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FERC’s landmark interconnection and transmission reforms: what are they, and will they survive?

By Steven Shparber, Omar Bustami and Julia Hutchinson Morton of Mintz
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Grid infrastructure in the US.
Proposed reforms for helping ease grid congestion in the US are facing mounting legal challenges. Image: ERCOT.

The US Federal Energy Regulatory Commission has introduced major transmission reforms aimed at easing interconnection bottlenecks. Steven Shparber, Omar Bustami and Julia Hutchinson Morton of law firm Mintz explore details of the reforms and whether they will survive a number of legal and other challenges.


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The Federal Energy Regulatory Commission (FERC) is a US governmental body that regulates and oversees, among other things, the rates, terms and conditions of service for wholesale electric energy sales, transmission service, natural gas transportation and oil transportation. FERC’s regulations impact electric transmission planning and electric generator grid interconnections, which in turn, directly impact and enable the growth of electric and renewable energy generation in the US.

This article provides an overview of recent landmark FERC reforms regarding US transmission planning and generator interconnection processes and describes challenges to those reforms, including a brief discussion of a recent US Supreme Court decision which may impact the validity of certain of FERC’s newly issued reforms. These reforms, their implementation and legal and political challenges to them are critical for any party interested in the US solar and storage industries to understand, as they will impact the power sector for years to come.

FERC interconnection reforms

On 28 July 2023 and 21 March 2024, FERC issued Order 2023 and Order 2023-A, respectively. In these landmark FERC decisions, FERC concluded definitively that its existing generator interconnection procedures were insufficient to ensure that interconnection customers are able to interconnect to the transmission system in a reliable, efficient, transparent and timely manner.

As such, FERC ordered reforms to address five key problematic areas in existing generator interconnection procedures:

  • The information (or lack thereof) available to prospective interconnection customers and the commitments required of them to enter and progress through the interconnection queue.
  • The reliance on a serial firstcome, first-serve interconnection study process in some regions, as well as the “reasonable efforts” standard that transmission providers are held to for meeting interconnection study deadlines.
  • The protocols (or lack thereof) for affected system studies.
  • The provisions for studying new generating facility technologies and evaluating the list of alternative transmission technologies enumerated in this final rule.
  • The modelling or performance requirements (or lack thereof) for non-synchronous generating facilities, including wind, solar and electric storage facilities.

Order Nos. 2023 and 2023-A instruct transmission providers to amend their local rules to comply with FERC’s directives.

However, not every transmission provider is seeking to implement the changes in the same manner. For example, while Order No. 2023 held, and Order No. 2023-A affirmed, that transmission providers must complete cluster studies within 150 days, with an additional 150 days permitted to conduct restudies, the US’s largest transmission provider, PJM Interconnection, proposed to deviate from these requirements in its compliance filing by maintaining its three-stage system impact study process, which is currently in effect and totals 480 days.

Another transmission provider, the Southwest Power Pool, Inc. (SPP), proposed a cluster study time frame of 180 days in its compliance filing. The different approaches taken by each of these entities with respect to their proposed cluster study timelines illustrate how transmission providers have already requested variations from the standard rules ordered by FERC (which is permitted in the US, subject to certain legal restrictions). Whether and to what extent FERC permits these requested variations will likely significantly impact the ultimate efficacy of Order No. 2023 and Order No. 2023-A and could lead to substantial regional variations in interconnection processes across the US.

Order No. 1920: electric regional transmission planning and cost allocation

On May 13, 2024, FERC issued Order No. 1920 to address several issues relating to long-term regional transmission planning and cost allocation. FERC held that its current transmission planning and cost allocation processes were ineffective and were, in fact, the root cause of certain interconnection queue delays and drastic increases in interconnection costs.

