[Federal Register Volume 72, Number 87 (Monday, May 7, 2007)]
[Notices]
[Pages 25838-25923]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 07-2115]



[[Page 25837]]

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Part II





Department of Energy





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Office of Electricity Delivery and Energy Reliability; Draft National 
Interest Electric Transmission Corridor Designations; Notice

Federal Register / Vol. 72, No. 87 / Monday, May 7, 2007 / Notices

[[Page 25838]]


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DEPARTMENT OF ENERGY


Office of Electricity Delivery and Energy Reliability; Draft 
National Interest Electric Transmission Corridor Designations

[Docket No. 2007-OE-01, Draft Mid-Atlantic Area National Corridor; 
Docket No. 2007-OE-02, Draft Southwest Area National Corridor]

AGENCY: Department of Energy.

ACTION: Notice and opportunity for written and oral comment.

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SUMMARY: Having issued the first National Electric Transmission 
Congestion Study under section 216 of the Federal Power Act (FPA), and 
having evaluated public comments on the Study, the Department of Energy 
(Department or DOE) today begins two proceedings that may lead to one 
or more orders designating one or more national interest electric 
transmission corridors (National Corridors). The Department believes 
that, although the FPA does not require it, allowing an opportunity for 
comment on draft National Corridor designations prior to the Department 
issuing its FPA section 216(a) report will aid both the public and the 
Department. Interested persons may file written comments in one or both 
of these proceedings in the manner indicated in the ADDRESSES portion 
of this notice. Only those persons who file such comments by the date 
listed in the DATES portion of this notice will become parties to the 
proceedings and, thus, eligible to file a request for rehearing under 
FPA section 313 of any final order issued in these proceedings.

DATES: Written comments on the draft National Corridors must be 
received on or before July 6, 2007.
    The Department has scheduled public meetings on Docket No. 2007-OE-
01 (the draft Mid-Atlantic Area National Corridor) for the following 
dates:
    May 15, 2007, 10 a.m. to 3:30 p.m., Arlington, VA; and
    May 23, 2007, 10 a.m. to 3:30 p.m., New York, NY.
    The Department has scheduled a public meeting on Docket No. 2007-
OE-02 (the draft Southwest Area National Corridor) for May 17, 2007, 10 
a.m. to 3:30 p.m., San Diego, CA.

ADDRESSES: Color versions of the figures included in today's notice as 
well as other supporting documents are available at http://nietc.anl.gov.
    You may submit written comments on one or both of the draft 
National Corridors electronically at http://nietc.anl.gov, or by mail 
to the Office of Electricity Delivery and Energy Reliability, OE-20, 
U.S. Department of Energy, 1000 Independence Avenue SW., Washington, DC 
20585. If you are commenting on Docket No. 2007-OE-01 (the draft Mid-
Atlantic Area National Corridor), your comments must be marked ``Attn: 
Docket No. 2007-OE-01.'' If you are commenting on Docket No. 2007-OE-02 
(the draft Southwest Area National Corridor), your comments must be 
marked ``Attn: Docket No. 2007-OE-02.'' The following electronic file 
formats are acceptable: Microsoft Word (.doc), Microsoft Works (.wps), 
Corel Word Perfect (.wpd), Adobe Acrobat (.pdf), Rich Text Format 
(.rtf), plain text (.txt), Microsoft Excel (.xls), and Microsoft 
PowerPoint (.ppt). If you submit information that you believe to be 
exempt by law from public disclosure, you may only submit your comments 
by mail, and you must submit one complete copy, as well as one copy 
from which the information claimed to be exempt by law from public 
disclosure has been deleted. DOE is responsible for the final 
determination concerning disclosure or nondisclosure of the information 
and for treating it in accordance with the DOE's Freedom of Information 
regulations (10 CFR 1004.11).

    Note: Delivery of U.S. Postal Service mail to DOE continues to 
be delayed by several weeks due to security screening. DOE therefore 
encourages commenters to submit comments electronically by e-mail. 
If comments are submitted by mail, the Department requests that they 
be accompanied by a CD or diskette containing the electronic files 
of the submission.

    The locations for the public meetings are:

Arlington--Doubletree Hotel Crystal City--National Airport, 300 Army 
Navy Drive, Arlington, VA 22202-2891;
New York--Park Central New York Hotel, 870 Seventh Avenue at 56th 
Street, New York, NY 10019-4038; and
San Diego--Manchester Grand Hyatt San Diego Hotel, One Market Place, 
San Diego, CA 92101.

    If you are interested in speaking at one of these meetings, please 
sign up at http://www.energetics.com/NIETCpublicmeetings or call 410-
953-6250.

FOR FURTHER INFORMATION CONTACT: For technical information, David 
Meyer, DOE Office of Electricity Delivery and Energy Reliability, (202) 
586-1411. <a href="/cdn-cgi/l/email-protection#0b6f6a7d626f25666e726e794b637a256f646e256c647d"><span class="__cf_email__" data-cfemail="2d494c5b444903404854485f6d455c03494248034a425b">[email protected]</span></a>. For legal information, Mary Morton, 
DOE Office of the General Counsel, (202) 586-1221, 
<a href="/cdn-cgi/l/email-protection#f39e92818add9e9c81879c9db39b82dd979c96dd949c85"><span class="__cf_email__" data-cfemail="4b262a3932652624393f24250b233a652f242e652c243d">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION: 

I. Background

A. Statutory Framework

    Section 1221(a) of the Energy Policy Act of 2005 (Pub. L. 109-58) 
(EPAct) added a new section 216 to the Federal Power Act (16 U.S.C. 
824p) (FPA). New FPA section 216(a) requires the Secretary of Energy 
(Secretary) \1\ to conduct a nationwide study of electric transmission 
congestion \2\ within one year from the date of enactment of EPAct and 
every three years thereafter. FPA section 216(a)(1) requires the 
Secretary to consult with ``affected States'' when conducting the 
study. 16 U.S.C. 824p(a)(1). FPA section 216(a)(2) provides 
``interested parties'' with an opportunity to offer ``alternatives and 
recommendations.'' 16 U.S.C. 824p(a)(2). Following consideration of 
such alternatives and recommendations, the Secretary is required to 
issue a report on the study ``which may designate any geographic area 
experiencing electric energy transmission capacity constraints or 
congestion that adversely affects consumers as a national interest 
electric transmission corridor.'' 16 U.S.C. 824p(a)(2). FPA section 
216(a)(4) states that in determining whether to designate a corridor, 
the Secretary may consider whether:
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    \1\ This notice uses the terms ``Secretary'' and ``Department'' 
interchangeably.
    \2\ Electric transmission congestion (congestion) is the 
condition that occurs when transmission capacity is not sufficient 
to enable safe delivery of all scheduled or desired wholesale 
electricity transfers simultaneously. Congestion results from a 
transmission capacity constraint (constraint). See Section II.A of 
this notice for further discussion of these terms.

    (A) the economic vitality and development of the corridor, or 
the end markets served by the corridor, may be constrained by lack 
of adequate or reasonably priced electricity;
    (B)(i) economic growth in the corridor, or the end markets 
served by the corridor, may be jeopardized by reliance on limited 
sources of energy; and (ii) a diversification of supply is 
warranted;
    (C) the energy independence of the United States would be served 
by the designation;
    (D) the designation would be in the interest of national energy 
policy; and
    (E) the designation would enhance national defense and homeland 
security.

16 U.S.C. 824p(a)(4).
    The effect of a National Corridor designation is to delineate 
geographic areas within which, under certain circumstances, the Federal 
Energy Regulatory Commission (FERC) may authorize ``the construction or 
modification of electric transmission facilities.'' FPA section 216(b); 
16 U.S.C. 824p(b). The statute imposes several conditions on the 
exercise of FERC's

[[Page 25839]]

permitting authority within a National Corridor.
    Under FPA section 216(b)(1), FERC jurisdiction is triggered only 
when either: the State does not have authority to site the project; the 
State lacks the authority to consider the interstate benefits of the 
project; the applicant does not qualify for a State permit because it 
does not serve end-use customers in the State; the State has withheld 
approval for more than one year; or the State has conditioned its 
approval in such a manner that the project will not significantly 
reduce congestion or is not economically feasible. 16 U.S.C. 
824p(b)(1).\3\ Further, FPA section 216(g) states, ``Nothing in this 
section precludes any person from constructing or modifying any 
transmission facility in accordance with State law.'' 16 U.S.C. 
824p(g).
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    \3\ See also Regulations for Filing Applications for Permits to 
Site Interstate Electric Transmission Facilities, Order No. 689, 71 
FR 69,440, 69,468 (Dec. 1, 2006), 117 FERC ] 61,202 at pp. 128-29 
(2006) (to be codified at 18 CFR parts 50 and 380), reh'g pending 
(FERC Order No. 689) (Sec.  50.6(e) requires applicants to 
demonstrate that the conditions of FPA sec. 216(b)(1) are met).
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    Under FPA section 216(b)(2)-(6), FERC may issue a permit only if 
all of the following conditions are met: the facilities will be used 
for the transmission of electric energy in interstate commerce; the 
project is consistent with the public interest; the project will 
significantly reduce congestion and protect or benefit consumers; the 
project is consistent with national energy policy and will enhance 
energy independence; and the project maximizes, to the extent 
reasonable and economical, the transmission capabilities of existing 
towers or structures. 16 U.S.C. 824p(b)(2)-(6).\4\
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    \4\ See also id. (Sec.  50.6(f) requires applicants to 
demonstrate that the conditions of FPA sec. 216(b)(2)-(6) are met).
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    Accordingly, a National Corridor designation itself does not 
preempt State authority or any State actions. A National Corridor 
designation is not a determination that transmission must, or even 
should, be built; it is not a proposal to build a transmission facility 
and it does not direct anyone to make a proposal. Transmission 
expansion is but one possible solution to a congestion or constraint 
problem; increased demand response, improved energy efficiency, and 
conservation, as well as siting of additional generation close to load 
centers are also potential solutions. Whether a particular transmission 
project, some other transmission project, or a non-transmission project 
is an appropriate solution to a congestion or constraint problem 
identified by a National Corridor designation is a matter that market 
participants, applicable regional planning entities, and State 
authorities, among others, will consider and decide before any project 
is built. In the event that FERC jurisdiction under FPA section 216(b) 
is triggered, the designation of a National Corridor by the Secretary 
does not control FERC's substantive decision on the merits as to 
whether to grant or deny a permit application, specifically where any 
facilities covered by a permit should be located, or what conditions 
should be placed on a permit.
    A National Corridor designation is not a siting decision; it does 
not dictate the route of any transmission project. If a transmission 
project is proposed in a National Corridor, it will be the State siting 
authorities, and potentially FERC if certain conditions are met, that 
will determine the specific route of that project.\5\
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    \5\ See id. 71 FR 69,440, 69,446, 117 FERC ] 61,202 at PP 41-42 
(``The Commission will conduct an independent environmental analysis 
of the project and determine if there is no significant impact as 
required by [the National Environmental Policy Act]. It will look at 
alternatives, including, as appropriate, alternatives other than 
transmission lines. * * * It will review the alternatives for their 
respective impacts on the environment and will determine mitigation 
measures to lessen the adverse impacts. * * * The Commission will 
also consider the adverse effects the proposed facilities will have 
on land owners and local communities.''); and 71 FR 69,440, 69,470, 
117 FERC ] 61,202 at p. 142-43 (Sec. Sec.  380.5(b)(14) and 
380.6(a)(5) require either an environmental assessment or an 
environmental impact statement for projects seeking permits under 
sec. 216(b)).
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    Thus, FPA section 216(a) does not shift to the Department any of 
the traditional roles of transmission planners and siting authorities 
in evaluating solutions to congestion and constraint problems and 
designing routes for transmission facilities. Instead, FPA section 
216(a) assigns to the Department the role of identifying transmission 
congestion and constraint problems, and the geographic areas in which 
these problems exist.

B. Congestion Study

    On August 8, 2006, DOE issued its initial congestion study (the 
Congestion Study) for comment by interested members of the public and 
affected States (71 FR 45,047 (Aug. 8, 2006)). The Congestion Study 
gathered historical congestion data obtained from existing studies 
prepared by the regional reliability councils, regional transmission 
organizations (RTOs) and independent system operators (ISOs),\6\ and 
regional planning groups. The Congestion Study also modeled future 
congestion: the years 2008 and 2011 for the Eastern Interconnection; 
and the years 2008 and 2015 for the Western Interconnection. The 
modeling focused on five metrics: binding hours (the number of hours 
per year that a path is loaded to its limit and, thus, unable to 
accommodate all desired power transactions), U90 (the number of hours 
per year that a path is loaded above 90 percent of its limit), all-
hours shadow price (the marginal cost of generation redispatch required 
to accommodate a given constraint averaged across all hours in the 
year), binding hours shadow price (average shadow price over only those 
hours during which the constraint is binding), and congestion rent 
(shadow price multiplied by flow, summed over all hours the constraint 
is binding).
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    \6\ RTOs and ISOs are Federally regulated entities charged with 
operating a regional transmission system in a manner that is non-
discriminatory and ensures safety and reliability. The existing RTOs 
and ISOs do not own any transmission or generation and are run by 
independent boards of directors.
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    Based on the historical data and the modeling results, the 
Congestion Study classified the most significant congestion areas in 
the country. Two ``Critical Congestion Areas'' (i.e. areas where the 
current and/or projected effects of congestion are especially broad and 
severe) were identified: the Atlantic coastal area from metropolitan 
New York through northern Virginia (the Mid-Atlantic Critical 
Congestion Area); and southern California (the Southern California 
Critical Congestion Area). Four ``Congestion Areas of Concern'' (i.e. 
areas where a large-scale congestion problem exists or may be emerging 
but more information and analysis appear to be needed to determine the 
magnitude of the problem) were identified: New England; the Phoenix-
Tucson area; the San Francisco Bay area; and the Seattle-Portland area. 
Also, a number of ``Conditional Congestion Areas'' (i.e. areas where 
future congestion would result if large amounts of new generation were 
to be developed without simultaneous development of associated 
transmission capacity) were identified, such as: Montana-Wyoming; 
Dakotas-Minnesota; Kansas-Oklahoma; Illinois, Indiana and upper 
Appalachia; and the Southeast.
    DOE has received over 400 comments on the Congestion Study. DOE has 
made all of these comments available at http://nietc.anl.gov. The 
Department is no longer accepting comments on the Congestion Study. All 
comments filed in response to today's notice should be limited to the 
draft National Corridors set forth in this notice.

