## Facts

- FERC issued Order No. 1000 (and related orders) under the Federal Power Act (FPA) to reform open-access transmission planning and cost allocation for interstate transmission service.
- FERC found existing transmission planning and cost-allocation practices deficient and likely to produce unjust and unreasonable wholesale transmission rates.
- Order No. 1000 required transmission providers to participate in a regional planning process producing a regional transmission plan and to coordinate interregional planning.
- It required regional planning to consider transmission needs driven by “public policy requirements” established by state or federal laws or regulations.
- It required regional and interregional cost-allocation methods consistent with FERC principles, including that costs be allocated in a manner roughly commensurate with estimated benefits (cost-causation).
- It required removal from FERC-jurisdictional tariffs of certain federal rights of first refusal for transmission facilities selected in a regional plan for cost allocation, to allow competition from non-incumbent developers.
- Numerous utilities, state commissions, and industry entities petitioned for review, asserting that the rules exceeded FERC’s statutory authority, were arbitrary and capricious under the APA, and violated federalism limits, including the Tenth Amendment.

## Issues

1. Whether transmission planning, cost allocation, and tariff provisions such as federal rights of first refusal are “practices affecting” wholesale transmission rates within FERC’s authority under FPA § 206.
2. Whether FERC reasonably found existing planning and cost-allocation practices deficient and likely to cause unjust and unreasonable rates, justifying rulemaking reforms.
3. Whether requiring regional planning to consider state and federal “public policy requirements” unlawfully intrudes on state authority.
4. Whether FERC’s cost-allocation principles, including rough commensurability between costs and benefits, are lawful and not arbitrary and capricious.
5. Whether FERC could eliminate certain federal rights of first refusal from jurisdictional tariffs for regionally selected projects.
6. Whether the rules impermissibly commandeer states or otherwise violate the Tenth Amendment, and whether certain challenges were unripe because they depended on later compliance filings.

## Decision

- The D.C. Circuit largely denied the petitions for review and upheld Order No. 1000 and related orders.
- The court held that transmission planning and cost-allocation methods are practices affecting wholesale transmission rates and fall within FERC’s remedial authority under FPA § 206.
- The court found FERC’s determination of deficiencies in existing planning and cost allocation supported by the administrative record and adequately explained under the APA.
- The court upheld the requirement that regional planning processes consider transmission needs driven by state and federal public policy requirements, concluding FERC did not dictate state policy choices.
- The court upheld FERC’s regional cost-allocation principles, including the requirement that costs be at least roughly commensurate with benefits, while leaving implementation details to later compliance filings.
- The court upheld elimination of certain federal rights of first refusal from FERC-jurisdictional tariffs for projects selected in regional plans for cost allocation.
- The court rejected Tenth Amendment objections, emphasizing that the rules regulate transmission providers’ tariffed service and do not compel states to approve facilities or accept particular cost allocations.
- The court treated some objections to hypothetical future applications as premature, indicating that challenges to specific compliance outcomes could be brought later.

## Legal Principles

- Under FPA § 206, FERC may regulate not only wholesale rates but also rules, practices, and tariff provisions that directly affect those rates, including transmission planning, cost allocation, and entry-related tariff rules.
- FERC may require participation in regional and interregional transmission planning as a means to prevent unjust and unreasonable wholesale transmission rates, if supported by a reasoned explanation and record evidence.
- FERC may require regional planners to consider transmission needs driven by state and federal public policy requirements without compelling states to adopt or change those policies.
- FERC may require cost-allocation methods for regional transmission facilities to reflect cost-causation, including allocating costs in a manner roughly commensurate with estimated benefits, while reviewing specific implementations through later filings.
- FERC may remove from jurisdictional tariffs federal rights of first refusal for certain regionally selected projects when FERC reasonably finds such provisions impede competition and can affect rates.
- Federalism limits are not violated where FERC’s rules condition jurisdictional tariffed transmission service on compliance and do not require state approval of construction or mandate state acceptance of any specific cost allocation.

## Conclusion

The D.C. Circuit sustained FERC’s Order No. 1000 framework as a lawful exercise of FPA § 206 authority to remedy transmission planning and cost-allocation practices affecting wholesale rates, including public-policy consideration, beneficiary-based cost allocation, and removal of certain federal rights of first refusal, while leaving disputes over specific implementations to later proceedings.


S.C. Pub. Serv. Auth. v. FERC, 762 F.3d 41 (D.C. Cir. 2014)