FERC Order 1000 shakes up the electric transmission industry.
The ground didn't tremble when the Federal Energy Regulatory Commission (FERC) issued Order 1000 in July 2011. It probably only seemed that way to the electric transmission industry.
The commission mandated developing a cost allocation process for large-scale, interregional transmission projects and required all transmission providers to participate in regional planning processes and coordinate between regions on multiregional projects. And FERC really shook things up by removing the federal right of first refusal (ROFR) on projects subject to those processes.
"It's a big deal, a landmark order," says Chris Underwood, manager of transmission development at Burns & McDonnell. "To date, utilities have essentially had a monopoly when it comes to building transmission projects within their service territory. With the federal right of first refusal removed, that's gone for many projects."
FERC affirmed the order in May 2012 with Order 1000-A.
The first tremors were felt 16 years ago with the introduction of FERC Orders 888 and 889, which aimed to increase competition in electric generation by opening access to transmission lines.
"Independent generators wanted to build new generation facilities, but contended that some utilities made it difficult to connect to the transmission system," Underwood says. "The new rules moved to open that access."
One side effect from those earlier orders was the organizing of regionwide planning areas. These regions created a framework for utilities to provide equal access to the power grid.
With Order 1000, FERC will expand competition into the electric transmission industry and fundamentally alter how large-scale transmission projects — especially those that extend through multiple regions — are developed, built and operated.
"Non-incumbent developers thought they were getting pushed aside. FERC wants more competition to build and own transmission and ultimately lower prices to consumers," Underwood says.
Many transmission projects that traditionally had been assigned based on geography and service territory are now open to competition. Incumbent utilities no longer have the right of first refusal to build, own and operate large-scale transmission projects within their service territory.
Local and regional compliance filings were due to FERC in October 2012, and plans for interregional compliance are due on April 11, 2013. The challenges can differ by region, but the reality is that the game is changing and industry members are evaluating their options.
Some utilities are focusing on protecting business in their territory. Others are forming joint ventures and planning to develop wherever they can in the newly opened competitive landscape.
It is more important than ever to identify the most promising transmission projects and put together competitive bids. Burns & McDonnell can provide the preliminary engineering and cost estimates that will support competitive proposals.
"We can help existing clients protect their territory with good defense," Underwood says. "And we can help them play offense if they're looking outside their traditional service territory."
For more information, contact Chris Underwood, 816-822-4313.
Transmission stakeholders can monitor developments at www.burnsmcd.com/order1000.