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NARUC Resolution Mulls Change in Transmission Siting Authority

The electricity committee of the National Association of Regulatory Commissioners (NARUC) "tabled for further consideration" a resolution that says the group of state utility regulators would not oppose legislation to expand FERC's authority over the siting of electric transmission facilities.

While no action was taken on the issue at the recent NARUC winter meeting in Washington, DC, the mere fact that the electricity committee considered the resolution is a "signal" that NARUC may be willing to relax its long-standing objection to federal preemption of state jurisdiction over transmission.

The Federal Energy Regulatory Commission's (FERC) existing authority over transmission facilities is limited to backstop power, meaning that the federal regulator can take over when a state commission has "withheld approval" of a permit application for a transmission project for more than one year after it was filed. FERC intrepreted the legislative language "withheld approval" to also include a state's denial of an application, but an appellate court last week rejected the agency's interpretation.

Members of the NARUC electricity committee are expected to hold a conference call in a couple of weeks to discuss whether they will act on the resolution, said NARUC spokesman Robert Thormeyer. If the electricity committee should pass the resolution, it would be sent to the NARUC Leadership Committee for action and then to the association's board of directors, where it would become policy if approved. The earliest the board would vote on it would be July, he noted.

"If the [electricity] committee approves it, it would more or less send a signal" that NARUC "would be more willing to talk about this," Thormeyer said. This would be "significant would clearly change our position."

The resolution was offered at the winter meeting to "take the temperature of [our] members" in light of the fact that Congress is expected to "move quickly" to introduce legislation to give FERC more authority over transmission siting, he said.

"Congress and the Obama administration are now poised to amend the Federal Power Act [FPA] to provide the Federal Energy Regulatory Commission with authority to issue certificates authorizing the siting and construction of new interstate transmission lines," read the NARUC resolution, which was tabled.

Senate Majority Leader Harry Reid (D-NV) is expected to offer legislation "soon" that would expand federal authority over the siting and construction of electric transmission facilities, said Chris Miller, a policy adviser to Reid.

The NARUC resolution indicated that the group would not oppose such legislation if the authority granted to FERC is "limited in scope" to authorizing transmission facilities that support access by renewable generating facilities to wholesale and retail consumers.

In a related development last Wednesday, a federal appeals court in Richmond, VA, delivered a major blow to FERC by rejecting the agency's "expansive interpretation" of congressional language, which granted FERC preemption authority over the siting of electric power transmission projects when a state regulator has "withheld approval" of a permit application for more than one year.

FERC in 2006 orders interpreted the legislative phrase "withheld approval" to include "denied," but the U.S. Court of Appeals for the Fourth Circuit rejected FERC's interpretation. "With FERC's word substitution, the statutory phrase would read 'denied approval [of an application] for more than one year.' The substitution renders the entire phrase nonsensical because, in the context of dealing with a permit application, the final nature of 'denied' conflicts with the continuing nature of 'for more than one year,'" wrote Judge M. Blane Michael.

Piedmont Environmental Council, the New York Public Service Commission, the Minnesota Public Utilities Commission and Communities Against Regional Interconnect challenged a November 2006 rule issued by FERC, which determined that "withheld approval for more than one year" included a state regulator's denial of an application to build transmission facilities. In mid-2007 the Commission denied the parties' requests for rehearing, making the case ripe for review by the appeals court.

The dispute arose from the Commission's broad interpretation of the Energy Policy Act of 2005's (EPAct) amendment of the FPA, which gave FERC the authority to issue permits for the construction or modification of electric transmission facilities in national interest corridors when a state regulator has "withheld approval for more than one year after the filing of an application." Until EPAct, FERC historically had no permitting authority over transmission facilities. This had always fallen to the states.

"FERC's reading of the 'withheld approval' circumstance to include denial of a permit renders it completely out of proportion...The Commission's reading would mean that Congress has told state commissions that they will lose jurisdiction unless they approve every permit application in a national interest corridor. Under such a reading, it would be futile for a state commission to deny a permit based on traditional considerations like cost and benefit, land use and environmental impacts, and health and safety. It would be futile, in other words, for a commission to do its normal work."

EPAct's amendment to the FPA "read as a whole, does not indicate that Congress intended to bring out the sweeping transfer of jurisdiction suggested by FERC. Indeed, if Congress had intended to take the monumental step of preempting state jurisdiction every time a state commission denies a permit in a national interest corridor, it would surely have said so directly," the court said.

FERC Commissioner Suedeen Kelly echoed the court's concerns when she dissented from the final rule in 2006 (see NGI, Nov. 20, 2006). The final rule "gives states two options -- either issue a permit or we'll do it for them. Obviously this is no choice. This is preemption," Kelly noted, adding that Congress under the EPAct did not give FERC the permission to override states' decisions with respect to siting electric transmission facilities.

The court decision has been called a setback for electric transmission projects, including one proposed by New York Regional Interconnection (NYRI), which would run from Utica to New Windsor. "This decision puts the kibosh on NYRI's effort to do an end-around local law and correctly determines that New York State should have the preeminent role in siting projects like NYRI," said U.S. Sen. Charles Schumer (D-NY).

The court ruling "certainly puts this [project] back in the hands of the public power authority in New York State to make [a] decision within a 12-month period of time and...we would hope [it] would be in denial of this NYRI application to enhance and build this line in the seven counties," said Orange County Executive Edward Diana.

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