Over the objections of state regulators and consumer advocate and power groups, FERC has upheld a ruling in a November 2006 order that allows the agency to override permit denials by state regulators to promote construction of electric transmission facilities in a national corridor.

The center of the dispute is language in the Energy Policy Act of 2005 (EPAct), which gave the Federal Energy Regulatory Commission the authority to issue a permit to build power transmission facilities in a national corridor if it finds that a state commission or other entity have “withheld approval for more than one year after the filing of an application seeking approval…or one year after the designation of the relevant national interest electric corridor, whichever is later.”

In seeking rehearing of the November 2006 order, the protesting parties — some of which included Communities Against Regional Interconnection, the Minnesota Public Utilities Commission and the New York Public Service Commission — argued that the words “withheld approval” did not mean “denial,” as FERC interpreted in its final rule (see NGI, Nov. 20, 2006).

“We find the parties’ arguments unpersuasive,” said the latest FERC order, which was issued May 17 [RM06-12]. “The Commission continues to believe that a reasonable interpretation of the language of the legislation supports a finding that a state’s withholding approval includes a state’s denial of an application. The parties argue that the concept of a state having ‘denied approval for more than one year’ is nonsensical, and thus, the word ‘withheld’ cannot be interpreted to include ‘denied,” it noted.

But “we believe the most common sense reading of ‘withheld approval for more than one year’ encompasses any action — whether it is a failure to act or an outright denial — that results in an applicant not having received state approval at the end of one year,” the order said.

But not all of the Commissioners were onboard with FERC’s decision in the final rule. It “gives states two options — either issue a permit or we’ll do it for them. Obviously this is no choice. This is preemption,” Commissioner Suedeen Kelly said at the time the final rule was issued. She added that Congress under EPAct did not give FERC the permission to override states’ decisions with respect to siting electric transmission facilities.

Most of the commissioners expressed respect for state jurisdiction over transmission siting, saying they hoped that they never have to use the new authority under the final rule. Commissioner Marc Spitzer said he thought it should be used “sparingly.” He likened the agency’s new authority to possessing a nuclear weapon. “[We] possess a weapon with the intent that it not be used.”

A key change in the final rule, according to Chairman Joseph Kelliher, was that the Commission made the pre-filing process mandatory for power transmission projects, and pledged not to initiate the pre-filing process at FERC during the first year after an application has been filed with the state. That gives state siting authorities “one clear year” without any interference from FERC to make timely decisions, Kelliher noted.

Congress in EPAct gave the FERC “some limited authority” to site power transmission facilities, but it did not completely preempt states’ authority in this area. The states will continue to site most of the electric transmission facilities, while FERC will supplement states’ efforts, he said.

FERC can only issue construction permits for transmission projects located in a national interest corridor that is designated by the Department of Energy. And even in areas where there are national interest transmission corridors, FERC can only issue permits where states do not have the authority to site these facilities or consider the interstate benefits of the project, or the applicant does not qualify for state siting under state law, or the state siting body has withheld approval for more than a year or imposed strict conditions on a project.

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