FERC Order 1920 reforms electric transmission planning

US electricity regulators have issued a major order addressing the nation's policy on regional planning of the electric transmission grid. The Federal Energy Regulatory Commission describes its Order No. 1920 as "the first time in more than a decade that FERC has addressed regional transmission policy – and the first time the Commission has ever squarely addressed the need for long-term transmission planning."

FERC adopted Order No. 1920 at its May 13, 2024 Open Meeting, by a vote of 2-1. Captioned "Building for the Future Through Electric Regional Transmission Planning and Cost Allocation", Order No. 1920 spans 1,364 pages. 

Issued in Docket No. RM21-17-000, the order adopts a final rule revising the Commission's pro forma Open Access Transmission Tariff (OATT) "to remedy deficiencies in the Commission's existing regional and local transmission planning and cost allocation requirements." As described by FERC, the order "finds that sufficiently long-term, forward-looking, and comprehensive regional transmission planning and cost allocation to meet long-term transmission needs is not occurring on a consistent and sufficient basis". According to FERC, this results in "piecemeal transmission expansion that addresses relatively near-term transmission needs" and "transmission providers investing in relatively inefficient or less cost-effective transmission infrastructure", causing customers to incur costs and miss benefits. This, according to the Commission, "in turn renders Commission-jurisdictional regional transmission planning and cost allocation processes unjust and unreasonable."

To remedy this problem, the order prescribes specific requirements that regional grid operators and transmission providers must follow in conducting long-term planning for regional transmission facilities and in allocating their costs. Among other reforms, it requires transmission operators to engage in long-term planning, with a 20-year time horizon, and a process for updates at least once every five years. It requires planners to consider seven specific categories of benefit, to determine whether a regional proposal will efficiently and cost-effectively address long-term transmission needs. These benefits are:

1. avoided or deferred reliability transmission facilities and aging infrastructure replacement;
2. either reduced loss of load probability or reduced planning reserve margin;
3. production cost savings;
4. reduced transmission energy losses;
5. reduced congestion due to transmission outages;
6. mitigation of extreme weather events and unexpected system conditions; and
7. capacity cost benefits from reduced peak energy losses. 

The order includes provisions designed to "right-size" transmission facilities, by which FERC means considering cost-effective expansion to increase transfer capability, whenever replacement is needed. Incumbent transmission owners will have a right of first refusal to develop these "right-sized" transmission facilities.

Order 1920 also gives states key responsibilities in planning, selecting, and determining the cost allocation for transmission lines, while continuing to require that customers pay only for projects from which they benefit. It also creates a process giving states and interconnection customers the opportunity to fund some or all of the cost of a long-term regional transmission facilities that otherwise would not meet the transmission provider’s selection criteria. 

Commissioner Christie dissented, asserting that the order exceeds FERC's legal authority and fails to protect consumers. The order is set to take effect 60 days after its publication in the Federal Register. Order No. 1920 requires one set of compliance filings within 10 months of its effective date, with another round concerning interregional coordination due within 12 months of the effective date.