On August 15, 2014, a three judge panel (Circuit Judges Rogers, Griffith and Pillard) of the United States Court of Appeals for the District of Columbia Circuit affirmed the Federal Energy Regulatory Commission’s (FERC) Order No. 1000 Final Rule and subsequent rehearing orders – Order No. 1000-A and Order No. 1000-B (together, Order No. 1000) on regional transmission planning and cost allocation, South Carolina Public Service Authority v. FERC, Case Nos. 12-1232, et al. (consolidated). 45 petitioners and 16 intervenors, including state regulatory agencies, electric transmission providers, regional transmission organizations, and electric industry trade associations, had petitioned for review of Order No. 1000.  The Court’s 97-page opinion is attached.  In brief, the Court held as follows:

• FERC had authority under Section 206 of the Federal Power Act (FPA) to require transmission providers to participate in a regional planning process.  The Court held that FERC reasonably concluded that transmission planning affects rates for transmission service and its order therefore was within the scope of Section 206.  The Court also rejected assertions that Section 202 of the FPA limits FERC to encouraging voluntary coordination of transmission, stating that Section 202 applies to operational coordination, not pre-operational planning.

• There was substantial evidence of a theoretical threat to support adoption of the reforms in the Final Rule.  The Court held that the FERC’s conclusions concerning the inadequacy of regional planning were not speculative since they were supported by the record in Order No. 890 proceedings, industry consultants and the records in FERC technical conferences; and because the Commission was entitled to rely on reasonable predictions.  The Court’s decision is consistent with its position at oral argument, in which one judge indicated that FERC was not required to wait until the reforms initiated in Order No. 890 had demonstrably failed before issuing another rulemaking.

• FERC has authority under Section 206 to require removal of rights of first refusal (ROFR) provisions from FERC-filed tariffs and rate schedules upon determining they are unjust and unreasonable practices affecting rates.  The Court held that FERC reasonably concluded that ROFRs constitute a barrier to entry, and that their elimination would likely result in more competition and more efficient transmission construction.  Because ROFRs “affect” transmission, the FERC has the authority to eliminate them under Section 206 of the FPA.  The Court also held that challenges to the elimination of ROFRs from specific tariffs on Mobile-Sierra grounds were not ripe because the FERC had deferred the evaluation of specific ROFR provisions until it issued orders on utilities’ Order No. 1000 compliance filings.

• FERC had authority under Section 206 to require the allocation of the costs of new transmission facilities among beneficiaries.  The Court rejected arguments that Section 206 of the FPA is limited to the establishment of rates for entities that have existing commercial relationships with transmission providers, holding that Section 206 gives the FERC the authority to establish “any” rate for “any” transmission service.  The Court also held that FERC reasonably concluded that before-the-fact allocation of transmission costs eliminates the risk that transmission developers will not have a group of customers from which to collect costs, and therefore helps to ensure that needed transmission will be constructed.

• FERC reasonably determined that regional planning must include consideration of transmission needs driven by public policy requirements.  The Court held that FERC’s requirement that regions consider public policy goals was reasonable since those public policies have a direct impact on transmission usage.

• FERC’s decision to rely on the reciprocity condition to encourage non-public utility transmission providers to participate in a regional planning process was reasonable.  The Court rejected assertions that the Commission exceeded its authority in expanding the reciprocity requirement to regional planning.  It held that the Commission had permissibly expanded the reciprocity requirement to apply to regional planning in Order No. 890 and that Order No. 1000 simply broadened the scope of the requirement.  The Court also rejected assertions that FERC should have mandated non-public utility participation in regional transmission planning and cost allocation under Section 211A of the FPA, holding that FERC reasonably exercised its discretion not to mandate participation based on past history of voluntary cooperation by non-public utilities.