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C. Purpose of Today's Notice

    This notice summarizes and responds to the comments received in 
response to the Congestion Study that are relevant to the designation 
of National Corridors. This notice also issues and solicits comment on 
draft National Corridor designations for the two Critical Congestion 
Areas identified in the Congestion Study: the draft Mid-Atlantic Area 
National Corridor; and the draft Southwest Area National Corridor. See 
Figure I-1 for the location of these draft National Corridors.\7\ 
Further, the Department has scheduled three public meetings to discuss 
these draft National Corridor designations. If, after consideration of 
all comments on these draft designations, the Secretary decides that 
one or more National Corridor designations are appropriate, he will 
issue one or more orders making such designations.
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    \7\ A detailed explanation of the location of these draft 
National Corridors is provided in Sections VIII.D and IX.D of this 
notice.
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BILLING CODE 6450-01-P

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[GRAPHIC] [TIFF OMITTED] TN07MY07.000

    This notice is also intended to notify interested persons how to 
obtain party status for the proceeding in Docket No. 2007-OE-01 or the 
proceeding in Docket No. 2007-OE-02. Review of any final order 
designating a National Corridor in one of these proceedings will be 
governed by section 313 of the FPA (16 U.S.C. 8251). Thus, only those

[[Page 25842]]

persons who have obtained party status in the proceeding may file a 
request for rehearing of a final order with the Department. Further, to 
the extent that any person has standing to obtain judicial review, the 
filing of a rehearing request within 30 days of issuance of the final 
order is a prerequisite to such potential judicial review. In order to 
become a party to one or both of these proceedings, you must file 
comments in response to this notice in the manner indicated in the 
ADDRESSES portion of this notice by the deadline date identified in the 
DATES portion of this notice.
    The proceedings being started today focus on the two geographic 
areas of the Nation experiencing the most acute and urgent electric 
transmission congestion problems. This notice takes no action with 
regard to the other geographic areas discussed in the Congestion Study. 
Thus, today's notice does not address comments received on the 
Congestion Study that relate solely to areas outside the two Critical 
Congestion Areas. Also, today's notice does not address those comments 
that relate to the conduct of future congestion studies. The Department 
will address the subject of how it intends to conduct future congestion 
studies in a later notice.

II. Deciding When a National Corridor Designation Is Warranted

    The Congestion Study solicited comment on the criteria the 
Secretary should use when determining when a National Corridor 
designation is warranted. In this section, the Department summarizes 
and responds to these comments.

A. General Scope of the Secretary's Authority

Summary of Comments
    The Department received numerous comments that relate to the 
general scope of the Secretary's authority to designate National 
Corridors, including comments on the meaning of key terms used in FPA 
section 216(a). The Department received a few comments on the 
appropriate definition of ``congestion'' and ``constraint.'' 
FirstEnergy Service Company (FirstEnergy) supported the definition of 
``congestion'' used in the Congestion Study. National Grid USA 
(National Grid) argued that the Congestion Study's definition of 
``constraint'' should be expanded to include not just limitations due 
to a piece of equipment, but also due to the absence of equipment 
between two or more nodes. Similarly, the California Energy Commission 
(CEC) argued that the focus of the Congestion Study is too narrow to 
accommodate State laws and policies on renewable portfolio standards. 
The CEC stated that the Department's criteria for identifying 
congestion should incorporate consideration of constraints that pose 
obstacles to reasonably priced power, diversity of supply, and energy 
independence, regardless of whether those constraints currently produce 
congestion.\8\ Upper Great Plains Transmission Coalition argued that 
the lack of evidence of curtailments and congestion costs does not 
necessarily mean that a critical constraint is absent; for example, 
sophisticated management tools in place in the upper Great Plains have 
avoided the need for transmission loading relief (TLR) actions,\9\ 
nevertheless, export capacity is constrained.
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    \8\ See also comments of BP Alternative Energy North America 
Inc.
    \9\ TLR is a procedure used in the Eastern Interconnection, 
usually outside of organized markets, to deal with situations when a 
transmission path has reach its operating limit.
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    The Department received comments on the level of adverse effects on 
consumers needed to justify a National Corridor designation. The 
Pennsylvania Public Utility Commission (PAPUC) argued that National 
Corridors should be designated only where it is demonstrated that there 
is chronic physical congestion that has potential for substantially 
impairing existing or future grid reliability. The Attorney General for 
the State of Connecticut (Connecticut Attorney General) argued that the 
Department has no authority to designate a corridor in an area that the 
Congestion Study acknowledges does not rise to the level of a Critical 
Congestion Area. The Connecticut Attorney General argued that the 
statute was not intended to empower the Department to ``act as a sort 
of roving commission that oversees transmission planning and 
construction nationwide,'' and thus designations should be limited to 
``those limited and extraordinary circumstances in which transmission 
constraints so severely impact the national interest that Federal 
intervention'' may be warranted.
    On the other hand, LS Power Development, LLC (LS Power) argued that 
the statutory standard for designating a corridor ``appears to be 
relatively low'' and that this is understandable given the limited 
purpose of a National Corridor designation. LS Power further argued 
that the Department should apply the standard for designation 
liberally, instead of ranking different areas of congestion and only 
addressing some of those areas. LS Power asserted that if an area is 
congested, consumers are therefore adversely affected by higher costs, 
and consumers should be afforded the potential relief available through 
a National Corridor designation. Similarly, the Edison Electric 
Institute (EEI) argued that the Department should not wait until a 
major problem emerges before designating a National Corridor, given the 
long-term, capital-intensive nature of electricity infrastructure 
development. EEI urged the Department to maintain a high-level view and 
not dwell on the unachievable goal of technical precision in the 
congestion study process before making designations. The Electric Power 
Supply Association (EPSA) argued that National Corridor designation is 
warranted wherever the grid is constrained to the point of only being 
available to accommodate power flows of incumbent utilities to serve 
their native load, because in all such circumstances consumers are 
adversely affected by the existence of a barrier to entry of 
potentially lower-cost competitors.
    The Department received comments on the use of projections of 
future congestion to support a National Corridor designation. The 
Organization of MISO States (OMS) argued that the statute makes clear 
that designations may only be made for areas actually experiencing 
congestion adversely affecting consumers, and does not provide for 
designations in areas that may experience congestion in the future or 
under certain circumstances. Therefore, OMS was not persuaded that 
National Corridor designation is warranted in the Congestion Areas of 
Concern or the Conditional Congestion Areas. OMS stated that rather 
than attempting to forecast the need for future National Corridors, 
designations should be in response to existing, persistent, and well-
documented problems. Some Western commenters, including Northern Wasco 
County Peoples Utility District (NWPUD) and Seattle City Light (SCL), 
argued there is a need to examine historical data and not rely solely 
on simulated congestion metrics. Public Service Electric and Gas 
Company, PSEG Power LLC, and PSEG Energy Resources and Trade LLC 
(collectively PSEG) argued that forecasts of future congestion, driven 
by long-range projections of fuel costs, are inherently questionable. 
ABB, on the other hand, said National Corridor designation should not 
be based solely on analysis of historic congestion but rather should be 
made after a comprehensive analysis of future resource mix and resource 
adequacy.

[[Page 25843]]

The American Wind Energy Association, Wind on the Wires, Interwest 
Energy Alliance, the Wind Coalition, and the Renewable Northwest 
Project (collectively Wind Associations) expressed concern that the 
Department may approach Conditional Congestion Areas in a manner that 
``continues the `chicken and egg' problem of wind development, in which 
no generators are constructed until transmission capacity is built, but 
no transmission capacity is expanded until there are generators 
requesting service.'' Thus, the Wind Associations sought clarification 
that National Corridors can be designated in a Conditional Congestion 
Area before all the expected generation has been developed in that 
area.
    Some commenters called for clarification of the criteria the 
Department would use in deciding whether to designate a National 
Corridor and made recommendations about criteria they considered most 
important. For example, the Committee on Regional Electric Power 
Cooperation (CREPC) stated that the Department should develop metrics 
for the criteria used to designate National Corridors and document how 
it has applied the criteria. CREPC argued that priority should be given 
to designating National Corridors that enable the achievement of State 
energy policy objectives or that address location-constrained 
generation resource areas; low priority should be given to areas with 
contractual congestion but little physical congestion, or areas where 
findings of congestion are based on studies with a high level of 
uncertainty. The American Public Power Association (APPA) suggested 
that the Department focus on the effect that a designation will have on 
the plans of load-serving entities to meet their long-term service 
obligations to their retail customers; in particular, the effect on 
deliverability of new base-load and renewable resources to the load-
serving entities that intend to purchase power from those resources. 
The Midwest Independent Transmission System Operator, Inc. (Midwest 
ISO) \10\ supported the reduction in electricity supply costs as a 
criterion for National Corridor designation; however, only if there is 
sufficient evidence that such cost reductions would occur and that the 
amount of the reductions would be significant enough to warrant 
national attention.
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    \10\ Midwest ISO is the RTO serving all or parts of Illinois, 
Indiana, Iowa, Kentucky, Michigan, Minnesota, Missouri, Montana, 
Nebraska, North Dakota, Ohio, Pennsylvania, South Dakota, and 
Wisconsin.
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DOE Response
    FPA section 216(a)(2) gives the Secretary the discretion to 
designate as a National Corridor ``any geographic area experiencing 
electric energy transmission capacity constraints or congestion that 
adversely affects consumers.'' The statute does not define any of the 
terms in this phrase.
    The Congestion Study defined ``congestion'' as the condition that 
occurs when transmission capacity is not sufficient to enable safe 
delivery of all scheduled or desired wholesale electricity transfers 
simultaneously. This definition generated little debate among 
commenters.\11\ The Congestion Study defined ``transmission 
constraint'' as a limitation on one or more transmission elements that 
may be reached during normal or contingency system operations. The 
Congestion Study also defined ``constrained facility'' as a 
transmission facility (line, transformer, breaker, etc.) that is 
approaching, at, or beyond a System Operating Limit or Interconnection 
Reliability Operating Limit.\12\ ``Congestion,'' then, refers to the 
denial of desired transmission service over a transmission path, while 
``constraint'' refers to the chokepoint on the transmission system that 
causes such denial of desired transmission service.
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    \11\ Other sources use similar definitions. See, e.g., 
California Independent System Operator, Conformed Simplified and 
Reorganized Tariff, App. A, Master Definitions Supplement (April 6, 
2007) (``Congestion--A condition that occurs when there is 
insufficient Available Transfer Capacity to implement all Preferred 
Schedules simultaneously or, in real time, to serve all Generation 
and Demand.''); and Southwest Power Pool, Glossary and Acronyms, 
http://www.spp.org/glossary.asp?letter=C (``Congestion is a 
condition that occurs when insufficient transfer capacity is 
available to implement all of the preferred schedules for 
electricity transmission simultaneously.'').
    \12\ One aspect of the constraint-related definitions used in 
the Congestion Study did generate debate among commenters, which is 
addressed later in this section.
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    In contrast, there is no generally accepted understanding of what 
constitutes ``constraints or congestion that adversely affects 
consumers,'' as the debate among the commenters amply demonstrates. The 
term is ambiguous, and the statute attaches no modifiers to the term to 
specify the particular type or magnitude of adverse effect intended. 
While the Congestion Study identified and applied various metrics 
``related to the magnitude and impact of congestion,'' the Congestion 
Study did not attempt to define when constraints or congestion 
``adversely affects consumers.'' In the following discussion, the 
Department will first address congestion that adversely affects 
consumers and then constraints that adversely affect consumers.
    With regard to congestion that adversely affects consumers, the 
Department notes that any congestion, by definition, thwarts customer 
choice, because it prevents users of the transmission grid from 
completing their preferred power transactions. These users include 
wholesale industrial consumers of power as well as load-serving 
entities buying power on behalf of retail consumers, all of whom are 
prevented by congestion from obtaining delivery of desired quantities 
of electricity from desired sources. In other words, any congestion on 
a line necessarily interferes with the choices of those who wish to use 
that line on their own or their customers' behalf. Whenever there is 
congestion on a transmission path, there simply is not enough 
transmission capacity to accommodate all the desired power 
transactions, and some sort of rationing of available capacity is 
needed. In areas with organized electricity markets, this rationing 
generally occurs through a pre-established economic mechanism, such as 
a congestion management system based on locational marginal prices 
(LMPs),\13\ which is designed to allocate the limited capacity to the 
users who value it the most. In areas of the country without organized 
markets, the rationing may involve the transmission provider denying 
requests for transmission service, adjusting schedules, or in some 
cases making pro rata curtailments in real time. Regardless of how the 
rationing is resolved, however, one thing remains true: congestion 
results in some users of the transmission system being denied the 
benefit of their preferred transactions.
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    \13\ In general terms, an LMP-based congestion management system 
entails an RTO or ISO operating a bid-based energy market in which 
those generators and loads who have not fully committed themselves 
through bilateral power contracts can participate. As the operator 
of the transmission system, the RTO or ISO also analyzes whether 
transmission of all the desired energy transactions is 
simultaneously feasible. When there are no binding constraints, the 
energy market clears at a single price throughout the system. When a 
constraint is binding, separate prices result on either side of the 
constraint. Market participants can then see and respond to these 
different LMPs. Those customers who choose to have power transmitted 
over the binding constraint are assessed a transactional congestion 
charge based on the difference between the LMPs on either side of 
the constraint.
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    Moreover, electricity buyers generally seek power from the most 
economic source. Arranging for delivery of power from less preferred 
sources is referred to as ``redispatching'' power. When congestion 
occurs, resulting in the need

