On January 19, 2023, FERC established that a facility’s classification as transmission or distribution under criteria established in the Southwest Power Pool, Inc.’s (“SPP”) Open Access Transmission Tariff (“Tariff”) can be overcome in a challenge at the Commission if the protestors provide sufficient evidence to call into question the classification under the Tariff criteria. FERC found that once protestors present evidence that the facilities are distribution under FERC’s seven-factor test, the burden of proof shifts back to the filing transmission provider and transmission owner seeking a specific classification under Section 205 of the Federal Power Act to demonstrate its proposed classification under FERC’s seven-factor test. FERC found that GridLiance High Plains, LLC (“GridLiance”), as the applicable transmission owner, failed to carry this burden to demonstrate its facilities at issue were transmission facilities after such a challenge.

In August 2018, SPP proposed to add an Annual Transmission Revenue Requirement for transmission service over GridLiance facilities. SPP claimed that the GridLiance facilities qualified as transmission facilities pursuant to criteria outlined in the Commission-approved Attachment AI to SPP’s Tariff. Attachment AI classifies facilities as transmission if they meet at least one of six criteria designated therein. In prior proceedings, FERC declared that the Attachment AI criteria serve as an “initial screen” or prima facie evidence of a transmission owner’s classification “unless an entity seeks a determination . . . to classify or declassify any facility by applying the seven-factor test.” The seven-factor test is a general test established by FERC in Order No. 888 pursuant to which FERC identifies the “primary function” of a facility and assesses whether facilities are transmission or distribution. Various parties challenged SPP’s proposal and, in Opinion No. 579 issued on September 22, 2022, FERC found that SPP and GridLiance had failed to support their proposed transmission classification and associated rate recovery under the seven-factor test. GridLiance requested rehearing of that opinion.

On rehearing, FERC upheld Opinion No. 579. In support of its decision, FERC explained its longstanding precedent on burden shifting in a Section 205 proceeding. FERC found that SPP and GridLiance had the initial burden of proof to support their classification, and that they satisfied this initial burden by producing evidence that the facilities met at least one of the Attachment AI criteria for transmission facilities. The burden then shifted to protestors to present sufficient evidence to call into question the classification. Because protestors presented evidence that the facilities should be classified as distribution under the seven-factor test, FERC explained that the ultimate burden of persuasion rested with SPP and GridLiance “to prove by a preponderance of the evidence that the facilities are classified as transmission under the seven-factor test, and [they] could not rely solely on the prima facie evidence presented under the Attachment AI criteria.” FERC clarified that, notwithstanding that SPP and GridLiance were able to demonstrate satisfaction of at least one of the Attachment AI criteria, once such classification is “sufficiently contested,” SPP and GridLiance should have justified their proposed classification under the Commission’s seven-factor test. FERC found that, because the proponents did not meet their burden of persuasion, the facilities should be properly classified as distribution facilities. The Commission ordered GridLiance, to the extent necessary, to submit its proposed accounting entries for approval and refile its FERC Form No. 1s for any impacted rate years.

FERC’s order on rehearing, issued in Docket No. ER18-2358 et al., can be found here.