On May 1, 2018, FERC staff held a technical conference on local transmission planning within the California Independent System Operator Corporation (“CAISO”) footprint. The conference comes at a time when two California utilities, Pacific Gas and Electric Company (“PG&E”) and Southern California Edison Company (“SCE”), have transmission planning issues before the Commission, and also following FERC’s recent order addressing compliance with Order No. 890 in the PJM Interconnection, LLC (“PJM”) region (see February 20, 2018 edition of the WER).

Beginning in 2007, FERC issued Order No. 890 and several follow-on orders to increase nondiscriminatory access to the transmission system and eliminate artificial barriers to entry and participation by stakeholders. A key component of the Order No. 890 series is the requirement that transmission providers establish planning processes that satisfy various planning principles. In these orders, FERC explained that Regional Transmission Operators and Independent System Operators (“RTOs” and “ISOs”) focus on regional transmission problems and solutions, whereas local planning issues are to be addressed by the individual transmission owners outside of the RTO and ISO processes.

In a series of orders between 2008 and 2010, FERC accepted CAISO’s Order No. 890 compliance filings, approving CAISO’s then-proposed Transmission Planning Process (“TPP”), wherein transmission system needs and solutions are vetted through several stakeholder committees. FERC also found that “local planning activities conducted by the participating transmission owners [in CAISO] are reasonable and the process, as set forth in the [CAISO] tariff and business practice manual, is transparent.”

Recently, several California parties have claimed a lack of stakeholder involvement in local transmission planning activities occurring in the CAISO region. One such group (“Complainants”), led by the California Public Utilities Commission (“CPUC”), filed a complaint against PG&E on February 2, 2017, alleging that PG&E is violating Order No. 890 by categorizing roughly 60% of its capital transmission expenditures as routine maintenance, thereby insulating these projects from meaningful stakeholder review but nonetheless requesting a $387 million (or 29%) increase in PG&E’s currently-effective wholesale transmission rates. A second group (“Protesters”), also including the CPUC, is challenging a “Transmission Maintenance and Compliance Review” (“TMCR”) proposal from SCE, arguing that the proposal does not sufficiently comply with Order No. 890. Fodder for both Complainants and Protesters was FERC’s February 2018 order in which FERC faulted a particular PJM transmission planning process for being insufficiently transparent and not allowing meaningful stakeholder input.

Recognizing the issues raised by Complainants and Protestors, on March 23, 2018, FERC issued a notice of a technical conference to discuss which transmission-related activities and/or capital additions must be submitted to CAISO’s TPP, and which are left to the transmission providers to address on their own.

At the technical conference, utilities, regulators, and other stakeholders arrived prepared to address local transmission planning issues, with FERC staff moderating and directing questions. CAISO’s representatives argued that under the FERC-approved “Transmission Control Agreement” (“TCA”), CAISO’s TPP applies to the expansion or reinforcement of transmission facilities, particularly for reliability and economic reasons, while the responsibility for maintaining, replacing, and repairing the facilities is left to the transmission owners to handle separately. Thus, as one participant commented, transmission system maintenance and even replacement falls outside of CAISO’s TPP, and thus outside of Order No. 890 altogether.

Representatives from the three main California utilities, PG&E, SCE, and San Diego Gas and Electric (“SDG&E”) reiterated that they consider TPP an optimal avenue for transmission projects that enhance CAISO’s grid, impact power flows, or otherwise address a CAISO-identified need. On the other hand, they noted, the utilities manage what they termed “asset management” or “maintenance” activities such as replacing aging equipment, or complying with state-level safety and reliability requirements. Other stakeholders, meanwhile, alleged that utilities like PG&E were taking advantage of the ambiguity in these latter categories in order to streamline approval for projects outside the scrutiny of stakeholders and, in some cases, regulators. The CPUC staff in attendance expressed an interest in allowing greater oversight into the utilities’ practices so as to minimize the potential for post-hoc prudency reviews.

FERC staff’s questions narrowed in on the criteria used for system “maintenance.” The utilities echoed a commitment to best practices, but otherwise offered varied responses based on their respective systems. Although they indicated receptiveness to further collaboration, they reiterated, however, that attempts to uniformly apply requirements might prevent transmission owners from addressing system-specific needs. CAISO emphasized that although it conducts a yearly audit of utilities’ maintenance activities, such audits are primarily to ensure that the utilities have plans in place. CAISO’s representatives noted that their visibility into each utility’s maintenance needs and priorities is limited, and attempts to expand CAISO’s jurisdiction into such activities would come with significant liability concerns, among other problems.

By the end of the conference, many participants agreed that more clarity around maintenance activities was important, but the fundamental dividing line between CAISO-facilitated transmission system planning and utility-controlled transmission system maintenance, repair, and replacement remained hazy.

Details about the FERC technical conference, including supplemental notices and questions can be found here and in docket No. AD18-12. The PG&E complaint docket is EL17-45, and the SCE TMCR docket is ER18-370.