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Statement: July 21,
2011
Docket No. RM10-23-000

Statement of Chairman Jon Wellinghoff on
Transmission Planning and Cost Allocation

"Thank you
to the entire team for your dedication, persistence, patience and
creative thinking over many months to draft this rule for the
Commission's consideration. I also want to thank our executive team,
Michael Bardee, David Morenoff, and Maria Farinella from OGC, Jamie
Simler and Mason Emnett from OEPI, and Michael McLaughlin and Anna
Cochrane from OEMR, for their outstanding leadership on this
important project. The Final Rule will profoundly affect the
development of our nation's transmission system in coming decades.

And thank you to the almost 200 commenters who provided us
with information on the challenges facing the electric industry and
your advice on the best way these should be addressed.

I
thank my colleagues for thought-provoking discussion of the issues
presented here. Commissioners Spitzer and Moeller and I were
relatively new to the Commission when we issued Order No. 890, upon
which this Final Rule builds. However, as we monitored its
implementation, we recognized that changes in the electric power
industry over the ensuing four plus years necessitated additional
reform to transmission planning and cost allocation to reflect the
new demands placed on the nation's transmission system.

The
key driver of the action we consider today in this Final Rule is
reliable transmission service at just and reasonable rates.

NERC projects in its 2010 Long-Term Reliability Assessment
that approximately 60 percent of all new resources expected to be
added to the bulk power system by 2019 will be new wind and solar
resources. Strengthening and expanding the system for the reliable
integration of these resources will require significant investment
in transmission. In the decade ending in 2019, NERC expects a nine
percent increase in circuit miles of transmission will be added,
with significantly higher percentage increases in new circuit miles
in the WECC region, the southwest, New England and parts of the
southeast. Of the total miles of additional bulk power transmission,
50 percent is needed for reliability. An additional 27 percent will
be needed to integrate variable and renewable generation across
North America. The remainder is for integration of hydro,
fossil-fueled and nuclear generation and to reduce congestion, which
can lower the delivered costs of power to consumers. As the Final
Rule notes, the existing transmission system was not built to
accommodate this shifting generation fleet. Another emerging factor
is increasing interest by developers of transmission projects to
focus on innovative solutions to transmission needs, independent of
generation and retail distribution businesses.

With these
new factors in play, it is critical that transmission planners seek
the most efficient and cost-effective ways to meet the needs of
their region. Transmission providers have in place the foundations
for effective planning through their Commission-approved Order No.
890 planning processes. However, our monitoring of the
implementation of these planning processes, conduct of technical
conferences across the country and the numerous comments received in
this rulemaking proceeding indicate that there remain gaps that must
be filled if the transmission system is going to efficiently and
cost-effectively address the trends and challenges that were just
appearing on the horizon when Order No. 890 was issued. It is
essential that the Commission's transmission planning and cost
allocation requirements are adequate to support more efficient and
cost-effective decisions moving forward. The enhancement to those
procedures that we require today will promote efficient and
cost-effective transmission planning and the fair allocation of
costs for new transmission facilities. These changes will provide
consumers with greater access to efficient, low cost electricity.

The staff has ably summarized the decision we are making in
the final rule. I would like to briefly discuss four areas.

First, as I mentioned earlier, the mix of generation
resources seeking to use the transmission system is changing. These
changes result from the resource mixes chosen by the regions, which
in part reflect public policy requirements such as renewable
portfolio standards established by states. This Rule will facilitate
identification of transmission needs driven by a region's public
policy requirements, and consideration of efficient and
cost-effective transmission solutions to meet those needs. I should
point out that the enhanced transmission planning which we require
today is not for one type of technology versus another, but is
technology neutral.

Second, the Rule establishes principles
for allocating the costs of new transmission facilities selected in
the regional transmission plan for purposes of cost allocation.
Among those principles are that costs must be allocated at least
roughly commensurate with estimated benefits; those that receive no
benefits should not be allocated costs; and no costs should be
allocated outside a region unless the other region agrees.

Third, the Rule requires development of procedures in the
planning process to reevaluate the regional transmission plan if
delays in development of a transmission facility in the regional
plan for cost allocation purposes may affect the incumbent
transmission provider's ability to meet reliability needs or service
obligations. This provision is designed to ensure that procedures
are in place to address problems that may result from delay of
transmission facilities before those delays affect the reliable
operation of the system and reliable service. Such delays could
range from those related to siting and permitting to decisions by
incumbents providers or merchant developers to not proceed with a
project.

Finally, we are not requiring a "one size fits all"
approach to fulfilling the requirements we establish in the Final
Rule, but instead expect each region to fashion its procedures and
processes to fit its needs. Our staff will be available to answer
questions and provide assistance. I look forward to reviewing those
compliance filings.

For these reasons, I will vote to
approve this Final Rule."

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Telephone: 202-502-8680
Toll Free: 1-866-208-3372

Updated: July 21, 2011

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