Monday, June 10, 2013

Illinois Commerce Commission, Et Al v. FERC

Jun 7: In the U.S. Court of Appeals, Seventh Circuit, Case Nos. 11-3421, 11-3430, 11-3584, 11-3585, 11-3586,11-3620, 11-3787, 11-3795, 11-3806, 12-1027. Petitions to Review Orders of the Federal Energy Regulatory Commission (FERC). The Appeals Court explains that control of more than half the nation's electrical grid is divided among seven Regional Transmission Organizations (RTOs). These are voluntary associations of utilities that own electrical transmission lines interconnected to form a regional grid and that agree to delegate operational control of the grid to the association. Power plants that do not own any part of the grid but generate electricity transmitted by it are also members of these associations, as are other electrical companies involved in one way or another with the regional grid.
    Two Regional Transmission Organizations are involved in this case -- Midwest Independent Transmission System Operator, Inc. (MISO) and PJM Interconnection, LLC (PJM). MISO operates in the midwest and in the Great Plains states while PJM operates in the mid-Atlantic region but has midwestern enclaves in and surrounding Chicago and in southwestern Michigan. Each RTO is responsible for planning and directing expansions and upgrades of its grid. It finances these activities by adding a fee to the price of wholesale electricity transmitted on the grid. The Federal Power Act requires that the fee be "just and reasonable," and therefore at least roughly proportionate to the anticipated benefits to a utility of being able to use the grid. 
    The Appeals Court continues the case explanation saying in 2010 it sought FERC's approval to impose a tariff on its members to fund the construction of new high-voltage power lines that it calls "multi-value projects" (MVPs), beginning with 16 pilot projects. The tariff is mainly intended to finance the construction of transmission lines for electricity generated by remote wind farms. Every state in MISO's region except Kentucky (which is barely in the region) encourages or even requires utilities to obtain a specified percentage of their electricity supply from renewable sources, mainly wind farms. Indiana, North Dakota, and South Dakota have aspirational goals; the rest have mandates. The details vary but most of the states expect or require utilities to obtain between 10 and 25 percent of their electricity needs from renewable sources by 2025 -- and by then there may be federal renewable energy requirements as well.
    MISO identified what it believes to be the best sites in its region for wind farms that will meet the region's demand for wind power. Most are in the Great Plains, because electricity produced by wind farms there is cheaper despite the longer transmission distance; the wind flow is stronger and steadier and land is cheaper because population density is low (wind farms require significant amounts of land). Among other benefits, MISO has estimated that the cost of the transmission lines necessary both to bring electricity to its urban centers from the Great Plains and to integrate the existing wind farms elsewhere in its region with transmission lines from the Great Plains -- transmission lines that the multi-value projects will create -- will be more than offset by the lower cost of electricity produced by western wind farms. FERC approved (with a few exceptions) MISO's rate design and pilot projects.
    The Appeals Court indicates that six issues are presented: (1) the proportionality of benefits to costs; (2) the procedural adequacy of the Commission's treatment of proportionality; (3) the propriety of apportioning the cost of the multi-value projects among utilities on the basis of their total power consumption while allocating no MVP costs to the plants that generate the power; (4) whether MISO should be permitted to add the MVP fee to electricity transmitted to utilities that belong to the PJM Regional Transmission Organization rather than to MISO; (5) whether MISO should be permitted to assess some of the multi-value projects' costs on departing members of MISO; (6) and whether the Commission's approval of the MVP tariff -- which if implemented will influence decisions by state utility commissions regarding the siting of transmission lines -- violates the Tenth Amendment to the Constitution by invading state prerogatives.
    The Appeals Court immediately dispatches the Tenth Amendment issue calling it "frivolous" and then addresses each of the other five. On the issue of Proportionality and Procedure which the Panel discusses together, and says the petitioners' objections fall into two groups -- One consists of objections lodged by the Michigan utilities and their regulator (i.e. Michigan objectors) and the other, led by the Illinois Commerce Commission (i.e. Illinois objectors). [Note: The issues are far too complicated to adequately summarize here. The reader is referred to the complete opinion for a full explanation.]
    The Appeals Court concludes, "In summary, the challenged orders are affirmed, except that the challenge by the departing MISO members is dismissed as premature and the determination regarding export pricing to PJM is remanded for further analysis by the Commission in light of the discussion of the issue in this opinion."
    Access the complete opinion (click here). [#Energy/Wind, #Energy/Grid, #CA7]
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