On August 15, 2014, the United States Court of Appeals for the District of Columbia Circuit upheld the major components of FERC Order No. 1000 in the case of South Carolina Public Service Authority v. FERC.
On July 21, 2011, FERC issued Order No. 1000, an order that FERC contends builds in part on the reforms of Order No. 890, and corrects remaining deficiencies with respect to transmission planning processes and cost allocation methods. Among other things, Order No. 1000 requires in part that:
- each transmission owning and operating public utility participate in regional transmission planning that satisfies specific planning principles and results in a regional transmission plan;
- each planning process have a method to allocate the costs of new transmission facilities among beneficiaries in the regional transmission plan while satisfying six regional cost allocation principles; and
- each transmission provider remove from their jurisdictional tariffs and agreements any provisions that establish a federal right of first refusal to develop transmission facilities in a regional transmission plan.
A diverse group of parties challenged Order No. 1000, including state regulatory agencies, transmission providers, regional transmission organizations, and industry trade associations. Several of these parties contended that the Commission had exceeded its authority under Section 206 of the Federal Power Act (“FPA”) in promulgating many of these reforms, and that Order No. 1000 was arbitrary and capricious, and unsupported by substantial evidence.
The court rejected these challenges, and issued the following key holdings:
- the Commission had authority under Section 206 of the FPA to require transmission providers to participate in a regional planning process;
- there was substantial evidence of a theoretical threat to society caused by a lack of efficient and cost-effective transmission planning to support adoption of the reforms in Order No. 1000;
- the Commission had authority under Section 206 to require removal of federal rights of first refusal provisions upon determining they were unjust and unreasonable practices affecting rates, that this determination was supported by substantial evidence and was not arbitrary or capricious, and that the Mobile-Sierra objection to remove the federal rights of first refusal was not yet ripe;
- the Commission had authority under Section 206 to require the ex ante allocation of the costs of new transmission facilities among beneficiaries, and its decision regarding the scope of this requirement was not arbitrary or capricious;
- the Commission reasonably determined that regional planning must include consideration of transmission needs driven by public policy requirements; and
- the Commission reasonably relied upon the reciprocity condition to encourage non-public utility transmission providers to participate in a regional planning process. The reciprocity principle requires non-public utility transmission providers that choose to access a public utility’s transmission facilities to provide in exchange “reciprocal” transmission service on comparable terms.
A copy of the court’s opinion is available here.