On December 31, 2015, FERC issued an order applying the seven-factor test to exclude certain transmission facilities owned by Southern California Edison Company (“SoCal Edison”) from North American Electric Reliability Corporation (“NERC”) regulation. SoCal Edison filed an application under Section 215 of the Federal Power Act (“FPA”) and FERC Order No. 773, seeking a determination from FERC that certain of its 115 kV facilities were “facilities used in the local distribution of electric energy,” and therefore, were exempt from NERC regulation under the plain language contained in Section 215 of the FPA. In its application, SoCal Edison presented seven transmission and substation facility configurations for FERC consideration. Using the seven-factor test set forth in Order No. 888, FERC determined that five of the seven facilities were “facilities used in local distribution” and were exempt.

In Order No. 773, FERC established a process by which an entity could seek a determination regarding whether facilities are “used in local distribution.” That process includes submitting an application directly to FERC and providing supporting materials necessary for application of the Commission’s Order No. 888 seven-factor test. The seven-factor test involves a case-by-case analysis of the following seven indicators of local distribution: (1) local distribution facilities are normally in close proximity to retail customers; (2) local distribution facilities are primarily radial in character; (3) power flows into local distribution systems, and rarely, if ever, flows out; (4) when power enters a local distribution system, it is not reconsigned or transported onto some other market; (5) power entering a local distribution system is consumed in a comparatively restricted geographic area; (6) meters are based at the transmission/local distribution interface to measure flow into the local distribution system; and (7) local distribution systems will be of reduced voltage.

Based on its analysis of these seven-factors, FERC concluded that five of the seven sets of transmission and substation facilities SoCal Edison presented for consideration qualified for exemption from NERC regulation. For the remaining two sets of facilities, the Commission determined that, although they also satisfied the seven-factor test, “other factors”—including reliability concerns associated with misoperation of the protection systems at these facilities—weighed in favor of finding the facilities were not “used in local distribution.”

A copy of the order can be found here.