The US federal government’s evolving role in overseeing transmission development took another leap forward after the Federal Energy Regulatory Commission (FERC) issued Orders 1920 and 1977, two new rules that mark FERC’s first transmission planning overhaul in more than a decade. The rules, which address regional transmission planning and transmission siting for certain projects, respectively, are intended to improve the transmission grid’s ability to meet the nation’s growing demand for electricity. Here, we provide an overview of the landmark orders and key areas to watch.

ORDER 1920

At more than 1,300 pages, and the subject of the largest procedural record in FERC history, Order 1920 is dense with major reforms for transmission planning. These reforms focus on four key areas: establishing a long-term transmission planning horizon, developing planning scenarios, selecting transmission solutions, and cost allocation. The overarching goal of the order is to identify regional proposals that will efficiently and cost-effectively address transmission needs further into the future than transmission providers have generally planned.

At a high level, Order 1920 requires transmission providers to perform the following actions:

• Engage in long-term regional transmission planning at least 20 years in advance. The 20-year regional transmission planning process calls on transmission planners to reassess planning scenarios every five years. Transmission planners must also use at least three long-term scenarios to incorporate various assumptions about the future and allow for flexibility.
• Use at least seven enumerated benefits for evaluation and selection of long-term regional transmission facilities. These benefits include avoided or deferred reliability or asset management projects; reduced loss of load probability or reduced planning reserve margin; production cost savings; reduced transmission losses; reduced congestion due to transmission outages; mitigation of extreme weather events; and capacity cost benefits from reduced peak energy losses. The intention is for plans to be as realistic as possible and take into account circumstances surrounding transmission and distribution grids.
• Have a six-month engagement window with relevant state agencies before filing a cost allocation method with FERC for a chosen project. Cost allocation methods should be so designed that customers pay commensurate with benefits received. Transmission planners must provide notice of time period, post contact information, and provide a forum for negotiation and meaningful participation. Planners are also allowed to file a state-negotiated or State Agreement Process cost allocation in addition to a “default” proposal.
• Consider “right sizing” projects. Determine whether modification of existing transmission facilities would be more efficient or cost-effective compared with a full replacement.

The final rule also requires each transmission planning region to consider additional transmission enhancements and enhanced technologies such as dynamic line ratings, conductors, and line switching.

Practical Considerations

The rule takes effect on August 12, 2024 (i.e., 60 days after publication in the Federal Register). Transmission providers will need to submit two sets of compliance filings in 2025. Compliance filings to address most of the final rule’s requirements are due by June 12, 2025, while filings to comply with the rule’s interregional transmission coordination requirements are due by August 12, 2025.

Implementation of the rule will be overseen by a different roster of FERC commissioners. Commissioner Allison Clements, who supported the order, left FERC on June 30 when her term expired, leaving Commissioner Mark Christie, who dissented from the order, and Chairman Willie Phillips, on the commission until June 30, 2025 and June 30, 2026, respectively. The US Senate recently approved three new commissioners: David Rosner for a term expiring June 30, 2027, Lindsay See for a term expiring June 30, 2028, and Judy Chang for a term expiring June 30, 2029.

ORDER 1977

While not nearly as long as Order 1920, Order 1977—addressing FERC’s limited siting authority for electric transmission lines—also received a lot of attention and commentary from stakeholders, particularly from state utility commissions, which have largely governed transmission siting.

The order has several provisions tied to stakeholder engagement and outreach. In general, the order does the following:

• Modifies FERC’s “backstop” siting procedures for NIETCs projects. FERC now has the authority to issue permits to construct or modify electric transmission facilities in regional lines designated by the US Department of Energy (DOE) as National Interest Electric Transmission Corridors (NIETCs) even when developers are denied by state or local authorities.
• Does not allow simultaneous processing of FERC and state siting applications. FERC will not begin its siting process until at least one year into the state siting process as FERC has chosen to respect the state’s primacy in siting transmission infrastructure. FERC also reiterated the view that the Federal Power Act allows for a prefiling process to occur in parallel with state proceedings.
• Codifies the applicant code of conduct. The order includes recordkeeping and information-sharing requirements for engagement with affected landowners as well as general prohibitions against misconduct. Complying with the code of conduct can show an applicant has engaged in good-faith efforts.
• Creates a landowner bill of rights. This notifies affected landowners of their right to intervene in a FERC proceeding and must be included with a prefiling notification mailed to landowners.
• Requires a Tribal Resources Report. This report, which consolidates existing requirements regarding effects on tribes, tribal lands, and tribal resources, must be included with any siting application. Applicants must identify potentially affected tribes and describe the impacts of construction, operation, and maintenance on tribes and tribal interests.
• Requires engagement plans. Applicants must develop and file engagement plans describing outreach to “environmental justice communities” and tribes.

Practical Considerations

The rule enters into force on July 29, 2024. However, the DOE is still in the process of identifying NIETCs. While the DOE has taken initial steps to identify potential NIETCs, the process is not expected to be completed in the near future, meaning FERC and thus planners must wait for the process to be finalized. In the meantime, applicants would do well to ensure compliance with the specific application requirements related to outreach and engagement.

IMPLEMENTATION ISSUES

Moving forward, the implementation of these new rules raises several questions. Among them is the accuracy of forecasts and implications of cost recovery over a 20-year planning horizon as called for in Order 1920. The order’s requirements regarding benefits considerations could also carry the potential for conflict between FERC benefits and the requirements of state-regulated integrated resource planning.

Meanwhile, Order 1977 raises questions about federal and state balance. For instance, how would using backstop authority affect a utility’s relationship with landowners and state regulators, particularly if federal eminent domain is used? Another question is whether the availability of federal backstop siting could make transmission development in these regions more difficult.

WHAT COMES NEXT

The release of Orders 1920 and 1977 is a major milestone. However, as with any regulation, the final outcomes remain uncertain. Implementation and compliance filings are forthcoming, and potential challenges should be anticipated.

Order 1920 in particular has raised questions about FERC’s authority to regulate regional transmission planning and cost allocation, particularly after the US Supreme Court’s recent decisions in Loper Bright Enterprises v. Raimondo and Relentless, Inc. v. Department of Commerce.

In those two cases, the Court overturned the so-called Chevron doctrine, a long-standing judicial rule that required courts to defer to an agency’s reasonable interpretation of the statute it administers. Following those decisions, FERC Chairman Philips issued a statement insisting that Order 1920 is an appropriate exercise of FERC’s statutory authority. However, it remains to be seen how the Loper Bright and Relentless decisions will impact the fate of Order 1920 as well as FERC’s other administrative adjudications, rulemakings, and interpretations of its statutory authority.

Further, it is important to remember that FERC siting authority for transmission lines is just one of several steps in successfully building a project. Developers must engage with multiple stakeholders in various jurisdictions, raising the potential for delays. Supply chain issues can also affect project timelines. The coming weeks, months, and years will determine how FERC’s orders ultimately influence transmission projects.

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