Power Generation, Transmission, and Use

Markets, Regulation, and Oversight

Impacts of Power Generation and Transmission

Looking Ahead


CEIR Report Map


Maryland Power Plants and the Environment (CEIR-18)

3.4 The Role of Federal Entities

Regulatory jurisdiction over the electricity system as a whole is shared between federal and state entities. This section describes federal authority over the generation and transmission of electricity in Maryland.

3.4.1 Federal Energy Regulatory Commission

The FERC is an independent regulatory arm of the U.S. Department of Energy (DOE). FERC authority derives from the Interstate Commerce Clause (Article I of the U.S. Constitution) and a large set of federal statutes, primarily the Federal Power Act, the Natural Gas Act, the Energy Policy Act of 2005, and the Interstate Commerce Act. FERC’s authority specifically includes: hydroelectric projects on interstate waterways (those not otherwise regulated by other federal entities such as the U.S. Army Corps of Engineers); interstate natural gas pipelines and certain types of gas storage, transmission, and wholesale sales of electricity in interstate commerce; and import and export facilities for liquefied natural gas (LNG) (a responsibility shared with the U.S. Coast Guard). FERC also has authority over wholesale energy rates, natural gas pricing, interstate oil pipeline rates, electric reliability at a national level, and reviews of certain mergers and acquisitions by energy companies. FERC does not have authority over the following: local or otherwise non-interstate reliability; retail electricity and natural gas rates; mergers and acquisitions related to natural gas and oil companies; energy facilities; or energy issues regulated by state energy authorities (such as state public utility commissions) or regional energy authorities (such as Tennessee Valley Authority).

Electricity Transmission

FERC jurisdiction over wholesale transmission applies to entities that own, control, or operate interstate transmission facilities, primarily investor-owned utilities, but could include electric cooperatives, municipal utilities, and public power agencies. In addition, FERC jurisdiction over federal agencies is limited and FERC jurisdiction does not extend to regions not engaged in interstate commerce, which includes the part of Texas under the Electric Reliability Council of Texas and the states of Alaska and Hawaii. FERC has primary jurisdiction over all U.S. ISOs and RTOs with respect to both the ISO/RTO-administered wholesale electricity markets and the ISO/RTO regional transmission planning activities (except in Electric Reliability Council of Texas). The North American ISOs and RTOs are shown in Figure 3-7.

Figure 3-7 North American RTOs and ISOs

Figure 3-7 Map of North America with the Regional Transmission Operators highlighted

Transmission Planning and Cost Recovery

FERC originally issued Order No. 888 in April 1996, establishing requirements for transmission use and planning on both a local and regional level. Within this order, FERC outlined several broad planning principles for transmission providers such as PJM, but these were mainly focused on meeting reliability needs and promoting wholesale competition through establishing open access transmission service on a non-discriminatory basis to all wholesale customers. In February 2007, FERC issued Order No. 890, which strengthened the pro forma Open Access Transmission Tariff by requiring public utility transmission providers to participate in open transmission planning processes. Order 890 noted that transmission investment relative to load growth had declined in the decade following Order 888, and transmission constraints had become common occurrences. Order 890 also outlined new criteria for transmission planning. In July 2011, FERC issued Order No. 1000 to amend some of the transmission planning and cost allocation requirements established in Order 890. FERC noted that regional transmission planning processes had improved following the issuance of FERC Order 890 but some deficiencies remained. Order 1000 included several reforms with respect to transmission planning processes and cost allocation methods by FERC-jurisdictional entities, including:

Order 1000 also includes criteria that align cost allocation with transmission planning. Each public utility transmission provider is now required to have a method for allocating costs for new transmission facilities that follow principles that FERC sets out, with one set of principles for intraregional facility cost allocation within PJM and another for interregional facilities between PJM and adjacent transmission providers, such as the Midcontinent Independent System Operator (MISO). The methodology can include different cost allocation schemes for different types of projects driven by different needs; i.e., reliability, economics, and public policy goals.