[[Page 25844]]

for buyers to accept power from less-preferred generating sources in 
order to meet their power needs, redispatch is required and typically 
results in the use of more expensive power. Congestion also usually 
reduces competition and diversity, by limiting the range of generators 
from which buyers can obtain power. Finally, congestion means that 
parts of the transmission system are so heavily loaded that grid 
operators have fewer options for dealing with adverse circumstances or 
unanticipated events, thus increasing the risk of blackouts, forced 
interruptions of service, or other grid-related disruptions.
    Therefore, any congestion can adversely affect at least some 
consumers. Nevertheless, congestion remedies are not free; therefore, 
not all congestion is worth fixing. Under certain circumstances, 
congestion can arise on any transmission path. But the appearance of 
isolated or transient instances of congestion usually does not warrant 
consideration of transmission expansion. While the Department is not 
attempting in this notice to define the complete scope of the term 
``congestion that adversely affects consumers'' as used in FPA section 
216(a)(2), the Department concludes that the term includes congestion 
that is persistent. Thus, the Department believes that FPA section 
216(a) gives the Secretary the discretion to designate a National 
Corridor upon a showing of the existence of persistent congestion, 
without any additional demonstration of adverse effects on consumers. 
However, as discussed below, whether the Secretary should exercise his 
discretion to designate a National Corridor in a given instance of 
congestion is a separate question.
    With regard to constraints that adversely affect consumers, one way 
in which a constraint can adversely affect consumers is by causing 
persistent congestion that in turn, as discussed above, adversely 
affects consumers. However, the Department agrees with those commenters 
who argue that the Secretary's authority is not limited to areas where 
congestion presently exists. If Congress had intended to limit the 
Secretary's designation authority over constraints to cases where 
constraints are currently causing congestion, then there would have 
been no need for the statutory language to refer to ``any geographic 
area experiencing electric energy transmission constraints or 
congestion that adversely affects consumers.'' See 16 U.S.C. 824p(a)(2) 
(emphasis added). Further, the Department agrees with those commenters 
who argued that the total absence of a line connecting two nodes can be 
just as, if not more, limiting to consumers than the presence of a line 
that is operating at capacity and, therefore, constraints include the 
absence of transmission equipment between two or more nodes.\14\
---------------------------------------------------------------------------

    \14\ A node is the physical location on the transmission system 
where energy is, or will be, injected by generators or withdrawn by 
loads.
---------------------------------------------------------------------------

    Constraints limit access to power sources. Further, the existence 
of a constraint can hinder the development of new power sources, since 
project sponsors may not be able to obtain the financing they need if 
there is uncertainty over the degree to which their electricity could 
be delivered to consumers. Again, the Department is not attempting in 
this notice to define the complete scope of the term ``constraints that 
adversely affect consumers'' as used in FPA section 216(a)(2). However, 
the Department concludes that the term includes not only constraints 
that cause persistent congestion, but also constraints that hinder the 
development or delivery of a generation source that is in the public 
interest. Thus, the Department believes that FPA section 216(a) gives 
the Secretary the discretion to designate a National Corridor upon a 
showing of the existence of a constraint, including the total absence 
of a transmission line, that is hindering the development or delivery 
of one or more generation sources that is in the public interest, 
regardless of whether there is congestion and without the need for any 
additional demonstration of adverse effects on consumers.\15\ This 
interpretation of the term ``constraints or congestion that adversely 
affects consumers,'' which allows for a National Corridor designation 
when there is a constraint that adversely affects consumers even though 
there is no present congestion, is appropriate because it gives meaning 
to all of the terms used in the statutory provision.
---------------------------------------------------------------------------

    \15\ As the Department is not issuing any draft National 
Corridors today based on the existence of constraints in the absence 
of persistent congestion, it is unnecessary in this notice to reach 
the question of the type of information that would be required to 
demonstrate that a constraint is hindering the development or 
delivery of a generation source that is in the public interest. 
However, the Department notes that the considerations identified in 
FPA section 216(a)(4) provide some examples of generation sources 
the development of which would be in the public interest, including 
sources that are needed to ensure adequate or reasonably priced 
electricity, sources that are needed for diversification of supply, 
sources that would promote energy independence, sources that would 
further national energy policy, or sources that would enhance 
national defense and homeland security. There may, however, be other 
generation sources the development of which would be in the public 
interest.
---------------------------------------------------------------------------

    Additionally, this interpretation of the statute answers the 
concerns of those commenters who question whether the statute 
authorizes designation of National Corridors in the Conditional Areas 
of Concern based solely on projections of future congestion. The 
Congestion Study identified several Conditional Areas of Concern 
``where future congestion would result if large amounts of new 
generation were to be developed without simultaneous development of 
associated transmission capacity.'' The Secretary is taking no action 
with respect to those areas at this time. Nevertheless, were the 
Secretary to designate a National Corridor for one of those areas, the 
Secretary would need only to demonstrate the existence of a constraint 
that was hindering the development or delivery of a generation source 
that is in the public interest, and would not need to rely on 
demonstrations of future, or even present, congestion.\16\
---------------------------------------------------------------------------

    \16\ Because the Department is not issuing any draft National 
Corridor designations based solely on projections of future 
congestion (without any showing of a constraint that adversely 
affects consumers), it is not necessary to determine now the extent 
of its authority to do so.
---------------------------------------------------------------------------

    The Department's interpretation of the scope of the Secretary's 
authority is consistent with the objective and structure of the 
statute. FPA section 216(a), as well as other provisions of EPAct,\17\ 
evince concern about the need to strengthen transmission infrastructure 
throughout the Nation. The Department concludes that a broad 
interpretation of the Secretary's discretion to designate National 
Corridors is consistent with that concern, particularly given the 
effect of a National Corridor designation, as discussed in Section I.A 
above. Given the statutory limitations on the exercise of FERC's 
permitting authority, there is no need to interpret narrowly the 
Secretary's National Corridor designation authority.
---------------------------------------------------------------------------

    \17\ See, e.g., EPAct sec. 1241 (requiring FERC to establish 
rules to promote capital investment in transmission); EPAct sec. 
1233 (requiring FERC to exercise its authority in a manner that 
facilitates planning and expansion of transmission to meet the needs 
of load-serving entities); EPAct sec. 368 (requiring the designation 
of energy right-of-way corridors across Federal lands for electric 
transmission and other energy projects); FPA sec. 216(h) 
(establishing procedures to ensure timely and efficient review of 
proposed transmission projects by Federal agencies); and EPAct sec. 
1222 (giving additional authority for Western Area Power 
Administration and Southwestern Power Administration to participate 
with other entities in the development of transmission).
---------------------------------------------------------------------------

    While the Department concludes that the Secretary has broad 
authority to designate National Corridors, FPA

[[Page 25845]]

section 216(a) does not require the Secretary, under any circumstances, 
to make a National Corridor designation. Rather, in recognition of the 
Department's expertise, the statute leaves to the Secretary's judgment 
which geographic areas experiencing constraints or congestion adversely 
affecting consumers to designate as National Corridors. The Department 
recognizes that FPA section 216(a) adopted a novel approach to 
addressing the need for new transmission infrastructure, an approach 
that poses challenges to all stakeholders as we collectively work to 
address this problem. Therefore, the Secretary intends to proceed 
carefully in the exercise of his discretion to designate National 
Corridors. As evidenced by the specific draft designations set forth 
below, the Department is not starting the process of designating 
National Corridors at the outer limits of its authority. The Congestion 
Study identified two Critical Congestion Areas, and today's notice 
issues two draft National Corridors to address them. These draft 
National Corridors are based on the existence of well-known, persistent 
congestion that adversely affects large numbers of consumers.
    Finally, the Department does not believe it is necessary to develop 
a specific and finite set of criteria to guide the exercise of the 
Secretary's discretion. Instead, the most reasonable interpretation of 
FPA section 216 is that the Secretary may make National Corridor 
designations based on the totality of the information developed, taking 
into account relevant considerations, including the considerations 
identified in FPA section 216(a)(4), as appropriate.

B. Analysis of Potential Solutions

Summary of Comments
    The Department received comments on whether a National Corridor 
designation should be based on an analysis of potential solutions to an 
identified congestion problem. Many commenters, including the National 
Association of Regulatory Utility Commissioners (NARUC), the New York 
Public Service Commission (NYPSC), and the New Jersey Board of Public 
Utilities (NJBPU), argued that the Department should conduct a cost/
benefit analysis of transmission solutions as well as non-transmission 
solutions to relieving congestion before designating a National 
Corridor; otherwise, they contend, the designation would unfairly skew 
the playing field in favor of transmission solutions.\18\ For example, 
the NJBPU and PSEG argued that without such an analysis, National 
Corridor designation may lead to preemptive siting of long-haul rate-
based transmission projects intended to move power from remote 
generating sources to load centers, and thus distort or destroy market 
signals for local developers of generation, demand response resources, 
and improvements to local distribution systems. NYPSC and the New York 
Independent System Operator (NYISO)\19\ urged the Department to analyze 
the potential market impact of a National Corridor designation, because 
the very act of designating a National Corridor could cause downstream 
project developers to abandon already-planned facilities. Consolidated 
Edison Company of New York, Inc., and Orange and Rockland Utilities, 
Inc. (collectively ConEd) and NJBPU expressed concern about whether a 
National Corridor would disadvantage local generation to the detriment 
of reliability, noting that remote generation cannot provide the same 
level of voltage support and other ancillary services that local 
generation can. Numerous individuals who commented in opposition to 
specific transmission projects asserted that the Department has an 
obligation under FPA section 216 to consider alternatives to building 
new transmission lines.
---------------------------------------------------------------------------

    \18\ See also comments of EPSA, Northern Indiana Public Service 
Company, Old Dominion Electric Cooperative (ODEC), OMS, Piedmont 
Environmental Council (PEC), PSEG, The Wilderness Society 
(Wilderness), and many individuals.
    \19\ NYISO is the ISO serving New York State.
---------------------------------------------------------------------------

    On the other hand, numerous commenters argued that the Department 
should not engage in analysis of possible solutions to congestion. 
These commenters noted that the Department's role is to identify areas 
where congestion and constraints exist, whereas other entities, 
including State siting authorities, regional planning entities, market 
participants, and under some circumstances FERC will consider the 
relevant solutions. These commenters cautioned that any such analysis 
by the Department would unnecessarily delay the designation 
process.\20\
---------------------------------------------------------------------------

    \20\ See, e.g., comments of FirstEnergy, National Grid, and 
National Rural Electric Cooperative Association (NRECA).
---------------------------------------------------------------------------

DOE Response
    The Department disagrees with those commenters who argue that a 
National Corridor designation is warranted only if the Department has 
demonstrated that transmission is the best, or at least a cost-
effective, solution to an identified congestion problem. Nothing in FPA 
section 216 requires or envisions that the Department make such a 
demonstration. In fact, the preparation of a transmission cost-benefit 
analysis by the Department would be inconsistent with the very role 
that the statute assigns to the Department. As discussed in Section I.A 
above, the Department's role under FPA section 216 is to identify 
constraint or congestion problems and their geographic locations; the 
statute does not call for the Department to analyze and decide upon 
solutions. While FPA section 216(a)(2) does call for the Secretary to 
consider ``alternatives and recommendations from interested parties'' 
before making a National Corridor designation, the reference to 
``alternatives and recommendations from interested parties'' in this 
provision is ambiguous. In light of the statutory framework, the 
Department concludes that the term ``alternatives and recommendations 
from interested parties'' is intended to refer to comments suggesting 
National Corridor designations for different congestion or constraint 
problems, comments suggesting alternative boundaries for specific 
National Corridors, as well as comments suggesting that the Department 
refrain from designating a National Corridor.
    The Department acknowledges that transmission expansion is but one 
possible solution to a congestion or constraint problem; increased 
demand response, improved energy efficiency, and conservation, as well 
as siting of additional generation close to load centers are also 
potential solutions. However, given the effect of a National Corridor 
designation and the existing obligations of State and Federal siting 
authorities as discussed in Section I.A above, there is no need for the 
Department to undertake an analysis of transmission solutions and non-
transmission solutions or to speculate about any theoretical indirect 
effects a National Corridor designation would have on the market. 
Indeed, the Department believes that expanding its role to include 
making findings on the optimal remedy for congestion could supplant or 
otherwise duplicate the traditional roles of States and other entities.

C. Cost Allocation

Summary of Comments
    The Congestion Study solicited comment on how the costs of proposed 
transmission should be allocated. A few commenters argued that the 
Department

[[Page 25846]]

should consider cost allocation when deciding whether to make a 
National Corridor designation, and offered recommendations on specific 
cost allocation structures.\21\ For example, Montana-Dakota Utilities 
Co. argued that the Department should only designate National Corridors 
where the resulting transmission facilities would be paid for on a 
beneficiary-pays, rather than a postage-stamp, basis. NRECA supported 
rolled-in rate treatment for projects that serve native load network 
customers. However, the majority of those who provided comment on cost 
allocation issues urged against the Department considering those issues 
in the FPA section 216(a) process.\22\ These commenters noted that 
FERC, rather than the Department, has jurisdiction over cost allocation 
for transmission projects, and argued that cost allocation was not 
relevant to National Corridor designation.
---------------------------------------------------------------------------

    \21\ See comments of PSEG, ODEC, and J. Hayden.
    \22\ See, e.g., comments of Allegheny Power, American Electric 
Power (AEP), Arizona Public Service Company (APS), ConEd, Duke 
Energy Corporation (Duke), EEI, FirstEnergy, LS Power, National 
Commission on Energy Policy (NCEP), National Grid, and OMS.
---------------------------------------------------------------------------

DOE Response
    The Department agrees with those commenters who argue that the 
analysis of whether to designate a National Corridor should not include 
consideration of how the costs for new transmission facilities will be 
allocated. While cost allocation issues can be critically important to 
determining whether, when, and where specific transmission projects are 
developed, those issues are not relevant to the Secretary's role under 
FPA section 216(a) of identifying geographic areas where congestion or 
constraints are adversely affecting consumers.

