Appeals Court Says FERC Calls Shots on Grid Upgrade Costs

The California Public Utilities Commission cannot order investor-owned utilities to pay the up-front costs of transmission upgrades needed to allow new renewables suppliers to connect, according to the California Second District Court of Appeals. Who pays the initial costs of upgrading high-voltage lines to connect to alternative projects has been an ongoing battle, with privately owned generators insisting that placing the initial financial burden on them squelches projects. The decision, however, left some key issues up in the air, including whether and to what extent state regulators can order the utilities to build new transmission lines in a timely and effective manner. The court held that the Federal Energy Regulatory Commission?s jurisdiction under the Federal Power Act ?includes the authority to order interconnection to the grid and to specify the terms of the interconnection.? It ruled that the matter fell under ?field preemption,? thus making immaterial the question of whether a clash exists between state and federal law. The court also disagreed with the CPUC and held that the issue is ripe for review because ?negotiations on developing new sources of renewable energy for connection to the grid are being inhibited by uncertainty over this issue.? The appeals court noted, however, that states are allowed to regulate certain aspects of transmission, including that related to the export of hydropower and moving power within the state, as well as local distribution and qualifying facilities (QFs). ?The court?s decision is a very positive one for Southern California Edison customers,? said Paul Klein, utility spokesperson. Nancy Rader, California Wind Energy Association executive director, said the ?court did not address the crucial legal distinction between the CPUC directing the utility to provide up-front financing for the upgrade, which the court ruled against, and the CPUC directing the utility to file at FERC for permission to provide the up-front financing.? The CPUC?s Tehachapi transmission decision, not challenged by Edison, ?was careful in ordering Edison to seek transmission rate recovery? from federal regulators, she added. The CPUC issued an interim order in July 2003 that held developers did not have to pay the up-front network upgrade costs and wait for utility reimbursement. Later that month, FERC issued a standard interconnection agreement order, but state regulators argued that its ?silence? on state authority did not translate into congressional intent ?to preempt state commissions from directing a utility to provide the up-front costs of necessary network upgrades, subject to FERC approval of the interconnection agreement, and to seek recovery of those costs in transmission rates.? Edison, along with Pacific Gas & Electric, filed for a rehearing, but the commission denied it in October 2003. Edison later filed for a writ of review, which was challenged by the CPUC and the Center for Energy Efficiency and Renewable Technologies. ?We?re still looking over the decision to understand its implications and any next steps,? said CPUC spokesperson Terrie Prosper. (Decision No. B171050)

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Appeals Court Says FERC Calls Shots on Grid Upgrade Costs

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