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A federal order undermining utility monopolies on transmission in favor of open access to lower consumer costs and spur investment was upheld by an appellate court Aug. 15. The U. S. Court of Appeals for the District of Columbia ruled that the Federal Energy Regulatory Commission’s “Order 1000”—which launched competition into high voltage line operations in October 2011—was within the agency’s statutory authority. The agency applauded the decision by the three-judge panel. Order 1000 “is critical to the commission’s efforts to support efficient, competitive, and cost-effective transmission,” stated Cheryl La Fleur, commission chair. “Our nation needs substantial investment in transmission infrastructure to adapt to changes in its resource mix and environmental policies,” she added. “The industry can now move forward with its transmission planning efforts with greater certainty,” said California Independent System Operator spokesperson Steven Greenlee. None of the state grid operator’s projects are impacted by the ruling, he added. Multiple challenges to the federal agency’s order included claims that its elimination of utilities’ first rights of refusal to make way for competition infringed on state control over planning, siting, and constructing transmission, and thus was beyond federal regulators’ reach. Under rights of first refusal, the incumbent utility got first dibs on transmission projects, including those proposed by a third party. The court disagreed with claims that doing away with the rights of first refusal was not a legitimate exercise of FERC’s power. The commission’s “mandate fits comfortably within Section 201(b)’s grant of jurisdiction over the transmission of electric energy in interstate commerce,’” it reasoned. It also noted that the first refusal right led to cost-ineffective projects concern of the federal agency it called “acute” because of an expected “massive amount of transmission facility development” over “the next two decades as renewable energy sources were integrated into the grid.” The court noted that the agency’s authority under the Federal Power Act over transmission is much broader than in the area of energy sales. In late May, a majority of a three-judge panel of the D.C. Circuit court ruled that federal regulators lacked the authority to allow negawatt bidding into the wholesale market because it crossed the blurry link between federal and state jurisdictions over markets. The commission appealed the panel’s challenge to its demand-response policy last month, asserting its importance to the nation’s competitive wholesale electricity markets and reliable electric service (Current, July 1, 2014). That panel’s ruling will not go into effect while the petition to the full court is pending. In the legal challenge to the commission’s open access order, petitioners also challenged the federal commission’s transmission cost allocation ground rules, asserting the agency also lacked authority over this issue. Another claim was that the cost allocation methodology was “arbitrary and capricious.” The appeals court rejected both arguments, backing the agency’s allocation rules for independent system and regional system operators. “The final rule uses a light touch: it does not dictate how costs are to be allocated. Rather, the rule provides for general cost allocation principles and leaves the details to transmission providers to determine in the planning processes,” according to the court. Petitioners’ argument that the order’s cost allocation violated the Mobile Sierra doctrine was held to be premature. That doctrine assumes that freely negotiated contracts are just and reasonable, unless proven to be harmful.

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