Department of Energy 2012 Congestion Study

Vol. 27 No. 1

Mr. Grover is a partner in the Birmingham, AL, office of Balch & Bingham LLP and a member of the editorial board of Natural Resources & Environment.

Later this year, the U.S. Department of Energy (DOE) is expected to release its 2012 National Electric Transmission Congestion Study (2012 Congestion Study). The 2012 Congestion Study will be the third such study since Congress, as part of the Energy Policy Act of 2005 (EPAct 2005), added Section 216 to the Federal Power Act and authorized DOE to undertake triennial studies of electric transmission congestion. 16 U.S.C. § 824p. The return of the study finds its context in a state of flux. And the ultimate impact this uncertainty will have on the study is somewhat of an open question that, depending on how resolved, could serve to either improve or fray future interactions between state and federal regulatory authorities and the entities under their respective jurisdiction.

By its own right, the study represents a significant undertaking by DOE. Specifically, the congestion study serves as the statutory predicate for the designation by DOE of national-interest electric transmission corridors (“national corridors”), which are areas “experiencing electric energy transmission capacity constraints or congestion that adversely affects consumers.” 16 U.S.C. § 824p(a)(2). And in areas designated national corridors, the Federal Energy Regulatory Commission (FERC) may grant, under certain prescribed circumstances, a federal permit for the construction or modification of electric transmission facilities, which includes the right of eminent domain. 16 §§ U.S.C. 824p(b), (e). Even in the absence of a national corridor designation, however, the labeling of an area in a study as “congested” is not without consequences. As observed in the San Diego workshop for the 2012 Congestion Study, congestion labels can imply that responsible state authorities and system planners are not suitably addressing congestion issues. National Electric Transmission Congestion Study Workshop (San Diego), pp. 56–57 (Dec. 15, 2011). Thus, the very concept of a congestion study segueing to a national corridor designation has been a controversial one since its introduction in 2005. Transmission siting historically has been a local responsibility and not within the purview of the federal government. The Section 216 congestion study, national corridor designation, and federal siting authority—often referred to as the Backstop Siting Program—encroach on that prerogative.

The 2009 Congestion Study, which was delayed to April 2010 so that DOE could undertake certain additional analysis required of it by Congress as part of the American Recovery and Reinvestment Act, perhaps was most notable for its identification of a number of conditional constraint areas related to potential future renewable energy generation. 2009 Congestion Study, pp. 22–25. Between the issuance of that study, however, and the advent of preparation for the 2012 Congestion Study, there were a number of notable developments. First, the original national corridors designated in 2007 and predicated on the 2006 Congestion Study—the Mid-Atlantic Area and Southwest Area national corridors—were vacated last year by the U.S. Court of Appeals for the Ninth Circuit. See California Wilderness Coalition v. DOE, 631 F.3d 1072 (9th Cir. 2011). (Without exploring the full details of the opinion here, the thrust of the Ninth Circuit’s decision was that DOE failed to satisfy the language of Section 216 requiring the study to be performed “in consultation with affected States” and failed to abide by the requirements of the National Environmental Policy Act.)

Several months later, DOE announced that it was giving consideration to delegating its principal responsibility over congestion study performance and national corridor designation to FERC. However, DOE abandoned that course in October 2011 after a number of electric industry representatives and state regulatory authorities objected to the idea. In announcing its decision as part of a joint statement with FERC, DOE stated that the agency and FERC would be working together to prepare not only future congestion studies but also supplements to those studies based on transmission plans prepared pursuant to FERC Order Nos. 890 and 1000 (the latter order having only been finalized in July and, at the time of DOE’s and FERC’s joint statement, facing numerous requests for rehearing, including a request from the National Association of Regulatory Utility Commissioners). DOE also expressed recognition that it “can execute its § 216(a) powers better, faster, with more transparency, and more effectively,” and with such in mind, intended to (1) begin immediately to identify targeted areas of congestion based on the evaluation of existing information and on comments submitted by stakeholders; (2) identify narrower areas of congestion than the broad areas previously studied; and (3) solicit statements of interest from transmission developers while considering what National Corridors to designate.

In addition, operators and regulators across the electric industry continue to grapple with the effect of current and pending environmental regulation by the U.S. Environmental Protection Agency (EPA), including how such regulation will impact generation availability and, in turn, the reliability of the bulk electric system. While the consequences of environmental regulation on the reliability and cost of the nation’s electricity supply continue to be monitored at any number of levels of federal and state government, the issue too has penetrated the development of the 2012 Congestion Study. As part of its public notice that public workshops would be convened as part of the preparation of the 2012 Congestion Study, DOE identified the sources of data and analyses on which it planned to rely. Among the items listed was the “[p]rojected impacts of current or pending environmental regulation on generation availability.” Plan for Conduct of 2012 Electric Transmission Congestion Study, 76 FR 70122, 70123 (Nov. 10, 2011).