In order to improve transmission planning and transmission cost allocation, such that they would not unjustly and unreasonably overburden generator interconnection customers and continue to clog interconnection queues across the US, under Order No. 1920, FERC required each transmission provider, among other things, to:

  • Produce a regional transmission plan of at least 20 years to identify long-term needs and the facilities to meet them, and to update the plan every five years using a plausible and diverse set of at least three long-term scenarios and the “best available data” to evaluate long-term regional transmission needs.
  • Apply certain economic or reliability benefits to determine whether any identified regional proposals will efficiently and cost-effectively address long-term transmission needs.
  • Include selection criteria and an evaluation process to identify long-term regional transmission facilities for potential selection in the regional plan.
  • Provide relevant state entities and interconnection customers an opportunity to fund a portion of, or the entire cost of long-term regional transmission facilities, which otherwise do not meet the transmission provider’s selection criteria.
  • Be transparent with regards to local transmission planning processes and identify opportunities to “right-size” replacement transmission facilities.
  • Consider the use of “grid enhancing technologies”, such as dynamic line ratings, advanced power flow control devices, advanced conductors and transmission switching in long-term regional transmission planning to ensure they identify more efficient or cost-effective transmission facilities for selection.

Order No. 1920 was issued with three sitting FERC Commissioners, and was a 2-1 decision, with Commissioner Mark Christie, a Republican, strongly dissenting. In his dissent, Christie argued, among other things, that Order No. 1920 did not respect the role of individual states with respect to how the costs of long-term regional transmission facilities are ultimately allocated. Order No. 1920 has been subject to over 50 rehearing requests and numerous court petitions for review (the equivalent of an appeal for an agency ruling). Further, since the issuance of Order No. 1920, FERC has regained its full complement of five commissioners, with three such commissioners being appointed since the issuance of Order No. 1920—meaning that a new makeup of FERC commissioners will issue an order on rehearing of Order No. 1920.

These factors, as well as the upcoming US presidential election (which could lead to a change in the party affiliation of the FERC chairman from Democrat to Republican) may mean that the reforms eventually directed by FERC in an order on rehearing of Order No. 1920 could look significantly different to what FERC promulgated in Order No. 1920.

Order No. 1977: permits for interstate electric transmission facilities

On 13 May 2024, FERC also issued Order No. 1977, relating to applications for permits to site interstate electric transmission facilities. While FERC does not typically have authority to site transmission lines (such authority is typically reserved to individual states, even though FERC regulates the charges for transmission service stemming from such lines), Order No. 1977 amends the process by which FERC may exercise certain limited siting authority in certain transmission-constrained or congested geographic areas designated by the US Department of Energy as national interest electric transmission corridors (“national corridor”).

Specifically, under Order No. 1977, FERC clarified that it has the authority to issue permits for the
construction or modification of electric transmission facilities in these designated national corridors only if an individual state has denied a siting application. Order No. 1977 is expected to speed up the siting of long-range transmission lines in these designated national corridors and, by and large, has not been as controversial as Order No. 1920 or Order Nos. 2023 and 2023-A.

Loper Bright Enterprises v. Raimondo and Relentless, Inc. v. Department of Commerce

On 28 June 2024, the US Supreme Court issued a consolidated opinion in Loper Bright Enterprises v. Raimondo and Relentless, Inc. v. Department of Commerce, which overturned the seminal decision Chevron v. Natural Resources Defense Council requiring that federal courts defer to an agency’s reasonable interpretation of ambiguous statutory provisions.

Under “Chevron Deference”, the Supreme Court had established a two-step test for courts when reviewing an agency’s interpretation of a statute.

First, a court was required to determine whether the statute was ambiguous, “whether Congress has directly spoken to the precise question at issue”. If the meaning of the statute was ambiguous, then the court would “give effect to the unambiguously expressed intent”.

Second, a court was required to determine whether the agency’s interpretation of the statute is reasonable. “If the statute is silent or ambiguous with respect to the specific issue,” the court would ask, “whether the agency’s answer is based on a permissible construction of the statute.”

In Loper Bright and Relentless, which concerned a National Marine Fisheries Service rule that required Atlantic herring fisherman to pay certain fees to monitor their fishing activity under the Magnuson Stevens Fishery Conservation and Management Act, and ultimately whether the Fisheries Service’s rule was entitled to Chevron Deference, the US Supreme Court addressed whether to overturn the Chevron doctrine.

