FERC 890 Questions on Cost Allocation
In September 2009, the FERC held three regional technical planning conferences as part of its ongoing efforts under Order No. 890 to advance transmission planning. The conferences were designed to enable FERC officials to determine the benefits of transmission projects, while obtaining customer and stakeholder input. FERC sought to better understand the challenges facing transmission development, specifically whether current transmission planning processes were equipped to facilitate regional or interconnection-wide projects and address emerging challenges to transmission development. Another critical issue emerged as technical conference speakers repeatedly questioned the effectiveness of existing cost allocation methods and discussed implementing alternatives that would better enable regional planning.
In a recent notice, FERC noted the Department of Energy's Electricity Advisory Committee's designation of cost allocation as, "…the single largest impediment to any transmission development, especially across multiple [regional transmission organizations (RTOS)] or across RTO and non-RTO regio" in a January 2009 study published by the committee enti"Keeping the Lights On in a New World." [1]
Coming out of its technical conferences, FERC directed transmission providers to respond to questions on enhancing regional transmission planning processes and allocating the cost of transmission. Several conference participants noted the lack of mechanisms to allocate and recover the costs of new transmission development and upgrades.
The FTC weighed in and focused on how consistent cost allocation approaches would benefit consumers:
"Because building transmission that spans several transmission operating areas may significantly reduce the costs of complying with renewable portfolio standards or potential climate policies, FERC should foster consistent, Interconnection-wide cost allocation approaches. The use of the same, reasonable cost allocation approach throughout each Interconnection-wide transmission planning area is likely to benefit consumers by reducing the transaction costs, regulatory risk, and project delays that the existing processes often create." [2]
References:
- 1. http://www.oe.energy.gov/DocumentsandMedia/adequacy_report_01-09-09.pdf. [return to article]
- 2. FERC Docket No. AD09-8-000; Reply Comment of the Federal Trade Commission, December 3, 2009, page 9. [return to article]