APPA Urges FERC to Keep Affordability in Mind as it Considers Interregional Transfer Capability

May 24, 2023

by Paul Ciampoli
APPA News Director
May 24, 2023

As the Federal Energy Regulatory Commission explores avenues for promoting interregional transfer capability development, it is essential that the Commission recognize the importance of maintaining affordability for load-serving entities and their customers, the American Public Power Association said in recent comments submitted to FERC.

APPA’s May 15 comments were submitted in response to a late 2022 FERC workshop on interregional transfer capability, or ITC.

APPA said it agrees that the nation needs additional bulk transmission facilities to accommodate new resources, to replace aging infrastructure, and to promote reliability and resilience. APPA further agrees that ITC is likely to be part of the solution for achieving these goals.

The workshop, as well as the lessons learned from Winter Storm Uri, document potentially significant benefits from interregional transfers, it said.

“Although regions are making progress in planning interregional capacity, APPA recognizes that the current Order No. 1000 rules have resulted in relatively few interregional projects,” it may be worthwhile to consider reforms to existing planning processes to help promote the development of beneficial interregional capacity, APPA said.

“At the same time, public power utilities are extremely concerned about additional transmission cost increases, and any consideration of policy changes to promote ITC must recognize the importance of maintaining affordability for LSEs and their customers,” the group told FERC.

“Part and parcel of maintaining affordability is ensuring that increases in ITC are evaluated in open and transparent planning processes to ensure cost-effectiveness, taking into account particular regional factors. Further, public power utilities should not be assigned costs of transmission facilities from which they derive little or no demonstrable reliability or economic benefits,” APPA said.

The Commission could best accommodate these various considerations by directing any ITC policy reforms toward existing regional planning processes rather than mandating a minimum level of ITC.

Much of the discussion at the workshop centered on the question of whether the Commission should specify a minimum level of ITC, or a metric for identifying a minimum ITC, that each region must maintain.

APPA said that the workshop record, while pointing to potential benefits of ITC, identified significant practical and legal challenges associated with establishing a reasonable generic minimum requirement. Given these substantial challenges, APPA urged the Commission not to pursue a generic minimum ITC requirement.

A one-size-fits-all minimum transfer capability requirement “that does not appropriately account for regional conditions and needs could also raise significant cost allocation objections, which in turn, could slow the interregional transmission development that any minimum requirement aims to encourage,” APPA said.

If the Commission pursues policy reforms to promote ITC development, APPA recommended that the Commission focus on a process for identifying beneficial interregional capacity, as opposed to mandating a minimum amount of capability (or adopting a formula to determine a minimum amount of ITC).

“Specifically, the Commission could consider modifying its existing regional planning process requirements to require transmission planners to identify ITC as a regional need that must be considered in the regional planning process,” APPA said.

Consistent with recommendations at the workshop, the Commission could facilitate this process by identifying a set of principles that each region should consider in evaluating how much ITC may be appropriate and reasonable for the region.

“APPA submits that such principles should focus primarily on potential reliability-related benefits of ITC, while allowing regions flexibility in the factors they will consider in evaluating an appropriate level of ITC.”

Any principles articulated by the Commission should not mandate any particular level of ITC and/or require the expansion of transmission facilities, APPA said.

Under the approach recommended by APPA, each region, as part of the regional transmission planning process, would identify the ITC needs the region will plan for as part of its regional transmission planning process, consistent with the principles established by the Commission.

Any required process to identify the need for ITC, and plan for it, would need to include transparent criteria for assessing its costs and benefits.

Leveraging existing Order No. 1000 regional planning processes, regions could identify transmission solutions (or non-transmission alternatives) to meet the identified levels of beneficial ITC.

“Consideration of ITC in the regional planning process could also inform the interregional planning process focused on identifying potential interregional projects, subject to existing Order No. 1000 interregional coordination principles, including the requirement that interregional projects must be evaluated jointly, and the prohibition on a region involuntarily imposing an interregional transmission project on another.”

Consistent with Order No. 1000, inclusion of a project in a regional or interregional plan would not require any entity to construct the facilities.

Under the approach outlined by APPA, regions would also have the option of developing cost allocation methodologies for Transfer Transmission Facilities or other investments to meet beneficial ITC objectives, or regions could rely on existing cost allocation approaches. Consistent with Order No. 1000, one region should not be able to involuntarily assign costs to a neighboring region, APPA told FERC.