FERC Adopts Electricity Transmission Siting Rules: Says it Can Reverse State Denials

In Section 1221(a)of the Energy Policy Act of 2005, Congress for the first time enabled the federal government to approve the siting and location of new electric transmission projects. The new law required the Department of Energy (DOE) to issue a national transmission congestion study for comment by August 2006, and every three years thereafter. Based on its study and public comments filed in response to it, DOE may designate selected geographic areas as "National Interest Electric Transmission Corridors."

Applicants for electricity transmission projects proposed within the DOE-designated "corridors" that are not acted upon by state siting authorities within one year may request FERC to exercise federal "backstop" siting authority.

The Federal Energy Regulatory Commission (FERC) issued new rules November 16, 2006 to implement the new law. In a statement issued with the new rules, FERC Chairman Kelliher stated

The final rule also clarifies the meaning of the term “withheld approval” in the statute. As indicated earlier, one of the circumstances where FERC is authorized to issue a construction permit for a transmission project in a designated corridor is where a state siting body has "withheld approval"” for a year. The question has arisen as to whether than term only means state failure to act, or means both state failure to act and denial. We interpret this term using the usual rules of statutory construction, and conclude the most reasonable interpretation is that the term encompasses both state failure to act and denial.

In dissent, Commissioner Suedeen Kelly said the new rules go too far. Under her reading of the words of the statute, the power of FERC to approve a project comes into play only if a state fails to act on a transmission siting proposal:

States have always had exclusive, plenary jurisdiction over transmission
siting.... In 2005, Congress passed EPAct, which, for the first time, carefully carves out a limited role for the federal government in the area of transmission siting. EPAct amended the FPA [Federal Power Act] to give the Commission the authority to site electric transmission facilities in five specific situations.... The majorityÂ’s interpretation of Section 216(b)(1)(C)(i) would add a sixth situation: the Commission would have jurisdiction to approve the siting of a transmission line pursuant to federal law where the State has lawfully denied an application pursuant to state law.

In Commissioner Kelly's view, if a state acts on a proposed project within a year, and denies the project, there could be no overriding federal approval. Thus, the effect of the statute would be to encourage prompt action by states on often controversial transmission projects, and a state that wants to retain its full powers over transmission would be able to do that if it handles project applications expeditiously.

Given the likelihood of litigation over siting of transmission projects, the FERC majority view - that it can approve projects rejected by a state - will probably be tested in the courts, with the Supreme Court having the last word. Or, Congress may amend and clarify the law, giving new and clearer instructions to FERC for its implementation.

Meanwhile, DOE issued its first transmission congestion study on August, 8 2006. It found "critical" congestion areas in "the Atlantic coastal area from metropolitan New York southward through Northern Virginia." DOE did not, however, designate any "national interest transmission corridors." On November 9, 2006, DOE issued a press release announcing the opportunity for further comments on its 2006 study.

Update
February 18, 2009 -- Federal Appeals Court decision rejects FERC's assertion of override authority.

APPA Study Debunks NY PSC Report on Electric Restructuring

In March 2006 the New York Public Service Commission issued a Staff Report on the State of Competitive Energy Markets lauding the claimed results of its efforts to restructure New York state's wholesale and retail electricity industry. A new study undertaken for the American Public Power Association (APPA) examines the methodology of the New York PSC report and other reports that have attempted to measure costs and benefits of restructuring. With respect to the New York PSC report, the APPA report states:

In summary, the intention of this staff report of the New York State Department of Public Service seems not to be a careful or balanced assessment of the issues. Rather, it is at best an update on changes in the electricity (and gas) markets in New York and in state policies affecting these markets. Even as an update, however, it pays inadequate attention to causation and precision in its evidence and claims.