With the 2012 Congestion Study then, DOE finds itself with much to influence the design of its report, as well as something of a clean slate upon which to write. The previous studies and their findings remain, but the national corridor designations have been stricken. While DOE has been quick (and correct) to observe in each of its four workshops that a finding of congestion in a study does not translate into an obligation to issue a national corridor designation for the area perceived to be experiencing congestion, the prospect for such a designation is the primary issue that demands the attention of interested parties. And if DOE’s and FERC’s joint statement is any indication, the idea of future national corridor designations is certainly on the agency’s collective radar.

The primary question that appears open is the granularity with which DOE intends to approach the issue. In each of the four workshops, DOE representatives explored with panelists the question of how granular, or precise, the study should be in terms of pinpointing congestion areas. With prior studies and the original national corridor designations themselves, DOE generally painted with broad strokes, identifying significant geographic regions spanning large, multistate areas. (The 2006 and 2009 studies did focus on the San Francisco Bay area as an identified area of concern.) As it moves to the 2012 Congestion Study, DOE appears to be rethinking that approach.

Recognizably, DOE was criticized for the indefiniteness of earlier designations. By example, the critical congestion area that gave rise to the Mid-Atlantic Area national corridor was a kidney-shaped swath extending from mid-New York state down through New Jersey and Pennsylvania and into Maryland, Delaware, Virginia, and Washington, D.C. The national corridor designation itself included a number of counties in western and northern New York, nearly the entire state of Pennsylvania, much of West Virginia, and portions of Ohio. National Electric Transmission Congestion Report, 72 FR 56992, 57027 (Oct. 5, 2007). While a more granular approach does respond to such concerns, a too-precise tack puts DOE at risk of going beyond its statutory mandate and potentially dictating a transmission solution. In a similar vein, it puts DOE potentially at odds with states, in terms of its being perceived as making a decision about local infrastructure that is not within its jurisdictional purview. Indeed, one of the several objections lodged against the idea of DOE delegating its Section 216 powers to FERC was the idea that a private developer could somehow facilitate the designation of a national corridor by a federal agency in contravention of state wishes. Path-specific congestion designations echo this concern.

This is, of course, not to say that DOE cannot declare what it observes based on the data analyzed. But as electrons are wont to flow along the paths of least resistance, and not necessarily along a specific path, the prospect that DOE will identify a single line as contributing to congestion, which has not already been identified and addressed through actual or planned improvements by the owners or operators of the line, is unlikely. More likely is the scenario that has manifested thus far—DOE identifying areas of congestion for which solutions are many, complicated, or simply forthcoming when the economics justify the investment and cost to consumers. Certainly refinements are to be had, but for a study such as the congestion study, where the goal is identification of the issue, not solving it, maintaining some perspective seems in order.

A secondary question is the extent to which DOE will, and can, take any action based on forward-looking plans. Throughout the workshops DOE representatives question whether the agency should be looking into the future as part of its study, and, if so, how far. Typically, responders identified ten years as a practical period, as much transmission planning is performed within such a framework. It is one thing, however, for a state regulator and responsible planning authority to plan within this context; it is quite another for DOE to do so.

Section 216 of the Federal Power Act does authorize DOE to conduct a study of electric transmission congestion without qualification as to kind. National corridors, however, only may be designated in “any geographic area experiencing electric energy transmission capacity constraints or congestion that adversely affects consumers.” Thus, it is plain that, at least with regard to national corridors if not more broadly, DOE is constrained from taking action based on projected scenarios. It may only act based upon what actually is being (as opposed to will be) experienced in a particular area.

This limitation has practical benefits. Congestion issues frequently resolve themselves over the course of a planning horizon in the absence of the construction of new facilities. The issues associated with the environmental regulations may well prove to be a prime example, as it can be expected that any reliability issues that do manifest as a result of EPA actions will be transitional and resolved by the installation of control technologies, replacement capacity, or new transmission facilities.

The 2012 Congestion Study will be a Version 2.0—a reboot of sorts driven by a decision by the Ninth Circuit and decision by DOE to embrace FERC more fully as a collaborator in the process. How far it will depart from prior studies, and how such departure will be received, should be revealed this year. Perhaps anticipating these possibilities, DOE is adding a level of process to this study not extended in prior studies. Specifically, while DOE accepted comments on the prior studies, the studies nonetheless were issued in final form. For the 2012 Congestion Study, DOE has stated that it will issue the study first in a “draft” form and, thereafter, accept comments on the study before releasing a final study reflecting its review of the comments.

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