The Court ultimately ruled to overturn Chevron, finding that the Administrative Procedure Act (“APA”) (a statute which governs all US federal agencies, including FERC) requires courts to “exercise their independent judgment in deciding whether an agency has acted within its statutory authority”, thereby eliminating Chevron deference. The Court emphasised that a “reviewing court shall decide all relevant questions of law, interpret constitutional and statutory provisions and determine the meaning or applicability of the terms of an agency action”, under Administrative Procedure Act § 10(c), 5 U.S.C. § 706.

Loper Bright and Relentless’s Impact on Order 1920

Whether and to what extent the Loper Bright and Relentless decisions will impact Order 1920 on judicial appeal remains to be seen, although early public statements from FERC Commissioners already demonstrate a difference of opinion on the future of Order 1920 in light of Chevron being overturned.

In evaluating whether Loper Bright and Relentless will affect Order 1920’s ability to withstand judicial scrutiny, it is key to recognise that Order 1920 builds off of FERC’s last major regional transmission planning and cost allocation rule: Order No. 1000.

In S.C. Pub. Serv. Auth. v. Fed. Energy Regulatory Comm’n, 762 F.3d at 54 (D.C. Cir. 2014), which upheld Order 1000, the US Court of Appeals for the D.C. Circuit analysed whether Order 1000 was a permissible exercise of FERC’s authority under the Federal Power Act (FPA), giving FERC’s order Chevron Deference.

In his dissent of Order 1920, FERC Commissioner Mark Christie stated that “Order No. 1000 was built on what may be a foundation of sand known as ‘Chevron deference.’” Following the Loper Bright decision, Commissioner Christie issued a public statement in which he stated that “the most important legal lifeline that Order No. 1920 needed was pulled away today, and the final rule’s chances of surviving court challenges just shrank to slim to none”.

However, the text of Order 1920 (written by the majority of FERC commissioners at the time) posits that FERC’s legal authority to adopt reforms related to long-term transmission planning stems from unambiguous language in Sections 205 and 206 of the FPA, stating “[t]ransmission planning and cost allocation processes are practices affecting the rates charged by public utilities in connection with the Commission-jurisdictional transmission of electric energy in interstate commerce.” This indicates that FERC did not believe its authority to issue Order 1920 depended on ambiguous statutory text, but on direct and plainly proscribed authority under the FPA.

In line with this view, following issuance of the Loper Bright decision, FERC Chairman Willie Phillips stated publicly that: “[b]oth regional transmission planning and cost allocation are practices that have exactly the type of ‘direct effect’ on Commission-jurisdictional rates that the US Supreme Court has held brings a matter within this Commission’s jurisdiction.” This statement indicates that a court may not necessarily see fit to overturn Order 1920, simply because the US Supreme Court overturned Chevron Deference, and that Order 1920 may in fact rest upon a solid legal foundation, rather than upon “a foundation of sand”.

Conclusion

While FERC is moving on track to improve transmission planning and interconnection processes across the US, there are still many uncertainties with respect to the future of FERC’s transmission and interconnection reforms. In particular, the implementation of these reforms is subject to the changed composition of FERC itself, ongoing legal challenges, the upcoming US presidential election and the impact of Chevron being overturned. As a result, solar industry stakeholders should pay close attention to how these factors, and others, ultimately impact transmission planning and interconnection processes at the local, state, regional and national levels across the United States.

To learn more about how best to work through a challenging grid environment, read this week’s coverage of the US’ grid landscape here, and the lessons that can be learned from the ERCOT grid in Texas here.


Steven Shparber is a member in the Energy & Sustainability Practice at Mintz. He regularly represents energy project developers, independent power producers, private equity and infrastructure funds, commercial and corporate end users of energy and clean energy trade groups across a broad spectrum of high-stakes legal and business matters.

Omar Bustami is an attorney in the Energy & Sustainability Practice at Mintz, representing energy generation companies, project developers, industrial users of energy, businesses, manufacturers and municipal utilities.

Julia Hutchinson Morton is a litigator in the Energy Regulatory Practice at Mintz who focuses her practice on complex civil litigation. Prior to joining Mintz, Julia interned at the Massachusetts Appeals Court for associate justice Vickie L. Henry, and at the United States Attorney’s Office for the District of Massachusetts.

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