PJM submitted its Order 1000 compliance plan in October 2012, outlining its proposed changes to its intraregional transmission planning process. PJM proposed to expand its current planning process to consider direct submissions by states of proposed public policies to be studied at the assumptions stage of the transmission planning process. These submissions would then form the basis for developing scenarios and ultimately could be factored into the selection of projects. PJM also proposed a new cost allocation methodology for large backbone transmission projects. Under PJM’s proposal, the cost of new 500 kV or double-circuit 345 kV projects would be split evenly between the PJM system as a whole and the identified beneficiaries of the project. This method contrasts with the then-existing PJM cost allocation methodology whereby backbone transmission costs were assigned to the system as a whole, with direct beneficiaries bearing the same cost as entities receiving little if any benefit. The project costs assigned throughout PJM will be allocated pro rata to all LSEs based on their peak loads. The other half of project costs will be allocated to the beneficiaries of the new project as determined by PJM zonal modeling. On March 22, 2013, FERC conditionally accepted PJM’s Order 1000 compliance filing, approving the new cost allocation methodology. FERC also ordered PJM to clarify its definition of “Public Policy Requirements” to include duly enacted laws or regulations passed by a local governmental entity, such as a municipal or county government.

In July 2013, PJM submitted to FERC its compliance filing for interregional transmission planning and cost allocation. Interregional planning by PJM and MISO is already provided for under their Joint Operating Agreement (JOA). The existing JOA is largely compliant with many of the requirements of Order 1000, but PJM and MISO worked with stakeholders to agree upon a number of enhancements to the JOA. However, PJM and MISO were not able to come to an agreement on the future treatment of cross-border cost allocation for reliability projects currently specified in the existing JOA, nor on the need to maintain the established reliability planning criteria in the existing JOA. Interregional planning between PJM and the New York Independent System Operator is also provided for through a JOA. While PJM and New York Independent System Operator modified the JOA, PJM believes the enhancements only partially comply with Order 1000. Finally, PJM and the Southeast Region Transmission Planning entities filed an agreement on planning and cost allocation to meet the Order 1000 provisions. Compliance points were developed by PJM and Southeast Region Transmission Planning stakeholders, and tariff language (rather than a JOA) was filed with the FERC.

Various utilities and the National Association of Regulatory Utility Commissioners have sued FERC, arguing that some of the provisions in Order 1000 are beyond FERC’s authority. In September 2013, FERC argued before the District of Columbia Circuit Court of Appeals that it does, in fact, have the authority to reform the planning of high-voltage power transmission. FERC argued that the appeals court should dismiss claims against its requirement in Order 1000 which states that FERC-jurisdictional electric transmission providers must participate in a regional planning process that takes into account state and local public policy when outlining a regional plan, and requires them to also coordinate with other adjacent providers to find better ways to boost efficiency and reliability. FERC argued that its rule did not intrude on state authority and that its public policy directive to regulate in this area is sufficiently clear.

In November 2013, the Coalition for Fair Transmission Policy along with National Association of Regulatory Utility Commissioners and various other utilities, trade associations, and public power organizations filed two reply briefs with the U.S. Court of Appeals challenging FERC’s defense of Order 1000. The first brief addressed controversial cost allocation provisions and asked that key provisions in Order 1000 be reversed. The second brief challenged FERC’s assertion that Order 1000 was simply the last in a series of evolutionary transmission restructuring orders and also addressed the effect of Order 1000 on state utility regulators. The Court heard oral arguments in March 2014 and issued a decision in August 2014 to uphold Order 1000, stating that FERC acted within its authority and that the rule was not arbitrary and capricious.

Hydroelectric and Liquefied Natural Gas

Click to OpenThe Eastern InterconnectionUnless a project has a valid pre-1920 federal permit, non-federal hydroelectric projects are subject to FERC jurisdiction if the project:

FERC issues licenses for projects for up to 50 years and has a complex licensing procedure that incorporates interagency processes such as the U.S. Fish and Wildlife Coordination Act and local public consultation.

FERC also has authority under the Natural Gas Act to authorize the siting of facilities used to import or export liquefied natural gas, which are constructed and/or operated inside the state waters limit. State waters are generally three nautical miles from shore, but this distance varies in some areas, such as the Gulf of Mexico and Puerto Rico where this limit is nine nautical miles.

FERC Docket Number ER13-198

The Eastern Interconnection

North America is comprised of two major and three minor alternating current (AC) power grids or “interconnections.” The Eastern Interconnection, one of the major grids, reaches from Central Canada eastward to the Atlantic coast (excluding Québec), south to Florida and west to the foot of the Rockies (excluding most of Texas). All of the electric utilities in the Eastern Interconnection are electrically tied together during normal system conditions and operate at a synchronized frequency at an average of 60Hz. The other major interconnection is the Western Interconnection. The three minor interconnections are the Québec Interconnection, Alaska Interconnection, and Texas Interconnection.

Map of North America with Interconnections highlighted.