D. Regional Planning and Local Siting

Summary of Comments
    The Department received comments on the relevance of regional 
planning processes to National Corridor designation. FirstEnergy argued 
that in general, in RTO regions, National Corridors should be 
designated when a transmission facility would relieve congestion in an 
identified congestion area and the facility has been recognized as 
needed for reliability in an RTO's transmission planning and expansion 
process. The Midwest ISO argued that the Department should wait to 
designate a National Corridor until a suitable planning solution is 
proposed within an identified congestion area. NARUC argued that the 
Department should grant deference to the results of adequate regional 
planning processes. Other commenters, for example NYPSC, also 
recommended that the Department should coordinate its designations with 
regional planning processes.
    On the other hand, some commenters expressed concern about the 
Department relying too much on RTO input regarding designation of 
National Corridors. For example, ODEC argued that while RTOs provide a 
forum within which public and well-vetted transmission planning could 
occur, at this time they lack procedures needed to ensure that such 
planning would actually occur. ABB expressed concern about the 
fragmented nature of the studies performed by RTOs.
    OMS argued that any designation must be based on the existence of 
siting barriers. For example, OMS asserted that if needed transmission 
is not being constructed due to cost recovery or other non-siting 
uncertainties, then a designation is inappropriate. According to OMS, 
designation is only appropriate when a National Corridor is truly 
necessary to solve a congestion problem of national significance, when 
the congestion problem is persistent, and when the prior failure to 
develop a solution is the result of siting problems. The Public 
Utilities Commission of the State of California (CPUC) argued that 
designation is unwarranted unless there is evidence that State and 
regional processes are not addressing the problem in a timely manner. 
CPUC argued that it is, first of all, up to the States and the regions 
to solve their transmission planning and siting problems, and Federal 
agencies should not intervene unless and until there is a demonstrated 
need for them to do so. CPUC further asserted that designation of a 
National Corridor in connection with any large multi-state project is 
likely to delay project siting, because of litigation and conflict it 
would produce. CEC commented that Federal back-stop siting would be 
beneficial where the State has been unable to make progress in 
approving vital transmission projects.
    PAPUC argued that the Department should not make any designation 
that does not clearly identify the national interests requiring 
protection and without making findings of fact that those interests are 
better served by a National Corridor designation than by another 
approach that would be less intrusive of State laws and policies. NYISO 
urged the Department to designate National Corridors with care so as 
not to usurp arbitrarily State siting authority. On the other hand, the 
Midwest ISO argued that the Department should not wait until local 
siting has become problematic, given the effect of a National Corridor 
designation.
DOE Response
    The Department disagrees with those commenters who suggest that the 
Department defer making a National Corridor designation either until 
siting problems have already manifested themselves or until a regional 
planning process proposes a solution to the congestion or constraint 
problem. Nothing in FPA section 216 requires or envisions that the 
Department adopt a wait-and-see approach to National Corridor 
designation. FPA section 216 empowers the Department to make 
designations when it finds constraints or congestion adversely 
affecting consumers, a finding that is not dependent on actions that 
others (e.g., transmission owners, regional planners, or States) may 
take to remedy those constraints or congestion. The Department fully 
supports such entities taking aggressive action to remedy congestion 
and nothing in a National Corridor designation conflicts with their 
ability to do so. Moreover, acting in parallel with the efforts of 
other entities is consistent with Congressional intent in enacting 
EPAct, which emphasizes the immediate need for new investment in 
transmission. Delaying action by the Department until action by all 
others is exhausted would not be consistent with this intent, nor with 
the Nation's pressing need for new transmission.
    Moreover, the statute provides a specific mechanism by which States 
can insulate themselves from the FERC permitting provisions of FPA 
section 216(b). FPA section 216(i)(1) provides that three or more 
contiguous States may enter into interstate compacts establishing 
regional transmission siting agencies. 16 U.S.C. 824p(i)(1). Such 
regional transmission siting agencies would then have authority to site 
transmission facilities in National Corridors. FPA section 216(i)(3); 
16 U.S.C. 824p(i)(3). Further, FERC would have no authority to issue a 
transmission permit within a State that is party to such a compact 
unless the members of the compact were in disagreement and the 
Secretary, after notice and opportunity for hearing, made a finding 
that the conditions of FPA section 216(b)(1)(C) were met. FPA section 
216(i)(4); 16 U.S.C. 824p(i)(4). In light of this mechanism, as well as 
the other statutory limitations on FERC's permitting authority 
discussed in Section I.A above, the Department concludes it would be 
inappropriate for it to limit itself to designating National Corridors 
where States have either

[[Page 25847]]

failed to act or have already developed a preferred solution.
    The Department supports and encourages regional planning efforts. A 
National Corridor designation neither dictates nor bars any solution 
that might be considered in a regional planning process. The Department 
intends to draw the boundaries of any National Corridor so as to 
encompass a range of potential transmission solutions. In the event 
that a regional planning process concludes that a modification to an 
existing National Corridor designation is needed, the Department will 
consider such a request.

III. Defining National Corridor Boundaries

Summary of Comments

    In the Congestion Study, the Department solicited comment on how, 
where, and on what basis to establish the boundaries of a National 
Corridor. One approach identified in the Congestion Study would use 
specific transmission projects to define National Corridor boundaries. 
Under this approach, a proponent of a National Corridor would identify 
a specific project that could serve as a solution to the underlying 
congestion or constraint problem, an approximate centerline for the 
project would be identified, and the National Corridor boundary would 
be banded around that centerline. A number of commenters, including 
EEI, AEP, and Allegheny Power (Allegheny), supported this approach.
    Some commenters supported a project-based approach provided that 
there was some sort of independent review of the project. For example, 
ODEC argued that an open stakeholder process should first identify and 
vet conceptual projects and then make National Corridor boundary 
recommendations to the Department for those projects. Southern 
California Edison Company (SCE) argued that National Corridor 
boundaries should be tailored to aid in the construction of specific 
viable transmission projects approved through a regional planning 
process. CREPC stated that the delineation of National Corridor 
boundaries should be informed by a detailed analysis of congestion 
mitigation options.
    Several commenters raised the possibility of an incremental process 
for setting National Corridor boundaries, under which the Secretary 
would first make a designation of a broad area, and then as specific 
transmission proposals are developed and presented for review by 
appropriate authorities, the Secretary would narrow the boundaries.\23\ 
Commenters who supported a project-based approach emphasized that 
National Corridor boundaries drawn in such manner should not dictate a 
particular line route, but rather should be drawn broadly enough to 
allow for consideration of alternative alignments during the siting 
process.
---------------------------------------------------------------------------

    \23\ See, e.g., comments of APS, Wyoming Infrastructure 
Authority, and Great Northern Properties, L.P. and Great Northern 
Power Development, L.P.
---------------------------------------------------------------------------

    On the other hand, some commenters opposed the project-centerline 
approach to developing National Corridor boundaries. For example, PAPUC 
argued that such an approach would involve the Secretary in siting 
decisions of the sort that Congress did not intend and for which the 
Department lacks expertise. OMS opposed National Corridor designation 
for particular projects. A number of commenters supported use of a non-
project-based approach either instead of or in addition to a project-
based approach. FirstEnergy suggested that in the absence of a specific 
project, a National Corridor could be drawn by means of a radius around 
the congested area. However, most commenters who supported a non-
project-based approach recommended that the Department use a source-
and-sink approach to setting National Corridor boundaries, in which the 
Department would identify a sink (the congested or constrained load 
area) and a source (an area of potential supply), and then draw a 
National Corridor connecting these two areas.\24\ AEP's version of a 
source-and-sink approach looks at three factors: the area of potential 
generation resources, the critically congested load area, and the 
transmission deficiencies between the two areas.
---------------------------------------------------------------------------

    \24\ See, e.g., comments of PAPUC, OMS, and National Grid.
---------------------------------------------------------------------------

    Several commenters supported the specification of precise 
boundaries for National Corridors. For example, Allegheny argued that 
specific boundaries are needed so that the project sponsor would know 
whether its project is encompassed within a National Corridor, FERC 
could readily determine the geographic scope of its potential 
jurisdiction, and land owners would know whether their property may be 
subject to the Federal exercise of eminent domain. However, OMS argued 
that instead of setting specific perimeter boundaries, the Department 
should identify source and sink areas, define the goal of the National 
Corridor, and then limit the National Corridor designation to those 
projects that further that goal. OMS expressed concern that delineation 
of specific boundaries could have the effect of establishing Federal 
transmission line corridors within States, and notes that just because 
a proposed project is located within a National Corridor it should not 
be assumed to address the concerns that lead to the designation of the 
National Corridor.
    With regard to drawing the specific perimeters of a National 
Corridor, Allegheny argued for using existing or proposed originating, 
intermediate, and terminating substations for proposed lines identified 
by planning studies. Numerous commenters argued that the Secretary 
should draw National Corridor boundaries to exclude parks and other 
environmentally protected areas.\25\ Some commenters, including CEC, 
Imperial Irrigation District (IID) and the Appalachian Trail 
Conservancy, recommended that the Department take into consideration 
existing rights of way when drawing boundaries. CEC argued that DOE 
should ensure that any National Corridors in California are delineated 
in a manner consistent with recent legislation concerning State 
designation of electric transmission corridors.\26\ NCEP noted that 
congestion occurs within an electrical system of flowgates rather than 
within a specific geographic framework, and expresses concern that 
arbitrary geographic boundaries may foreclose the most cost-effective 
option for remedying congestion. Thus, NCEP argued that Balancing 
Authorities, which have the job of managing congestion, should be used 
to define National Corridor boundaries.
---------------------------------------------------------------------------

    \25\ See, e.g., comments of CEC, National Parks Conservation 
Association, National Park Service, Wilderness, Upper Delaware 
Council, and numerous individuals.
    \26\ See 2006 Cal. Adv. Legis. Serv. 638 (Deering) (to be 
codified at Cal. Pub. Res. Code Sec. Sec.  25330-341).
---------------------------------------------------------------------------

    Several commenters emphasized the need to make the area covered by 
a National Corridor broad, to ensure adequate flexibility of 
transmission planners and siting authorities to consider 
alternatives.\27\ The Appalachian Trail Conservancy argued that 
National Corridors should be 75 to 100 miles wide in order to allow 
flexibility to align projects to avoid environmentally sensitive areas. 
Northwestern Energy argued for broad National Corridors so that one 
group of developers is not put at an unfair advantage. ABB argued that 
the boundaries of a National Corridor should include adjacent 
contiguous areas physically affected by large

[[Page 25848]]

transmission upgrades since it is likely that additional reinforcements 
will be needed in those outlying areas. EEI argued in favor of a two-
track process for drawing boundaries. Under EEI's process, where there 
is a specific transmission project that could address the congestion or 
constraint problem, the boundaries would be as narrow as several miles 
wide; where no specific projects have been proposed, the boundaries 
would be wider, up to 200 miles, to allow for a range of possible 
solutions.
---------------------------------------------------------------------------

    \27\ See, e.g., comments of PG&E, ConEd, LS Power, National 
Grid, and Western Business Roundtable.
---------------------------------------------------------------------------

    On the other hand, some commenters acknowledged the need for 
flexibility to consider alternatives but cautioned against drawing the 
National Corridor boundaries too broadly. For example, the City of New 
York stated that an overbroad interpretation of ``corridor'' is both 
inconsistent with the plain meaning of the word and may be too 
amorphous to provide adequate guidance for beneficial transmission 
planning. The PAPUC argued that National Corridors should be set so as 
to minimize the intrusion into State siting jurisdiction and to 
guarantee that any transmission projects claiming the benefits of the 
National Corridor designation will actually address the problem 
Congress intended to address. PAPUC further argued that the Department 
should require a project claiming the benefits of the National Corridor 
designation to show that its project would substantially alleviate the 
specific directional congestion on which the National Corridor was 
based and that the project would not conflict with any other 
transmission solutions being planned in the applicable regional 
planning process. Long Island Power Authority (LIPA) argued that an 
overbroad National Corridor would dilute the effectiveness of FPA 
section 216 and would discourage non-transmission solutions.

