be possible for Congress to hold hearings during that period and for the debate to continue there. We won't know where FERC comes out on the final rule and how responsive it may choose to be to the concerns that we've raised on beneficiaries paying and making sure that local transmission planning processes are respected and that FERC doesn't substitute its judgment for those regional planning processes. But I think we're going to hear this debate echo back and forth between the two branches for a bit. Certainly, what could happen is FERC could issue a rule, let's say in May, just to pick a date for the purpose of conversation, and Congress could be having hearings. FERC will then be going into a series of doubtless rehearing requests, so this won't end with the issuance of a final rule.
Monica Trauzzi: OK, we'll end it there. Thank you for coming on the show.
Sue Sheridan: Thank you.
Monica Trauzzi: And thanks for watching. We'll see back here tomorrow.
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