Does the Federal Energy Regulatory Commission's transmission and cost allocation rule unfairly place the cost of new transmission on customers who do not benefit from it? During today's OnPoint, Sue Sheridan, president and chief counsel for the Coalition for Fair Transmission Policy, explains why she believes the rule lacks clarity and could affect a large segment of ratepayers. She also discusses why the rule may violate the Federal Power Act.
Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Sue Sheridan, president and chief counsel for the Coalition for Fair Transmission Policy. Sue, thanks for coming back on the show.
Sue Sheridan: Thank you for having me, Monica.
Monica Trauzzi: Sue, several weeks since FERC released its highly anticipated transmission rule. You've had some time to sort through the large document. What's your takeaway overall on how FERC handled this rulemaking?
Sue Sheridan: Well, it's a bit of a mixed bag for us. Certainly, some of the major overarching themes that FERC enunciated are encouraging to us, but we're such that -- such as a statement that costs have to be commensurate with benefits for consumers to be allocated costs. But we're afraid there's a lot of slippage between the rhetoric and the reality. For instance, we think that this would still allow subsidization of long-distance lines when there might be cheaper, renewable sources closer to home. And all of that would add up to costs that aren't just and reasonable for consumers as the power act requires.
Monica Trauzzi: So, you feel that it lacks clarity? I mean, what can FERC do at this point than to clarify the things that you don't feel are clear?
Sue Sheridan: I think we'll just have to wait, given where it is, either for clarification on rehearing requests. We filed a rehearing request like so many other entities and the FERC certainly could give more definition to, for instance, the need for a benefit definition. FERC specifically said it wouldn't define benefits. And I think that that leaves an awful lot of uncertainty for us based on both the rule and also on the MISO decision, where that was one of the chief concerns, whether benefits had been assigned to the proper customers.
Monica Trauzzi: But FERC says clearly that only ratepayers who benefit from the transmission will pay for it. Why don't you see it quite is clearly as they do?
Sue Sheridan: It's the lack of a definition of benefit, because when the regional planning entities get together and try to figure out what a benefit is, there's not much for them to be certain about. And so we could have a number of regions coming up with a vast difference between what's considered a benefit and consumers who in some regions are paying for benefits that go to consumers in other states.
Monica Trauzzi: Do you think that this rule could help give renewables the push that they need in the U.S.?
Sue Sheridan: I think the interesting question is which renewables might it give a push to, because, again, they're concerned that long-distance lines would be subsidized by some consumers who don't receive the benefit under a cost socialization approach. Then we think that it biases and skews market choices toward distant renewables, when there might well be cheaper renewables closer to home.
Monica Trauzzi: Is there a way to absolutely guarantee that only people who are benefiting are paying?
Sue Sheridan: There's a way to determine whether or not the benefits are proportionate to the cost imposed and that's something FERC has been doing forever. It's the heart of the question in the pending Seventh Circuit decision which had to do with the cost allocation in PJM. And it might say that some of the tea leaves we're looking for, perhaps even before compliance filings are filed by public utilities to comply with the rule within about a year's time, there's still the Seventh Circuit case out there that's on remand for FERC that touches on many issues in the rulemaking. And also the MISO case, which we're not a party to, but definitely offered some tea leaves that gave us pause.
Monica Trauzzi: So, talk specifically about what your group has done in reaction to the rule and what you're hoping might transpire over the next few months.
Sue Sheridan: Yes. Well, Monica, we have filed for rehearing and clarification and so, again, we hope when FERC rules on the hearing and issues a decision, that we might get some helpful, tighter definitions, a little bit better understanding of what public policy consideration means at the regional level. Of course, anyone who filed for rehearing can also -- is eligible to go to court to bring a suit if they want to, but we've just got to see what comes on the rehearing decisions.
Monica Trauzzi: You mentioned the Federal Power act. Why do you believe that the rule breaks that act?
Sue Sheridan: Well, two reasons. One, it could be administered, implemented in a fashion that assign costs to consumers who don't really benefit and that's not just and reasonable. That, again, was what was discussed in the Seventh Circuit decision. So, we know that those are the primary issues to look at. And, also, if you socialize the costs of certain transmission, then it can be seen under the power act as an undue preference, which means that there aren't just and reasonable rates resulting from that kind of socialized spreading of costs.
Monica Trauzzi: Is there any way to tell, at this point, how the rule, as it's written right now, would directly impact consumers?
Sue Sheridan: That's one of our concerns. We can't tell exactly how it would impact consumers, but we know that there's enough slippage between the rhetoric and the details of the rulemaking that it's very difficult to tell. And, again, FERC specifically chose not to and explicitly didn't define what a benefit is, so there's no way to tell until we see compliance orders.
Monica Trauzzi: OK, we'll end it there. Thank you for coming on the show, nice to see you.
Sue Sheridan: Thank you, nice to be here.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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