DOE Response

    The statute provides little direction on how the Department should 
draw the boundaries of a National Corridor. FPA section 216(a) uses the 
term ``geographic area'' and lists several considerations the Secretary 
may take into account when making a National Corridor designation. 
However, the statute does not define the term ``corridor.'' While this 
term is commonly understood to refer generally to some sort of path 
between different areas, the specific meaning of the term in this 
context is ambiguous. After careful consideration of the overall 
purpose and effect of this statutory provision, as well as the comments 
received, the Department has concluded that, while there may be 
circumstances where a project-based approach would be appropriate, in 
general the Department will use a source-and-sink approach to defining 
National Corridor boundaries.
    As discussed in Section I.A above, the National Corridor 
designation process is intended as a process to identify congestion and 
constraint problems, and the geographic areas in which these problems 
exist, rather than as a process to identify solutions to those 
problems. Just as the determination of whether to designate a National 
Corridor need not await or rely on the existence or analysis of 
specific transmission proposals, neither does the determination of the 
boundaries of that National Corridor. Setting National Corridor 
boundaries through a source-and-sink approach is consistent with the 
problem-identification purpose of National Corridor designations under 
FPA section 216(a), because it is not focused on any particular 
transmission projects, or set of transmission projects.
    The Department recognizes that when it designates a National 
Corridor, there may be specific projects that have already been 
proposed within the boundaries of that National Corridor. Such is the 
case with the draft National Corridors designations in this notice. 
This result is not surprising, because these draft National Corridors 
encompass well-known constraints that have adverse effects on millions 
of consumers. However, the Department emphasizes that it is neither 
endorsing nor recommending any specific projects when it designates a 
National Corridor based on a source-and-sink analysis.
    There was broad consensus among the commenters that if a project-
based approach were not used to set National Corridor boundaries, then 
a source-and-sink approach should be used. Such an approach is 
consistent with the common usage of ``corridor'' as an area linking two 
other areas. Such an approach also is consistent with the physical 
properties of the electrical grid, because a transmission line into a 
congested or constrained load area will not benefit that load unless 
the line connects with a source of power that could help to serve the 
load.
    While the comments support the use of a source-and-sink approach to 
setting National Corridor boundaries, they provide little clarification 
about how such an approach should actually be implemented. The details 
of how the Department will draw the boundaries of a National Corridor 
will depend on the specific circumstances. However, in general terms, 
the geographic extent of the sink area in a National Corridor is 
determined by the geographic distribution of the consumers adversely 
affected by the congestion or constraints--in other words, the location 
of load downstream of the limiting transmission constraints.
    With regard to the source area, where the decision to designate a 
National Corridor is based on the existence of a constraint that is 
hindering the development or delivery of a particular generation source 
that is in the public interest,\28\ the identification of the 
appropriate source area would be relatively straightforward: the source 
area would be the geographic area within which that particular source 
of supply is, or is likely to be, located. In contrast, where the 
decision to designate a National Corridor is based on the existence of 
persistent congestion, the identification of an appropriate source area 
may require the consideration of a range of potential source areas. The 
selection of a source area or source areas in those situations will 
necessarily involve discretion and is not suited to a formulaic 
approach.
---------------------------------------------------------------------------

    \28\ See Section II.A above.
---------------------------------------------------------------------------

    Given the long lead time involved in planning, obtaining regulatory 
approvals for, and constructing transmission projects, areas without a 
current surplus of generation could well develop additional power 
sources by the time a transmission project is completed. Therefore, 
depending on the circumstances, the Department may consider as 
potential source areas not only those areas with existing surplus 
generation, but also areas with projected surplus generation, or areas 
with available fuel supply for additional generation.
    Once the Department has identified the range of potential source 
areas, it must then decide which of those potential source areas it 
will use to set the boundaries of a National Corridor. The Department 
observes that the considerations identified in FPA section 216(a)(4) 
provide guidance on some of the possible bases for making this 
decision. FPA section 216(a)(4)(A)-(E) authorizes the Secretary when 
making a National Corridor designation to consider lack of adequate or 
reasonably priced electricity, diversification of supply, energy 
independence, national energy policy, and national defense and homeland 
security. Each of these considerations potentially has relevance to the 
selection of source areas. For example, certain potential source areas 
may provide greater diversity of supply than others, or may be more 
consistent with national energy policy. Therefore, when there are 
multiple potential source areas, the Secretary will use his

[[Page 25849]]

expert judgment to determine which of the potential source areas to 
include, taking into account relevant considerations, including the 
considerations identified in FPA section 216(a)(4), as appropriate.
    After the Department has identified the sink and source areas, it 
must then delineate the specific boundaries of a National Corridor 
linking those areas. The Department agrees with the majority of 
commenters that National Corridor designations should specify precise 
geographic boundaries. Such an approach is not only consistent with the 
plain meaning of the statutory term ``geographic area,'' it also 
provides greater clarity and ease of administration to those entities 
concerned with whether a particular project or land area would be 
encompassed within a National Corridor.
    The Department acknowledges that determining the exact perimeters 
for a National Corridor under a source-and-sink approach is more an art 
than a science, and there will rarely be a dispositive reason to draw a 
boundary in one place as opposed to some number of miles to the left or 
right. The drawing of the boundary is ultimately a judgment the 
Secretary must make, based on all relevant considerations, including 
the considerations identified in FPA section 216(a)(4), as appropriate, 
and available, relevant data. There is no single boundary line that can 
be determined based solely upon analysis of the data. The Department 
notes that the drawing of the boundary lines of a National Corridor 
does not finally determine or fix the substantive rights of anyone. A 
National Corridor designation simply provides developers proposing 
certain projects within its boundaries an additional procedural option 
in the form of a potential Federal siting venue that is not available 
to transmission projects outside a National Corridor.
    Therefore, the Department agrees with those commenters who 
emphasize the need for the Department to draw National Corridor 
boundaries so that they could encompass a range of potential projects 
and a range of potential routes.\29\ So long as a range of alternatives 
is encompassed, further refinement is unnecessary. Given this approach, 
the Department concludes that it is not necessary to adjust the 
boundaries of a National Corridor to avoid parks or other 
environmentally protected areas or to align the boundaries with 
existing rights of way.\30\ Further, the Department need not attempt to 
interpret State laws on siting preferences. The determination of the 
best route for a specific project will be made by siting authorities, 
who are better positioned to make such a determination. As discussed in 
Section I.A above, if a project in a National Corridor were to satisfy 
the statutory requirements for seeking a permit from FERC, FERC would 
analyze alternative routes for that project, including route 
realignments necessary to avoid adverse effects on the environment, 
landowners, and local communities. Nothing in FPA section 216 alters 
the applicability of Federal environmental and cultural statutes and 
regulations.
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    \29\ Drawing National Corridor boundaries broadly may also help 
encompass transmission upgrades needed to address ``loop flow.'' 
Loop flow is a phenomenon of alternating current transmission 
networks in which electricity flows seek their own paths, sometimes 
in patterns unanticipated by system operators. Thus, a transmission 
improvement designed to correct a congestion problem on one part of 
the transmission system may in some cases cause loop flows elsewhere 
that must also be addressed.
    \30\ The Department acknowledges that this approach to 
establishing boundaries for National Corridors under FPA section 
216(a) differs from the approach being used for energy right-of-way 
corridors on Federal land under EPAct section 368. However, given 
the distinct purposes of FPA section 216 and EPAct section 368, the 
Department believes that applying different approaches to the two 
different types of corridors is appropriate. See Env't Def. v. Duke 
Energy Corp., No. 05-848, slip op. at 10 (U.S. April 2, 2007) (``A 
given term in the same statute may take on distinct characters from 
association with distinct statutory objects calling for different 
implementation strategies.'')
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    The Department recognizes that some States are concerned that 
specification of broad boundaries could result in unintended expansion 
of Federal siting authority to include proposed transmission projects 
that happen to be located within a National Corridor but are unrelated 
to the problem that prompted the National Corridor designation. 
Sometimes the approach described above could produce very large 
corridors; sometimes it could produce smaller corridors. The breadth of 
a corridor would be driven by the geographic expanse of the adversely 
affected load, the number and geographic dimensions of source areas, 
and the distance between the source and sink areas. FPA section 216(b) 
itself specifies the scope of FERC jurisdiction over projects proposed 
to be built in National Corridors, including a requirement that the 
project will ``significantly reduce transmission congestion and 
protects or benefits consumers.'' \31\ The Department believes that 
these statutory limitations adequately address the States' concerns and 
do not require further clarification by the Department.
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    \31\ See FERC Order No. 689, 71 FR 69,440, 69,446, 117 FERC ] 
61,202 at P 41 (``The Commission will review the proposed project 
and determine if it reduces the transmission congestion identified 
in DOE's study and if it will protect or benefit consumers.''); and 
71 FR 69,440, 69,468, 117 FERC ] 61,202 at pp. 128-29 (Sec.  50.6(f) 
requires applicants to demonstrate that the conditions of FPA sec. 
216(b)(2)-(6) are met).
---------------------------------------------------------------------------

    Finally, in the event that an affected party concludes at some 
later stage that a modification to the boundaries of an existing 
National Corridor is needed, the Department will consider such a 
request.

IV. Involvement of Interested Parties

A. Public Notice

Summary of Comments
    Some commenters argued that it would be premature to designate any 
National Corridors without a full disclosure of the data and analysis 
underlying the conclusions in the Congestion Study. NYPSC, the Maine 
Public Utilities Commission (Maine PUC), and NARUC argued that the 
Department must perform a more granular analysis of congestion before 
designating a National Corridor; according to these commenters, the 
Congestion Study alone does not provide an adequate record of how the 
conclusions about congestion were reached. PAPUC stated that while the 
Congestion Study is a good initial assessment of congestion at the 
national level, designation of specific National Corridors cannot be 
based on the preliminary analysis contained in the Congestion Study; 
according to PAPUC, more specific and focused regional studies must be 
conducted prior to any designation. A number of commenters argued that 
the Congestion Study fails to provide adequate notice of a National 
Corridor designation under the Administrative Procedure Act, 5 U.S.C. 
551.\32\
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    \32\ See comments of Upper Delaware Preservation Coalition, 
Delaware Riverkeeper Network, SayNo2NYRI, Upstate NY Citizens 
Alliance, and Stop NYRI, Inc. (collectively Delaware River 
Commenters), Communities Against Regional Interconnection (CARI) and 
Toll Brothers, Inc. (Toll Brothers).
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DOE Response
    The Department notes that as of September 27, 2006, it made 
available on its Web site non-proprietary data relied on in the 
Congestion Study. Moreover, as discussed further below, the Department 
in this notice is identifying the specific data on which it is relying 
to establish the existence of congestion or constraints adversely 
affecting consumers, to explain the reasons the Secretary is 
considering exercising his discretion to designate a National Corridor, 
and to explain how

[[Page 25850]]

the specific boundaries of the draft National Corridors were 
delineated. Commenters will have a full opportunity to comment on those 
data.

B. State Consultation

Summary of Comments
    A number of commenters raised concerns about the level of 
consultation with States. Several commenters asserted that the 
Department failed to consult with the States in New England in the 
preparation of the Congestion Study.\33\ NARUC commented that the 
Department failed to consult with States in some regions. Other 
commenters argued that the Secretary should not designate any National 
Corridors without further consultation with affected States.\34\
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    \33\ See comments of Maine PUC, New England Conference of Public 
Utility Commissioners (NECPUC), Connecticut Attorney General, New 
England Governors' Conference, Inc., and Maine Congressional 
Delegation.
    \34\ See, e.g., comments of the Governor of the Commonwealth of 
Virginia, Arizona Corporation Commission (Arizona Commission), and 
American Transmission Company LLC.
---------------------------------------------------------------------------

DOE Response
    FPA section 216(a)(1) requires that the Department conduct its 
congestion studies ``in consultation with affected States.'' FPA 
section 216(a)(2) then states that ``[a]fter considering alternatives 
and recommendations from interested parties (including an opportunity 
for comment from affected States), the Secretary shall issue a report, 
based on the study, which may designate * * * [National Corridors].'' 
The Department is committed to fulfilling its obligation to consult 
with States in this process. At the same time, the Department notes 
that there are practical difficulties in conducting the level of 
consultation that some may prefer in the context of a study of this 
magnitude, which examines congestion over 150,000 miles of transmission 
lines throughout 47 States and the District of Columbia, within 
statutorily mandated deadlines. Moreover, the statute refers to 
conducting the congestion study in consultation with ``affected 
States.'' It is difficult to know which States are ``affected'' until 
the conclusions of the congestion study are known.
    The Department has provided States with numerous opportunities for 
input and has held meetings with officials representing individual 
States and groups of States. The Department initiated a series of 
conference calls in December 2005 and January 2006 with States to 
describe the Department's study plan and request information and 
suggestions. On February 2, 2006, the Department published a Notice of 
Inquiry explaining the Department's intended approach for the 
Congestion Study and inviting comment. On March 29, 2006, the 
Department held a public technical conference in Chicago, Illinois to 
address the questions presented in the Notice of Inquiry. The 
Congestion Study itself was made available for comment on August 8, 
2006. In addition, the Department held numerous meetings with State 
officials to discuss the Congestion Study and made presentations at 
several State conferences and events.\35\
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    \35\ National Conference of State Legislatures, Seattle, WA, 
Aug. 18, 2005; Southern States Energy Board, Atlanta, GA, Aug. 27, 
2005; Midwest State Energy Office, webcast, Aug. 31, 2005; National 
Association of State Energy Officials, New York, NY, Sept. 12, 2005, 
and Washington, DC, Feb. 7, 2006; CREPC, San Diego, CA, Sept. 20, 
2005, and Sept. 27, 2006, and Portland, OR, April 4, 2006; NARUC, 
Palm Springs, CA, Nov. 14, 2005, Washington, DC, Feb. 14 and 22, 
2006, San Francisco, CA, Aug. 1, 2006, and conference calls, Jan. 
11, 2006, and June 16, 2006; NYPSC, Albany, NY, Dec. 20, 2005; OMS, 
conference call, May 11, 2006; Florida Public Service Commission, 
Tallahassee, FL, June 15, 2006; Midwestern Legislative Conference, 
Chicago, IL, Aug. 20, 2006; Organization of PJM States, Inc., 
Cambridge, MD, Sept. 17, 2006; CPUC, conference call, Sept. 20, 
2006; CEC, conference call, Sept. 22, 2006; and Maine PUC, 
conference call, Oct. 6, 2006.
---------------------------------------------------------------------------

    As indicated by its outreach efforts in connection with the 
Congestion Study, the Department recognizes the importance of State 
consultation. The Department further recognizes that the most 
significant stage of the entire process under FPA section 216(a) is the 
National Corridor designation stage. Therefore, in addition to making 
the draft National Corridor designations described in this notice 
available for comment, the Secretary is simultaneously contacting the 
Governors of each State in which the draft National Corridors would be 
located to arrange consultation meetings.

