FERC shakes up power industry with landmark grid rule (2024)

Federal energy regulators on Monday directed U.S. electricity grid operators to plan new transmission infrastructure that can deliver more renewable energy and defend against extreme weather.

Adivided Federal Energy Regulatory Commission said grid planners and transmission owners must look 20 years ahead to expected shifts in how electricity is produced and consider a range of long-term benefits to building and upgrading power lines. The vote for the rule, Order 1920, was 2-1.

FERC established new requirements for how the costs of building high-voltage power lines should be allocated among customers, pulling states deeper into issues around regional infrastructure.

Also Monday, FERC unanimously passed a separate rule, Order 1977, that gives it the authority to grant permits to electric transmission lines in certain instances where states do not act first.

The development of long-distance power lines that cross multiple states is increasingly dividing red and blue states. Many led by Democrats are adopting clean energy and climate goals that will require a larger grid, while some Republicans wary of a transition away from fossil fuels have questioned the costs of projects that may cross into their borders.

Monday’s FERC decision seeks to change federal and state approaches to regional planning that has made it harder to shift the nation to low-carbon technology. In areas where grid planning isn’t well coordinated among states, projections for rapidly expanding demand from data centers and the electrification of homes and vehicles is raising concern about grid reliability.

FERC Chair Willie Phillips called both new rules “giant steps” and said the transmission planning and cost allocation rule “cannot come fast enough.”

“Combined, these two new rules make the first significant FERC action on transmission policy in more than a decade,” Phillips said during Monday’s meeting.

New transmission projects spanning hundreds of miles are crucial if more renewable energy is to move from prime wind- and solar-producing areas of the Great Plains and Southwest to urban centers.

Seeking to expand the economic and political argument for a bigger and more resilient power grid, the Department of Energy has stressed the crucial role transmission lines can play in preventing or recovering from grid emergencies caused by weather assaults like Winter Storm Uri that rocked the Texas system in 2021.

Biden administration officials have said the existing regional transmission capacity needs to double to achieve a goal of cutting carbon pollution from the power sector by 2035. And electric utilities have been ratcheting down their use of coal. But power generation still accounts for nearly a quarter of U.S. greenhouse gas emissions.

Senate Majority Leader Chuck Schumer (D-N.Y.), who pushed FERC on the rulemaking, welcomed the final standards as talks on grid legislation languish in Congress.

“These new rules together with the Inflation Reduction Act will deliver lower costs for American families, cleaner air for our communities and a brighter future for the youngest generation and beyond,” Schumer said.

Beyond legal authority?

At FERC, the transmission policy debate has reflected a divide over clean energy and climate change. The two Democrats that form the commission’s current majority voted to pass the rule, with Phillips saying the rule presents strong opportunities for states to have a role in divvying up costs.

Commissioner Allison Clements, the other Democrat, called the rule “as common sense as it is historic.”

Commissioner Mark Christie, the lone Republican, voiced strong opposition to the rule, arguing that it “goes far beyond FERC’s legal authority and fails to perform our consumer protection function and the Federal Power Act.”

“This final rule is not a compromise,” he said during Monday’s meeting. “I was perfectly prepared to vote for this final rule, if it were a bipartisan compromise, if it preserved the state role that everybody sitting up here voted for two years ago.”

Clements diverged in her concurring statement from Christie’s view, saying “In reading the stridently worded dissent that I believe misrepresents the final rule and strains in its legal rationale, I can only surmise that ‘thou doth protest too much.'”

FERC has for months been under pressure to advance a final rule on transmission planning and cost allocation. More than 100 lawmakers and tech giants and private companies have sent letters with that message.

Now, attention turns to how states respond to FERC’s latest attempt at grid planning policy.

FERC’s new policy directs planners to seek agreement among state energy officials in setting cost-allocation formulas for multistate power lines. The FERC rule applies to grid planning organizations in the lower 48 states. The rule does not affect the Electric Reliability Council of Texas, the grid operator in most of the Lone Star state that is largely isolated from the rest of the U.S. power system.

FERC, as expected, did not act on a policy proposal that could have expanded planning requirements to interregional power line projects, which could advance development of the longest lines.

The nation’s major regional transmission organizations have only begun strengthening their interconnections in recent years. FERC has sought industry and advocacy group comment on an interregional planning policy and invited experts to weigh in on a possible rule that would require a minimum of transfer capacity between regions.

“Not everybody is going to get everything that they want. I don’t even get everything that I want,” Phillips said. “But that is the nature of these large proceedings and these large rules here at FERC.”

Reporter Peter Behr contributed.

FERC shakes up power industry with landmark grid rule (2024)
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