Order 1000 leaves some transmission problems unsolved

It seems the Federal Energy Regulatory Commission's (FERC) Order 1000 has caused the energy industry nothing but headaches since its July 2011 introduction. The challenges within Order 1000 have created a significant ripple effect throughout the transmission industry, stretching from planning to rate setting to construction and maintenance.

Order 1000 will implement regional transmission planning requirements and set new rules for cost allocation.

Order 1000 leaves many of these topics largely unresolved, and they have serious impacts on the future of grid reliability and transmission planning in the United States. On top of that, FERC Order 1000 is only the latest in a series of transmission regulations, and it most certainly won't be the last.  Overcoming these holes will not be easy and will take coordination and cooperation of regional planning organizations, regulatory commissions, and utility companies.  

Implications of transmission planning

At the basic level, Order 1000 establishes new regional transmission planning requirements and sets new rules for cost allocation. It's no secret that the U.S. electrical grid is ailing, and its age is only going to become more pronounced as standard coal-fired generation is phased out in favor of renewable sources which place new strain on transmission lines. The goal, in many ways, is to prepare for increased energy demand through incorporating state and public policy requirements and addressing reliability concerns through long-term transmission planning.

"There are so many more uncertainties in the transmission planning world than I think we've faced before, and the transmission planning models are not designed to deal with that easily," said Flora Flyght, a strategic planning and policy advisor at American Transmission Company (ATC), which was the first multi-state transmission-only utility in the country.

ATC has had success getting regulatory approval for transmission processes and has been approved for 60 of 60 projects brought to state energy regulatory commissions. The big key, Flyght said, is communication.

"We bring people in early and we bring them in often so that by the time we get that application filed, we have dealt with most of the concerns that people have," Flyght said at a TransmissionHub conference last week.

But Order 1000 has not addressed reliability concerns, she said, and a change must be made in the way transmission projects are developed. For example, she argued that while Order 1000 gives more authority to RTOS and ISOs to shape the future of transmission projects, transmission utilities are still are on the hook for reliability and need to make sure their proposals are considered.

Effects on cost allocation

No one would doubt that transmission planning is an incredibly complicated process, and Order 1000 could potentially muddy it even more by bringing together even more stakeholders. One of the main sticking points remains that it does not fully address cost allocation options for transmission build out.

For example, energy prices must now be set using new external values, such as the benefits of green power that cross state lines. Although one state might be more "green" than another, how do you properly split up these costs if multiple states are drawing from the same renewable source?

"Transmission lines don't care what's on the other end of that line, whether it's a solar panel or a coal plant. It's all electrons in the mind of the transmission system," said Roy Palk , a senior energy advisor at law firm LeClairRyan.

Palk sees Order 1000's purpose as leveling the playing field for transmission much like generation a decade ago. He noted that it will also act as supporting guidance for future transmission regulation, noting that FERC is not going to let up in its transmission regulation.

In terms of cost allocation and determining value, Order 1000 is not going to solve all the problems.

"FERC Order 1000, in my opinion, was not intended to be an all-resolved approach," Palk said. "It really was a way to get people together to talk about issues, to plan together, to identify costs, to allocate costs and to try to enable the implementation of public policy issues."

Flyght mused that failing to make these changes in the transmission planning process could have seriously negative implications.

"The nightmare scenario is that we haven't learned to deal with all the uncertainty," she said.

But despite current challenges and a widespread frustration over compliance issues, Order 1000 is fueling a necessary debate about how to reshape transmission with an eye on building out a more reliable electric grid. Order 1000 is both a revolutionary and evolutionary policy, and has the potential to foster new technologies to help deal with transmission reliability, such as energy storage, demand response and microgrids.