V. Environmental and Cultural Analyses

Summary of Comments

    The Department received several comments proposing that the 
Department prepare a Programmatic Environmental Impact Statement 
(PEIS), pursuant to the National Environmental Policy Act of 1969 (42 
U.S.C. 4321-4347) (NEPA), before designating any National Corridors. 
Specifically, some commenters state that designating a National 
Corridor is equivalent to establishing a plan for routing transmission 
lines and, therefore, must be evaluated in a PEIS.\36\ Other commenters 
argue that a National Corridor designation is not just a plan for 
routing of transmission lines, but rather would amount to a de facto 
permitting of a specific, identifiable transmission line for which a 
PEIS or an Environmental Impact Statement must be prepared.\37\
---------------------------------------------------------------------------

    \36\ See e.g., comments of Delaware River Commenters.
    \37\ See, e.g., comments of National Trust for Historic 
Preservation and numerous individuals.
---------------------------------------------------------------------------

    Several commenters also asserted that the designation of a National 
Corridor selects a transmission-based solution to congestion rather 
than alternative energy solutions such as siting local generation or 
increased demand response. These commenters argue that DOE should 
conduct a PEIS that considers alternatives to transmission-based 
solutions to congestion prior to designating a National Corridor.\38\
---------------------------------------------------------------------------

    \38\ See, e.g., comments of PEC and Virginia Chapter of the 
Sierra Club (Sierra Club); see also comments of U.S. Sen. Warner and 
U.S. Rep. Wolf.
---------------------------------------------------------------------------

    Other commenters note that the Council on Environmental Quality's 
regulations implementing the procedural provisions of NEPA (40 CFR 
1500-1508) require that NEPA be applied at the earliest possible time 
in the planning process and contend that, therefore, DOE should prepare 
a PEIS prior to any designation of a National Corridor.\39\ Still other 
commenters state that DOE should prepare a PEIS before designating a 
National Corridor because a PEIS would allow DOE to examine not just 
environmental impacts from individual projects but also cumulative 
environmental and non-environmental impacts, including socioeconomic 
impacts.\40\
---------------------------------------------------------------------------

    \39\ See, e.g., comments of CARI.
    \40\ See, e.g., comments of Wilderness.
---------------------------------------------------------------------------

    The Department also received comments that it should conduct other 
environmental and cultural analyses, such as a review under the 
National Historic Preservation Act (16 U.S.C. 470) (NHPA), before 
designating National Corridors.\41\ For example, the Advisory Council 
on Historic Preservation states that the Department should conduct a 
``tiered'' approach under the NHPA, and that the Department should 
designate National Corridors that are broad enough to ensure that 
feasible alternatives to mitigate potential adverse effects to historic 
properties may be developed and evaluated at a later stage.
---------------------------------------------------------------------------

    \41\ See, e.g., comments of Civil War Preservation Trust, 
Foundation of the State Arboretum of Virginia, and National Parks 
Conservation Association.
---------------------------------------------------------------------------

DOE Response

    Section 102(2)(C) of NEPA requires that all Federal agencies 
include an environmental impact statement in

[[Page 25851]]

``every recommendation or report on proposals for legislation and other 
major Federal actions significantly affecting the quality of the human 
environment.'' 42 U.S.C. 4332(2)(C). The designation of a National 
Corridor under FPA section 216(a)(2) does not significantly affect the 
quality of the human environment. To the contrary, as described in 
Section I.A above, a National Corridor designation is not a 
determination that transmission must, or even should, be built; it is 
not a proposal to build a transmission facility and it does not direct 
anyone to make a proposal. Nor does the Department's designation of a 
National Corridor result in or plan for any ground-breaking 
environmental impacts. Nor does National Corridor designation 
irrevocably commit any resources to any activity having foreseeable 
environmental impacts. Designation of a National Corridor does not 
control FERC's substantive decision on the merits as to whether to 
grant or deny a permit application, specifically where any facilities 
covered by a permit should be located, or what conditions should be 
placed on a permit. Further, as discussed in Section III above, the 
Department has decided not to establish the boundaries of today's draft 
National Corridors using a project-centerline approach that would give 
an advantage to a particular transmission line. As discussed in Section 
I.A above, the Department's approach to National Corridor designation 
does not foreclose future options for addressing congestion, including 
non-transmission options. For these reasons, National Corridor 
designation is not a ``proposal for a major Federal action 
significantly affecting the quality of the human environment'' that 
falls within the purview of NEPA.
    While NEPA review is not required at this time, all proposals for 
Federal siting permits will be subject to, as appropriate, project-
specific NEPA review. In addition to NEPA, proposals for such permits 
will also be subject to other environmental and cultural reviews, 
including, but not limited to, review under the NHPA.\42\ Nothing in 
FPA section 216 alters the applicability of Federal environmental and 
cultural statutes and regulations.
---------------------------------------------------------------------------

    \42\ See FERC Order No. 689 discussed in n.4.
---------------------------------------------------------------------------

VI. Duration of National Corridor Designations

Summary of Comments

    The Congestion Study solicited comment on whether National Corridor 
designations should be permanent or whether the Department should set 
an expiration date. Most commenters did not address this question. Most 
of those who did said that DOE should not set a standard duration 
period for National Corridor designations. SCE, for example, said that 
relevant conditions would vary too much from case to case, and that DOE 
should establish a period suitable to a given National Corridor and 
then work with affected parties to determine when or if the designation 
should be terminated. APS emphasized that the development of 
transmission facilities is often a protracted process; that the initial 
designation should be for a considerable period; and that thereafter 
DOE should ensure that a designation does not expire in a manner that 
would disadvantage existing efforts to relieve congestion problems. EEI 
said that designations should not have any fixed duration; rather, they 
should simply remain in force until rescinded by DOE. EEI argued that 
DOE should stipulate in its designations that it reserves the right to 
rescind a designation if it finds that the designation is no longer 
needed, and that it would revisit the need for existing designations in 
its periodic studies and reports. EEI also emphasized the need for DOE 
to ensure that it did not rescind a designation prematurely.
    Wilderness noted that DOE is to update its congestion study every 
three years, and suggested that DOE should reassess the need for 
existing National Corridors as part of each three-year study. 
Similarly, the York County Planning Commission said that designations 
should be for three-year terms, subject to renewal or rescission based 
on the findings in the updated congestion analyses.
    PJM Interconnection, LLC, (PJM)\43\ recommended that DOE designate 
National Corridors for an initial 10-year term, and stipulate the 
Secretary's right to rescind or modify the terms or boundaries of a 
National Corridor at any time after showing that such action was 
appropriate.
---------------------------------------------------------------------------

    \43\ PJM is the RTO serving parts or all of Delaware, Illinois, 
Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, 
Ohio, Pennsylvania, Tennessee, Virginia, West Virginia, and the 
District of Columbia.
---------------------------------------------------------------------------

DOE Response

    DOE appreciates the need to be responsive to the broad range of 
factors and considerations pertaining to the duration of National 
Corridor designations. It also recognizes that designations, once made, 
should be in place for a considerable period of years, with the 
possibility of either rescission or renewal for cause. Accordingly, DOE 
intends to adopt a default approach, under which an initial designation 
would be for a period of 12 years unless it finds reason in a 
particular case to set some other initial term. Notwithstanding this 
approach, the Department recognizes the disruptive effect that 
regulatory uncertainty can have on transmission investment. Therefore, 
the Department does not intend to terminate any National Corridor 
designations while an accepted permit application in that National 
Corridor is pending at FERC, or, once FERC has granted a permit, during 
the period in which the approved facilities are being constructed. The 
Department will stipulate in any National Corridor designation order 
that the designation may be modified, rescinded, or renewed for cause 
at any time, after a period of public notice and comment and 
consideration of the comments.

VII. Technical Comments on the Congestion Study

    In this section, the Department summarizes and responds to 
technical comments it received on the Congestion Study that are 
relevant to today's draft National Corridor designations. Specifically, 
the Department first summarizes and responds to those comments on the 
data and methodology used in the Congestion Study that have general 
relevance to any National Corridor designation. Then, the Department 
summarizes and responds to comments on the Congestion Study that have 
particular relevance to the draft National Corridor designations in 
this notice. As mentioned above, today's notice does not address 
comments received on the Congestion Study that relate solely to areas 
outside the two Critical Congestion Areas or that relate to the conduct 
of future congestion studies.

A. Comments of General Relevance

    Several commenters commended DOE for its efforts in completing the 
first national electric transmission congestion study and advancing the 
discussion on transmission congestion. NARUC stated, ``The DOE's 
successful development of a base case electric load flow model in a 
single year for the entire Eastern Interconnection is a significant 
achievement.'' First Energy commented that ``DOE seems to have relied 
on appropriate information to support its conclusions in the Congestion 
Study. DOE seems to have made reasonable assumptions about the electric 
infrastructure that will be in use and seems to have relied upon 
reasonable modeling methods with respect to identifying potential 
future transmission constraints.''

[[Page 25852]]

    The Midwest ISO remarked:

    The classification of congested areas into Critical Congestion 
Areas, Congestion Areas of Concern, or Conditional Congestion Areas 
is an appropriate means to distinguish between varying 
characteristics of these congested areas * * *. Overall, the method 
employed to identify congested areas is an appropriate combination 
of available historical data, transmission studies by planning 
organizations, and simulation of future congestion.

    EEI applauded the Department for the timely completion of the 
Congestion Study, stating, ``In light of the strong emphasis on 
electric infrastructure made by the Congress in enacting EPAct, the 
congestion study identifies a broad range of critical geographic areas 
throughout the nation that face potentially serious challenges for 
ensuring reliable and cost-effective electricity delivery.''
    International Transmission Company stated that as a general matter, 
``the Congestion Study did a commendable job of identifying areas of 
the United States in which congestion represents an economic problem, 
i.e., where densely populated, economically significant regions of the 
country face limited access to economic sources of electricity as the 
result of transmission congestion.'' However, the Department also 
received comments expressing concern about several general aspects of 
the Congestion Study, as discussed below.
1. Data Sources
    Summary of Comments: ODEC stated that the Department should not 
rely solely on RTOs and ISOs for data, asserting that their processes 
are not totally open, collaborative and inclusive. Toll Brothers 
asserted that rather than conduct its own Congestion Study, the 
Department has relied too much on industry sources, such as PJM, 
Allegheny, and transmission owners who wheel power for low-cost 
providers into higher priced markets.
    DOE Response: The Department did not rely solely on data and 
information from any single source or category of sources. The 
Department contacted a wide range of stakeholders for publicly 
available and current data. Through the notice of inquiry and technical 
conference the Department opened the call for data to all entities. 
Furthermore, the Department performed its own review of the information 
provided.
2. Congestion Metrics
    Summary of Comments: The Department received a number of comments 
on the use of congestion rents to measure congestion. ODEC supported 
the use of congestion rents as a congestion metric. However, several 
commenters complained that congestion rent can significantly overstate 
the economic effect of congestion because the figure does not account 
for hedging. NYISO argued that the proper metric to measure congestion 
is potential production cost savings not gross congestion rent, which 
``is merely an accounting protocol that does not recognize the offsets 
that exist under various hedging instruments and grandfathered contract 
arrangements.'' Similarly, NYPSC argued that gross congestion rent is a 
misleading metric that significantly overstates the cost of congestion 
by failing to factor in the return of some congestion revenues to 
loads. NYPSC argued that the Department should measure congestion by 
analyzing the additional cost of local generation required to serve 
customers in a load pocket.\44\ Toll Brothers argued that under FPA 
section 216(a), the Department may only consider economic factors after 
the Department has demonstrated that congestion exists, and the 
demonstration of the existence of congestion must be based on an 
analysis of the transmission system's physical capability of meeting 
the demand for electricity. According to Toll Brothers, if demand can 
be met, then there is no congestion, regardless of the relative price 
of the power needed to meet that demand.
---------------------------------------------------------------------------

    \44\ See also comments of PSEG.
---------------------------------------------------------------------------

    Other commenters argued that congestion rent has limited relevance 
outside of organized markets, and thus the Congestion Study 
significantly underestimated congestion and constraints in the areas of 
the country without such markets. Several commenters from the 
Southeast, for example the Public Works Commission of the City of 
Fayetteville, North Carolina, expressed concern that the Study had 
missed significant congestion problems and urged the Department to 
consider other types of information, such as lack of long-term firm 
transmission capacity. NRECA and NEC also argued for use of alternative 
metrics, including available transfer capacity. Western commenters, 
including NWPUD and SCL, noted that the need to look at alternative 
metrics, such as withdrawn or declined transmission requests, limits on 
scheduling rights, or real-time schedule curtailments, is particularly 
important in the Northwest, given that power there is obtained solely 
through bilateral markets. NWPUD and SCL assert that modeling 
congestion using production cost simulations may be misleading since 
most of the Western Interconnection uses contract path methods for 
acquiring, reserving, and scheduling transmission service. Duke noted 
that because areas without formal markets are generally served by 
vertically integrated utilities, the type of LMP-based congestion data 
typically provided by RTOs and ISOs are often not available. PSEG 
asserted that the Congestion Study is biased towards regions that use 
LMP because the Study is only capable of measuring congestion in LMP-
type markets. PSEG concluded that this inherent bias is not properly 
recognized or addressed in the Study, as is evidenced by the fact that 
the Congestion Study contains no significant congestion findings for 
areas without organized markets. NCEP asserted that lack of data for 
the Southeast and parts of the West, where organized markets do not 
exist, presents a significant gap in the knowledge available to the 
Department to determine the need for National Corridors in those 
regions. NCEP further asserted that the fact that data from these areas 
are not available does not mean that congestion does not exist.
    DOE Response: The Department recognizes that the Congestion Study's 
use of congestion rent as a metric has led to concern and confusion. 
The Department did not intend to suggest that congestion rents 
represent the actual monetary cost that consumers pay specifically as a 
result of congestion, or that congestion rents measure the benefits of 
relieving the congestion. The Department recognizes that outside of the 
organized markets that use LMP-based congestion management, 
transmission customers do not pay congestion rents per se. The 
Department further recognizes that within the organized markets that 
use LMP-based congestion management, financial transmission rights can 
provide load-serving entities with significant protection from the 
payment of congestion rents, although as the system becomes more 
constrained the availability of those rights may not be able to protect 
consumers from the full effects of congestion. Also, the Department 
recognizes that congestion rents are not the same as the cost of 
redispatch, a cost that some combination of transmission customers 
actually pay specifically as a result of congestion.
    Nevertheless, congestion rents are an indicator of the existence of 
congestion, since if there is no congestion, there are no rents, and 
whenever there is congestion, congestion rents can be calculated. The 
Congestion Study modeled congestion rents for areas with

