Presentation to Consumer Liaison Group on Order 1000 Transmission Reforms


Dated: September 7, 2017

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Order 1000 in New England
Consumer Liaison Group (CLG) 
September 7, 2017

Jason Marshall, General Counsel
New England States Committee on Electricity

Background: Order 1000

  • The Federal Energy Regulatory Commission (FERC) issued Order 1000 on July 21, 2011.
  • Objective: improve Tx planning processes and cost allocation mechanisms and ensure just and reasonable rates.
  • Nationally, intended to shift from utility company service-territory decisions to greater regional and interregional coordination and competition.
  • Recognition that areas like New England with ISOs/RTOs may be further along than others.
  • New England already complied in some areas, and needed changes in others.

Background: Order 1000

  1. Transmission Planning. Must be a transmission planning process that produces a regional plan.  Neighboring planning regions must coordinate regarding proposed interregional facilities.

2. Public Policies. Public policy requirements must be considered in transmission planning process.

D.C. Circuit: Rule required “processes for identifying and evaluating public policies that might affect transmission needs.” (emphasis in original)

3. Cost Allocation. There must be a cost allocation method in place to allocate the costs of new transmission facilities.

  • New in N.E.: default cost allocation method for policy-driven projects (70% regional/30% states with identified need)

4. Competition in Transmission Project Development.  Mandated removal of right of first refusal for incumbent transmission owners.

[see pdf for timeline graphic]

Where are We Now?

Panelists described Order 1000 as “either partially a success, generally a failure, cost containment is either important, unnecessary or unneeded, should be flexible or very well-defined.”

Former Commission Clark
Competitive Transmission Development Technical Conference
Docket No. AD16-18-000
June 27, 2016

Implementation in New England

  • ISO New England was last region to get final compliance orders.

–Offers potential to benefit from experience in other regions (cost containment)

  • Implementing tariff changes, for example:

–Qualified Transmission Project Sponsors (QTPS): 21 approved

–Planning process guides, I.3.9 process

Implementation in New England: RTUs

  • Reliability Transmission Upgrades (RTUs): Reliability Projects

–Projects needed to maintain power system, meet federal reliability standards (NERC).

–No RFPs to date.

–Many projects grandfathered (pre-May 2015)

–FERC eliminated incumbent TOs’ so-called “Right of First Refusal” (exclusive right to construct and own within territory).

  • Allowed exception for “immediate need” projects (within 3 years) and rejected calls to expand to 5 years.
  • NESCOE has questioned whether solving for near-term needs with sole-sourced projects effectively precludes competition: no easy answers.
  • RFPs cost consumers money. NESCOE does not support RFPs for the sake of an RFP. Need to be sure ISO-NE uses RFPs when and in a way that is sensible for consumers. Doing that is complicated and requires continued discussion.

Implementation in New England: METUs

  • Market Efficiency Transmission Upgrades (METUs): Economic Projects

–METUs are “designed primarily to provide a net reduction in total production cost to supply the system load.”

  • Do production cost savings justify infrastructure costs?

–No RFPs to date.

–ISO-NE economic evaluation of Keene Road interface suggested insufficient savings to justify initiation of RFP.

–NESCOE agreed.

  • RFPs cost consumers money (ISO resources and TO backstop solution) and no indication economic solution existed. RFP not sensible for consumers in this case.
  • Risk that any small savings offset by overruns.
  • Little or no interest from bidders in first RFP could provide false impression that no interest in N.E.

Implementation in New England: PPTUs

  • Public Policy Transmission Upgrades (PPTUs): Policy-Driven Projects

–Transmission needs driven by federal, state, or local public policy requirements (statutes and regs).

–No RFPs to date.

–First planning cycle commenced January 2017 and has concluded.

–NESCOE communication to ISO-NE identified no needs in current cycle.

  • Each state assessed stakeholder input on laws driving Tx

–Next planning cycle by 2020 (every three years).

D.C. Circuit Appeal

  • April 2017 decision:

–Rejected TOs’ petition challenging ROFR removal.

  • SCOTUS declined review of similar challenge from 7th Cir.

–Rejected narrow NESCOE petition on public policy process.

  • However, ruling served to provide clarity NESCOE had long sought: ISO not required to select a policy-driven project.
  • Important “off ramp” – helps prevent development of costly projects states do not view as advancing their policies or not in consumer interest.

Cooperative Federalism

  • Trio of recent SCOTUS cases (EPSA, Oneok, Hughes) recognize principle of cooperative federal and state jurisdiction.

–“Platonic ideal” of clear demarcation between federal/state authorities at odds with the “regulatory world”

–Wholesale and retail markets “not hermetically sealed from each other”

–FPA designed with federal-state interplay in mind

  • FERC: Order 1000 “not placing public utility transmission providers in the position of being policymakers or allowing them to substitute their public policy judgments in the place of legislators and regulators.”

–“Order No. 1000 and state-level Public Policy Requirements should be complementary . . . ”

NESCOE Perspective

  • NESCOE has strongly supported qualified project proponents having comparable project development & cost recovery opportunity.
  • New England consumers recognize the value of transmission, having invested roughly $8 billion in reliability projects since 2002 with another $4 billion on the horizon.
  • Cost containment is complex and implementation details matter. Cost control mechanisms would give consumers greater confidence in the planning process and safeguards against escalating costs.
  • Near-term, sole-sourced projects (exempt from competition) may have the effect of precluding competition for all reliability projects.
  • On public policy: Continue to advocate for a process states would use.

Closing Thoughts

  • Cost Containment

–PJM actively developing manual that would include procedures on cost caps and cost containment as part of its Order 1000 competitive transmission process.

RTO Insider reported earlier this year that out of twelve competitive windows in CAISO, SPP, and MISO, “54% of the 56 proposed projects and 55% of the selected projects included cost-containment provisions” and out of thirteen competitive windows in PJM “about 18% of 650 proposals included cost-containment provisions” with two of those projects selected.

–Time would be well spent in New England developing cost discipline procedures in advance of eventual RFP and NESCOE has recommended ISO-NE spend time on this in 2018.

Closing Thoughts

  • Sole-Sourced Reliability Projects

–Challenging issue requiring continued, thoughtful discussion.

–Cost containment provisions may be less effective for these projects

–NESCOE open and interested in continuing the conversation, hearing all ideas.

Should we consider a hybrid model? (fordiscussion, not a position)

Competitive Bidding– RTO identifies regional Tx need.

– RTO develops solution and selects project.

– RTO solicits and selects bids to construct (incumbent and nonincumbent).




Sponsorship– RTO identifies regional Tx need.

– RTO solicits bids to develop and construct solutions (incumbent and nonincumbent).

– RTO selects project/bidder.




Hybrid– Use competitive bidding model for immediate need projects.

– Use sponsorship model for longer-term needs.

None to date