On June 7th, 2013, the U.S. Court of Appeals for the Seventh Circuit issued an opinion that could significantly impact transmission and renewable energy policies across the country. The decision considers the propriety of two Federal Energy Regulatory Commission ("FERC") orders pertaining to cost allocation for new transmission projects bringing renewable energy (primarily wind) from remote locations in the Midwest to population centers.
In 2010, the Midwest (now Midcontinent) Independent System Operator ("MISO") sought FERC's approval to implement a tariff allocating the construction cost of new "multi-value projects" among its members. MISO proposed dividing the cost of these projects among various utilities based upon their share of total power consumption. FERC approved MISO's proposed plan in 2011, and in its June 7th, 2013 opinion, the U.S. Court of Appeals upheld FERC's orders.
This decision could have several significant impacts for public utilities, transmission operators, renewable project developers, and retail customers throughout the region, but perhaps the two most pressing results are as follows:
- In reaching its conclusion, the Court of Appeals held that state policies which favor in-state renewable generation may be Constitutionally invalid, as a state "cannot, without violating the commerce clause of Article I of the Constitution, discriminate against out-of-state renewable energy." This precedent could encourage a surge of legal challenges, and if successful, might open numerous new markets for comparatively inexpensive Midwestern wind generation; and
- Approving MISO's cost allocation methodology should help drive the continued development of transmission lines that bring remote renewable generation to market. Allocating the costs of constructing these lines by total consumption of energy rather than by region effectively increases the economic viability of the lines for transmission developers and Midwestern utilities constructing the projects.
For More Information
If you have any questions about this decision, please contact a member of the Polsinelli Energy Group. In addition to its established group of energy attorneys, Polsinelli is proud to have recently been joined by Kevin Gunn, the former Chairman of the Missouri Public Service Commission, who brings significant experience and unique insights to clients on these issues.
To read the full Alert, click here.