[[Page 25853]]

organized markets in the same way it modeled congestion rents for areas 
without organized markets. For both types of areas, the models 
determined congestion rent for a particular constraint by calculating a 
shadow price for that constraint and multiplying the shadow price by 
the megawatt (MW) flow on the constraint. For each constraint, models 
compute hourly shadow prices as marginal costs of redispatch required 
to relieve congestion (if any) on that constraint in each hour, taking 
into account the differences in production costs among the appropriate 
generators. Nevertheless, in most organized markets, RTOs and ISOs 
calculate LMPs and make them publicly available; whereas in areas 
without organized markets, there is less transparency with regard to 
the actual marginal cost of redispatch. Thus, the Congestion Study's 
modeling of congestion rents for areas with organized markets is easier 
to validate than for areas without organized markets.
    With regard to the recommendation that the Department use changes 
in bid production cost instead of congestion rent to measure 
congestion, the Department concludes that use of bid production cost in 
the context of FPA section 216(a) congestion studies is not required. 
Bid production cost analysis compares a base case against different 
scenarios in which action is taken to alleviate congestion or 
constraints. By contrast, the Department is specifically not seeking to 
assess the benefits of different fixes to a congestion or constraint 
problem. Rather, the Department is simply identifying congestion or 
constraint problems, and the geographic areas in which these problems 
exist.
    While the Department believes that congestion rent, when correctly 
understood, is a useful indicator of the persistence and pervasiveness 
of congestion within a transmission system, congestion rent was only 
one of the metrics used in the Congestion Study. Further, as discussed 
in Section II.A above, while FPA section 216(a) requires a National 
Corridor designation to be based on the existence of constraints or 
congestion that adversely affects consumers, once the Department has 
demonstrated the existence of persistent congestion, no additional 
demonstration, let alone monetization, of the adverse effects on 
consumers is required. Thus, in the draft National Corridor 
designations detailed below, the Department relies on historical 
binding hours and a range of other indicators to support its conclusion 
that the areas are experiencing persistent congestion and that National 
Corridor designation is appropriate. For the purposes of future 
congestion studies, the Department is considering whether other 
metrics, in addition to or instead of congestion rents, are 
appropriate, particularly in those areas without organized markets.
3. Direct Current Versus Alternating Current Modeling
    Summary of comments: Some commenters, including NARUC, NYPSC, and 
PAPUC, asserted that the direct current (DC) model used by the 
Department for the Eastern Interconnection is oversimplified, does not 
adequately reflect the system, may understate congestion, cannot take 
into account voltage-related constraints, and therefore will not 
include any congestion caused by such constraints. According to these 
commenters, the impact of voltage-related constraints can be 
significant and should not be overlooked in the Congestion Study. These 
commenters argued that alternating current (AC) modeling (including 
thermal, voltage, and stability analyses under both normal and 
contingency conditions) should be used on a sub-regional basis to 
provide more detailed analysis of the areas identified as problematic 
through the DC modeling.
    DOE response: For the Eastern Interconnection, modeling was 
performed using GE-MAPS, a commercially available simulation tool. GE-
MAPS uses a DC representation of the load flow, which does not model 
reactive power requirements directly. Use of indirect approaches to 
account for reactive power is not unusual in electric analysis. For 
example, many well-known operational constraints in PJM, such as the 
Eastern, Central, and Western interfaces are proxies for reactive power 
limitations downstream. PJM specifies the MW limit (real power) to 
ensure that the capacity of local units to provide sufficient reactive 
power is not exceeded. It is not possible to conduct a full-scale AC 
power flow modeling exercise (with forward-looking unit commitment and 
hourly chronological dispatch) of the Eastern Interconnection using 
today's computational resources. While sub-regional analyses using AC 
modeling may be feasible, the Department does not believe that such 
analyses are necessary, given the purpose of the Congestion Study and 
the effect of any National Corridor designation, as discussed in 
Section I.A above.
4. Marginal Versus Average Losses
    Summary of comments: Commenters, including NJBPU, asserted that 
using average costs for transmission losses (instead of marginal costs) 
for the entire Eastern Interconnection understates the congestion in 
certain areas. Specifically commenters pointed out that the PJM plan to 
adopt marginal losses as of June 2007 is not included and although the 
Florida Reliability Coordination Council sub-region uses marginal 
losses, the Congestion Study modeled that sub-region using average 
losses. In the West, the Western Electricity Coordinating Council 
(WECC) noted that its results showed that improvements are needed to 
address this issue.
    DOE response: It is true that the Congestion Study modeled average 
losses for all regions. Although in some regions transmission losses 
are charged based on average cost and in others they are charged based 
on marginal cost, the models used in the Congestion Study require the 
use of either average or marginal losses for the entire model 
footprint. In future congestion studies, it may be more appropriate to 
model marginal losses in all regions.
5. Aggregation of Nodes
    Summary of comments: Some commenters expressed concern that the 
Congestion Study's aggregation of the Eastern Interconnection's load 
and generation pockets into 253 nodes and analysis of the load flow 
patterns among them resulted in many local areas of congestion and 
localized transmission constraints not being identified or described. 
For example, Northern Indiana Public Service Company pointed out that 
not all congestion is on major transmission facilities and claims that 
flow on some major lines is limited by the potential of contingency 
overloads on secondary transmission lines contained within a node. 
Similarly, First Energy and SCL noted that the level of analysis does 
not present enough detail on their respective areas. ODEC claimed that 
the Department's node analysis should be made in conjunction with a 
more localized analysis of all nodes within a congested area. 
Otherwise, ODEC asserted that an aggregated approach is likely to 
result in congestion being understated because the implicit netting of 
adjacent buses may inadvertently offset one against another.
    DOE response: In the modeling of the Eastern Interconnection for 
the Congestion Study, congestion was calculated at all constraints 
known to have been previously identified for monitoring by regional 
reliability

[[Page 25854]]

councils, RTOs, ISOs, and transmission owners. This calculation was 
wholly separate from the aggregation of the Interconnection into the 
253 nodes, which was done later in the analytic process to identify 
broad patterns of power flows from sources to sinks and determine the 
principal transmission elements involved. Accordingly, all congestion 
at the identified locations was estimated and reported in the model's 
outputs. Any failure to flag real-world congestion through this 
approach should be traceable to either of two problems, or some 
combination of them: (1) a failure to identify a real-world constraint 
as appropriate for monitoring in the model; or (2) a disparity between 
the modeled results and real-world experience. The Department intends 
to explore this issue further in future congestion studies, and looks 
forward to working on it with interested entities.
6. Fuel Prices
    Summary of comments: Commenters such as ODEC, ConEd, and Toll 
Brothers cautioned the Department against reliance on fuel scenarios. 
ODEC argued that evaluating different fuel price scenarios implies that 
fuel price is a driver in transmission congestion, when in fact it is 
the lack of sufficient transmission capacity that is the principal 
driver of transmission congestion. ConEd and PEC stated that the 
Department's assumption of an increasing price difference between coal-
fired generation and natural-gas- and oil-fired generation is 
unrealistic. EPSA cautioned that the extreme weather conditions such as 
were experienced during 2005 and the related natural gas price impacts 
associated with hurricanes Katrina and Rita should not inflate 
assessments of the duration of congestion over the lifetime of a 
transmission asset.
    DOE response: The Department did not intend to suggest in the 
Congestion Study that fuel price is the only factor creating 
congestion. In fact, congestion can exist in the complete absence of 
fuel price differences when generation capacity in a load pocket 
combined with transmission capacity to import energy is insufficient to 
meet demand. Further, in the absence of such a reliability problem, 
fuel price differences between locations on the grid will not result in 
congestion if transmission capacity is adequate to accommodate the 
demand for the cheaper power. The modeling performed in the Congestion 
Study resulted in similar locational patterns of congestion under each 
fuel price scenario, but with different congestion costs. The cost 
differences reflect the marginal generation costs, but the locations 
reflect the underlying transmission system topology. Moreover, the 
constraints that were identified generally are well-known constraints 
that have been long observed.
    Contrary to the assertion of ConEd and PEC, natural gas and oil 
prices were assumed to drop in the base case of the Congestion Study 
over the time period of 2006 through 2015, thus narrowing the price 
spread between coal-fired generation and natural-gas- and oil-fired 
generation. What is more important is that the analysis considered 
three distinct fuel price scenarios which offer dramatically different 
relationships between the prices of natural gas and coal. At the same 
time, transmission problems identified in the Congestion Study as 
persistent are those that appear under all fuel price scenarios.
7. Seams
    Summary of comments: ConEd expressed concern that the Congestion 
Study did not effectively take into account congestion caused by seams. 
ConEd asserted that, given the differences in market design between PJM 
and NYISO, market inefficiencies may produce congestion costs while in 
fact the lines are underutilized.
    DOE response: The Department acknowledges that seams are an 
important issue in the analysis of congestion.\45\ In the modeling 
conducted for the Eastern Interconnection in the Congestion Study, 
seams were reflected by means of the hurdle rates used for commitment 
and dispatch and the use of a ``commitment by pool'' modeling logic. It 
may be appropriate in future congestion studies to consider additional 
analysis of the effects that seams are having on congestion. However, 
the Department does not believe that the congestion that has led to 
today's draft National Corridors is primarily a result of interregional 
differences in market design.
---------------------------------------------------------------------------

    \45\ Seams are interregional differences in market design that 
result in market inefficiencies.
---------------------------------------------------------------------------

8. Line Outages
    Summary of comments: NWPUD and SCL question whether the Congestion 
Study adequately accounted for lengthy maintenance outages on 
transmission lines in the Western Interconnection.
    DOE response: In the Western Interconnection, the transmission 
system is assumed intact when rating studies are conducted to determine 
the maximum capability, or Total Transfer Capability (TTC) of a path. 
In addition, seasonal Operating Transfer Capability (OTC) ratings are 
conducted for critical paths in the Interconnection. These studies 
assume system conditions expected to occur in the near term, such as 
long-term transmission or resource outages. The western studies used in 
the Congestion Study did de-rate some paths below their maximum path 
capability to account for the fact that operationally, they are often 
held below the maximum limits. The Pacific AC and DC Interties and the 
tie between Alberta and British Columbia are three examples that were 
de-rated in the studies to account for issues like those raised by SCL 
and Northern Wasco. The Department will consider additional approaches 
to handling the effects of line outages in future congestion studies.

B. Comments Specific to the Mid-Atlantic Critical Congestion Area

Summary of Comments
    PEC noted differences between the load data used in the Congestion 
Study and the PJM Load Forecast Report 2006 and suggested that a 
detailed review and validation of the data is warranted. PEC, ConEd, 
and LIPA argued that the Department should revise the Congestion Study 
to reflect the data in NYISO's final 2006 Comprehensive Reliability 
Plan.
DOE Response
    When preparing the Congestion Study, the Department made every 
effort to include the most current and best available data. The 
specific reports cited above were not available at that time, and the 
Department therefore relied on 2005 data. Nevertheless, the Department 
has reviewed the information cited by commenters and concludes that it 
does not alter the analysis set forth below concerning the draft 
designation of National Corridors.
Summary of Comments
    National Grid suggested that the geographic area from Albany and 
Utica to New York City should be included within the Mid-Atlantic 
Critical Congestion Area.
DOE Response
    The Department agrees that it is appropriate to include this area 
within the Mid-Atlantic Critical Congestion Area, and as discussed 
below, the Department has included this area in the draft Mid-Atlantic 
Area National Corridor.
Summary of Comments
    PSEG believed that the Mid-Atlantic Critical Congestion Area 
identified by the Congestion Study is too broad. PSEG

[[Page 25855]]

claimed that the Department's broad designation essentially means that 
each region and each city within this area suffers from the same type 
and degree of congestion problem. Given the unique transmission 
topology of the sub-regions, PSEG claimed that it is unlikely that each 
sub-region is experiencing the same degree of congestion.
DOE Response
    DOE agrees that this broad area is not homogeneous and that 
congestion is not uniformly distributed. Nevertheless, as the entire 
region is downstream of significant constraints, congestion occurs to 
one degree or another across the entire area.
Summary of Comments
    PSEG noted that the Congestion Study says (p. 41) that transmission 
congestion problems are worsening in southeastern New York, in New York 
State as a whole, in New Jersey, and in the Delaware River Path. PSEG 
added that the Study does not provide data applicable to PJM to support 
these assertions. Further, PSEG cited PJM's 2005 State of the Market 
Report as showing that although total gross congestion was rising in 
the PJM footprint over the 6-year period between 1999 and 2005, this 
was occurring as the geographic size of PJM's market was growing, and 
the level of gross congestion, as a percentage of total PJM billings, 
remained relatively consistent at about 8 percent (plus or minus 2 
percent) per year.
DOE Response
    DOE believes that the information it cites on pp. 42-43 of the 
Congestion Study strongly supports the assertions made on p. 41. 
Concerning congestion and PJM's expansion, DOE notes that from 1999 
through 2005, PJM was expanding into relatively uncongested areas, 
while congestion was rising sharply in PJM's original, ``classic,'' 
footprint. Thus, although total congestion for PJM's footprint remained 
relatively consistent as a percentage of total PJM billing is true, 
that is not particularly relevant. The rapid increase in congestion in 
the eastern portion of PJM's footprint can be demonstrated in two ways. 
One way is to compare total annual congestion costs in the PJM 
footprint with total transmission revenue requirements (adjusting the 
latter figure as appropriate to take PJM's broadening footprint into 
account). As shown in Table VII-1, congestion costs rose from 7.4 
percent of transmission revenue requirements in 1999 to 107.9 percent 
of these requirements in 2005. These figures suggest that the demands 
on the transmission system in PJM's footprint were increasingly 
intensive over this period.
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[[Page 25856]]

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    Another way to see that congestion was growing rapidly in the 
eastern portion of PJM's footprint during this period is to compare 
historical changes in LMPs for the utilities in ``classic PJM.'' As 
shown in Figure VII-1, the LMPs for the eastern utilities in ``classic 
PJM'' were generally increasing between 2002 and 2005 or 2006, as 
compared to the LMP for Penelec, which is in ``classic PJM'' but 
located west of most of PJM's major constraints.

