On October 28, 2016, FERC issued an order that both partially accepted compliance filings and also denied rehearing requests from PJM Interconnection, LLC (“PJM”), Midcontinent Independent System Operator, Inc. (“MISO”) and MISO Transmission Owners regarding Order No. 1000 interregional compliance filings. Of particular concern for the Commission was the parties’ MISO-PJM Joint Operating Agreement (“MISO-PJM JOA”), and whether it failed to satisfy certain required Interregional Cost Allocation Principles. This is the third such order to address the parties’ compliance with the interregional transmission coordination and cost allocation requirements of Order No. 1000.

In its order, FERC considered the MISO Transmission Owners’ request for rehearing of FERC’s findings regarding the MISO-PJM JOA’s proposed avoided cost-only method for allocating the costs of certain interregional transmission projects. As initially set out, the MISO-PJM JOA’s proposed allocation method excluded from consideration the avoided costs of displacing regional transmission projects that MISO and PJM had already selected in their respective regional transmission planning processes. FERC reiterated the decision in its prior compliance orders that MISO and PJM must also include such already-selected regional projects, notwithstanding the potential for frustrating the project developers’ financial expectations should they become displaced by an interregional project. As FERC explained, because Order No. 1000 does not require interregional transmission planning, such planning is only useful to the extent that it reveals more efficient and cost-effective solutions than the mandated regional planning process. Thus, in order to comply with Interregional Cost Allocation Principle 1 of Order No. 1000, which requires that a project’s costs be “at least roughly commensurate” with its estimated benefits, the interregional cost allocation method must consider all possible transmission projects—including regional projects that may be under development. To the extent that transmission project developers are concerned about cost recovery, the Commission noted, they could raise those issues in their respective stakeholder processes or file a Federal Power Act section 206 complaint.

FERC next analyzed whether the MISO-PJM JOA met the transparency requirements of Order No. 1000 Interregional Cost Allocation Principle 5. In particular, FERC considered whether PJM and MISO had fully explained the types of transmission facilities to be considered in the avoided cost calculations for interregional reliability projects, interregional public policy projects, and interregional market efficiency projects. The Commission determined that the JOA was insufficiently clear about what types of projects were captured in the MISO-PJM interregional planning process, because the tariffs for both MISO and PJM used inconsistent terms and excluded certain project categories because they involved multiple reliability, policy, and market efficiency drivers, as opposed to only one.

FERC also rejected a request for rehearing of its finding that MISO and PJM’s proposal to remove certain cross-border, baseline reliability projects from the JOA was not properly part of this compliance proceeding. In particular, FERC rejected the proposal on the grounds that the provision of the JOA in question was added as part of a prior proceeding and nothing in Order No. 1000 required its removal. Thus, FERC concluded that a compliance filing was “not an opportunity to make changes not directed or otherwise authorized.” As part of the most-recent compliance filing, which FERC accepted, MISO and PJM restored the cross-border, baseline reliability project provisions to the JOA.

FERC ordered MISO and PJM to submit new compliance filings rectifying these problems, and correct certain other minor deficiencies, within 30 days of the October 28 order.

A copy of FERC’s order can be found here.