FERC’s New Orders Address Electric Transmission Development and Planning to Maintain a Reliable Grid

The Federal Energy Regulatory Commission (“FERC”) recently issued a long-awaited rule governing development and cost-allocation for electrical transmission lines.  On May 13, 2024, FERC adopted Order Numbers 1920 and 1977.

These orders express FERC’s goal to meet the nation’s growing demand for reliable electricity and may impact energy generation facilities throughout the country.  We summarize four important features of these two orders below:

1. Order Number 1920 Imposes Long-Term Transmission Planning Requirements.

Under Order Number 1920, transmission providers must produce long-term transmission planning over a 20-year time frame to anticipate future transmission needs.  Transmission operators must conduct this planning at least once every five years using the “best available data.”

Further, transmission providers must consider potential transmission facilities that address interconnection-related needs.  Providers must also consider “Grid Enhancing Technologies” such as dynamic line ratings, advanced power flow control devices, and advanced conductor and transmission switching.

2. Order No. 1920 Enhances Transparency, “Right-Sizing” and Interregional Transmission Coordination.

Order Number 1920 requires transmission providers to publicly disclose local transmission planning information.  For instance, transmission providers must conduct stakeholder meetings about the local process during the regional transmission cycle. Also, providers will need to revise the current interregional transmissions coordination process to accommodate the new long-term regional transmission planning reforms.

The rule prescribes a method of right-sizing transmission facilities.  “Right-sizing” means replacing existing transmission facilities to increase their transfer capability. Providers must give transmission owners a federal right of first refusal to develop these right-sized replacement facilities. This right allows incumbent providers (those already providing transmission services in a specific area) to have the first opportunity to build new transmission facilities in that area before any new or non-incumbent entities can do so.

The federal right of first refusal can help the stability and continuity in transmission facility development because it utilizes the incumbent’s existing knowledge and infrastructure. However, this right can be problematic because it discourages competition. To mitigate negative effects, the new rule does not establish a conditional right of first refusal based on joint ownership. Thus, investor-owned utilities and public power utilities will still need to bid with independent transmission companies on projects.  

3. Order No. 1920 Allocates Transmission Costs between States and Interconnection Customers.

FERC’s new rule expands states’ role in the planning process to help select and determine how to pay for transmission facilities.  Additionally, applicants must open a six-month engagement period with state entities before they submit compliance filings.  Transmission providers need to include an evaluation process and a process giving states and interconnection customers the opportunity to fund all or a portion of the regional transmission facility costs.

4. Order No. 1977 Amends Its Regulation Regarding Application for Permits to Site Electric Transmission Facilities.

Order No. 1977 ensures permitting regulations remain consistent with the Infrastructure Investment and Jobs Act and the Federal Power Act Section 216 to promote efficient and timely review of permit applications.  It also includes a Landowner Bill of Rights notifying potentially affected landowners about how to object to a proposed transmission line.

Order Numbers 1920 and 1977 take effect 60 days after publication in the Federal Register.

Hannes D. Zetzsche
Laura P. Genett, Summer Associate