[[Page 25857]]

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[[Page 25858]]


Summary of Comments
    NYPSC and NYISO expressed concern about the accuracy of the data 
underlying the Congestion Study, noting that the modeling results 
indicated, contrary to NYISO's 2005 State of the Market Report, that 
the amount of congestion in upstate New York is relatively high 
compared to the amount of congestion in southeastern New York.
DOE Response
    NYISO market data on congestion are not directly comparable to the 
Congestion Study's simulation results for several reasons. First, 
NYISO's 2005 State of the Market Report relies on real-time congestion 
data. The Congestion Study simulations reflect forward-looking unit 
commitment in response to predictable loads and therefore should be 
compared to day-ahead data.\46\ Analysis of historical day-ahead LBMP 
prices indicates that price differences in upstate New York (Zone A 
[West] to Zone G [Hudson Valley], and Zone G to Zone I [Dunwoodie]) are 
becoming increasingly more significant compared to price differentials 
in downstate New York (Zone I to Zone J [New York City]) as shown in 
Table VII-2. This indicates that transmission limitations of the 
upstate system in NYISO are becoming at least as influential as 
downstate limitations.
---------------------------------------------------------------------------

    \46\ NYISO operates both a day-ahead LMP energy market and a 
real-time LMP energy market. NYISO uses the terminology ``location-
based marginal prices'' or LBMP instead of LMP.
[GRAPHIC] [TIFF OMITTED] TN07MY07.003

    Second, the Congestion Study simulations reflect ``planning'' 
interface definitions and limits published by NYISO whereas NYISO's 
2005 State of the Market Report is based on operational interface 
limits. Table VII-3 presents a comparison of planning limits and 
operating limits. For the upstate system, the planning limits are more 
stringent than the operating limits. For example, the planning limit 
reported by NYISO for Moses South used in the Congestion Study ranges 
between 1300 MW and 1700 MW. However, the operating limit for that 
interface used in NYISO operations ranges between 2550 MW and 2875 MW. 
On the other hand, for the downstate system, the planning limits are 
less stringent than the operating limits. For example, the planning 
limit reported by NYISO for UPNY-ConEd used in the Congestion Study 
ranges between 4850 MW and 5750 MW, whereas the operating limit for 
that interface used in NYISO operations ranges between 3300 MW and 3950 
MW. The combination of looser upstate operational limits and tighter 
downstate operational limits compared with the planning limits employed 
in the Congestion Study results in a shift in congestion in the 
Congestion Study's modeling from downstate to upstate New York.
[GRAPHIC] [TIFF OMITTED] TN07MY07.004


[[Page 25859]]


    Third, NYISO monitors only open interfaces (except for Total East). 
The Congestion Study simulations followed NYISO planning documents and 
modeled both open and closed interfaces.
    Finally, historical congestion data referenced in NYISO's 2005 
State of the Market Report do not reflect 1000 MW of new generation 
capacity added in Zone J in 2006. The Congestion Study simulations 
reflect these and other future capacity additions.
Summary of Comments
    NYPSC claimed that Appendix I and Section 12B of the memorandum 
entitled ``GE-MAPS Input Assumptions: Eastern Interconnect'' (GE-MAPS 
Assumptions Memo) appear to misrepresent NYISO's 118 percent installed 
capacity (ICAP) requirement by applying that requirement only to 
upstate load instead of to State-wide load.
DOE Response
    This is a reporting error and the capacity balance for NYISO as a 
whole provided in the referenced memorandum is incorrect. Nonetheless, 
ICAP requirements do not explicitly affect system simulations; they 
affect the timing of the need for new capacity additions. The NYISO 
system as modeled in the Congestion System is balanced. Thus, this 
reporting error did not affect the analysis and findings of the 
Congestion Study.
Summary of Comments
    NYPSC commented that Section 7 (Capacity Additions and Retirements) 
of the GE-MAPS Assumptions Memo employs a $65/kW-year cost for gas 
turbines, which appears to be very low.

DOE Response

    The Department agrees that this estimate seems low, especially in 
light of a recent increase in costs. However, $65/kW-yr was used as a 
generic carrying charge for new peaking capacity. With $10/kW-yr fixed 
operating and maintenance cost, this would make the cost of new entry 
equal to $75/kW-yr (in real 2005 dollars, or $81.2/kW-yr in 2008 
dollars). This is only moderately lower than the cost of new entry used 
in the NYISO ICAP manual for the New York Control Area demand curve for 
the 2007/2008 capability period ($87.6/kW-yr). Thus, the Department 
does not believe that increasing the cost of new entry would alter the 
conclusions in the Congestion Study.
Summary of Comments
    NYPSC commented that Section 10 (External Region Supply) in the GE-
MAPS Assumptions Memo ``scheduled'' flows from Hydro Quebec to New 
York, New England, and Ontario on 12 months of historical data that 
might not be typical.
DOE Response
    The Department will work with NYPSC to develop more representative 
data for use in future congestion studies. However, the Department does 
not believe that changing these data would alter the conclusions in the 
Congestion Study.
Summary of Comments
    NYPSC commented that Section 12C (Market Model Assumptions--ISO 
Boundaries) of the GE-MAPS Assumptions Memo cites high hurdle rates 
between NYISO and ISO New England (ISO-NE) \47\ even though wheeling 
charges between the two areas were eliminated.
---------------------------------------------------------------------------

    \47\ ISO-NE is the RTO serving Maine, Vermont, New Hampshire, 
Massachusetts, Connecticut, and Rhode Island.
---------------------------------------------------------------------------

DOE Response
    The Department recognizes the absence of wheeling charges between 
NYISO and ISO-NE. The Congestion Study used hurdle rates to reflect 
other inefficiencies in conducting transactions across market 
boundaries resulting from differences in market design.
Summary of Comments
    NYPSC commented that Section 12D (Market Model Assumptions--
Operating Reserves) of the GE-MAPS Assumptions Memo misstates how New 
York determines operating reserves.
DOE Response
    The Congestion Study based operating reserve assumptions on the 
actual requirements instituted by each reliability region.
Summary of Comments
    NJBPU argued that the Congestion Study fails to take into account 
reliability upgrades that PJM has already required in its existing 
Regional Transmission Expansion Program (RTEP) process and new upgrades 
continually being formulated as that process progresses. According to 
PSEG and PEC, the Department did not take sufficient account of PJM's 
proposed Reliability Pricing Model (RPM) or the effects of mandatory 
reliability-driven transmission reinforcements and upgrades, since such 
upgrades like the Neptune Project would reduce congestion. PSEG 
asserted that the Congestion Study's claim that ``addition of * * * 
generation capacity * * * will create additional congestion unless new 
transmission is also developed'' is erroneous and presumes the siting 
of remote generation that is far from load and located on the wrong 
side of the constraint. Additionally, PEC contended that RPM may spur 
the addition of new generation close to load centers that is not 
accounted for in the Congestion Study.
DOE Response
    The model included planned capacity that is scheduled to come on 
line over the next several years. In addition, the model assumes that 
when additional capacity is needed, new capacity will be added at 
locations that have high locational prices, which are usually close to 
load. This tends to reduce modeled congestion. The PJM RPM process, if 
and when it is implemented, should have a similar result.\48\ All 
transmission projects that are far enough along in the siting and 
construction process to be considered firm in the load flow, including 
the Neptune Project and any such projects approved in the RTEP process, 
are included.
---------------------------------------------------------------------------

    \48\ FERC conditionally approved a settlement on RPM. 117 FERC ] 
61, 331 (2006), reh'g pending. Since the issuance of that order, 
some parties that had provisionally agreed to support RPM have 
withdrawn their support.
---------------------------------------------------------------------------

    PEC questioned why the re-powering of the Potomac River and Benning 
plants is considered uneconomical.
DOE Response
    No assumptions were made in the Congestion Study with regard to 
these plants.
Summary of Comments
    Toll Brothers claimed that the Congestion Study fails to take into 
account two assumptions that will reduce the need for increased 
transmission capacity from west to east in the PJM footprint: (1) the 
likely retirement of some generation facilities between the Midwest and 
the District of Columbia; and (2) increased restrictions on traditional 
air pollution emissions from coal-fired plants and the future 
regulation of greenhouse gas emissions, both of which would increase 
the cost of electricity generated by such plants. NYPSC asked if 
modeling accounted for compliance with the Clean Air Interstate 
Rule.\49\
---------------------------------------------------------------------------

    \49\ 70 FR 25,162 (May 12, 2005) (Environmental Protection 
Agency regulation of sulfur dioxide and nitrogen oxides).

---------------------------------------------------------------------------

[[Page 25860]]

DOE Response
    The Congestion Study analysis included only planned retirements. 
Any attempt to forecast other retirements would be inappropriately 
speculative. Similarly, in the Eastern analysis, each unit in the model 
is assumed to comply with all promulgated air regulations, including 
the Clean Air Interstate Rule, and the Department did not speculate 
about potential future regulation.

C. Comments Specific to the Southern California Critical Congestion 
Area

Summary of Comments
    CPUC argued that the Congestion Study exaggerated the significance 
of congestion into southern California, relying heavily on simulations 
instead of historical data and on information from project proponents. 
CPUC noted that one of the studies provided to DOE concluded, based on 
physical flow data from 1999 through 2005, that Arizona-to-southern 
California was not among the areas found to be experiencing heavy path 
usage. CPUC noted that the year 2008 simulations cited in the 
Congestion Study as indicating high economic significance of congestion 
from Arizona into southern Nevada and southern California actually show 
that the highest simulated congestion costs occur on lines from Arizona 
into southern Nevada.
DOE Response
    The Department's identification of southern California as a 
Critical Congestion Area was based on a combination of factors, 
including the existence of historical congestion, projections that this 
historical congestion will worsen in the absence of remedial measures, 
as well as the economic and strategic significance of southern 
California to the Nation as a whole. Thus, while other areas in the 
Western Interconnection may have experienced higher levels of 
historical congestion, the Department believes that the totality of 
circumstances in southern California warrant its identification as a 
Critical Congestion Area and, as explained further in Section IX below, 
the draft designation of a National Corridor.

VIII. Draft Mid-Atlantic Area National Corridor

A. Alternatives and Recommendations

    In the Congestion Study, the Department solicited alternatives and 
recommendations for National Corridor designations. The Department 
received a number of such alternatives and recommendations for the Mid-
Atlantic Critical Congestion Area. Some commenters, including EEI and 
Exelon Corporation, recommended National Corridor designations in 
eastern New York and eastern PJM, citing the need to remedy the 
existing and growing congestion problems in the Mid-Atlantic Critical 
Congestion Area, but they did not specify specific boundaries.\50\
---------------------------------------------------------------------------

    \50\ See also comments of National Grid, Potomac Holdings, Inc., 
and HQ Energy Services (US).
---------------------------------------------------------------------------

    Based on its regional transmission planning studies, PJM 
recommended three specific National Corridors in the Mid-Atlantic area. 
According to PJM, a National Corridor is needed in a contiguous area of 
southeastern Pennsylvania, northern West Virginia, western Maryland, 
and northern Virginia, because in the absence of construction of a new 
high-voltage transmission circuit within this area, PJM and North 
American Electric Reliability Corporation (NERC) \51\ reliability 
planning criteria will be violated by 2011. The other two National 
Corridors recommended by PJM are: (1) a contiguous area of eastern 
Ohio, much of Pennsylvania, and part of northern New Jersey; and (2) a 
contiguous area of eastern Maryland, all of Delaware, and parts of 
eastern Pennsylvania and southern New Jersey. These two National 
Corridors are needed, according to PJM, to ensure that planning and 
development of required transmission solutions can be completed in time 
to prevent violations of PJM and NERC reliability planning criteria 
that would otherwise occur by 2014.
---------------------------------------------------------------------------

    \51\ NERC is the Electric Reliability Organization responsible 
for proposing and enforcing reliability standards for the bulk-power 
system throughout the United States subject to FERC approval under 
FPA section 215.
---------------------------------------------------------------------------

    AEP recommended a National Corridor to encompass the general 
anticipated route of a transmission line it is proposing to build 
between West Virginia and Maryland. Allegheny recommended a National 
Corridor to encompass the general anticipated route of a transmission 
line that it and Dominion Virginia Power (Dominion) are proposing to 
build between southwestern Pennsylvania and northern Virginia.
    The Governor of the State of West Virginia commented that 
development of transmission to supply regions north and east of West 
Virginia with low-priced clean-coal generation and renewable generation 
from within, as well as south and west of, his State would result in 
economic and reliability benefits for all involved regions. Thus, 
noting the time it can take to site a transmission line and the urgency 
of addressing the transmission problems, the Governor recommended 
designation of a National Corridor that would encompass the AEP project 
as well as the Allegheny-Dominion project.
    New York Regional Interconnect Inc. (NYRI) recommended a National 
Corridor to encompass the general anticipated route of a transmission 
line it has proposed to build from Marcy, New York to New Windsor, New 
York.
    The City of New York argued that growing energy demand, national 
security concerns, the unique nature of electricity dependence in the 
Nation's financial and commercial capital, and fuel diversity and 
stability factors all warrant the designation of one or more National 
Corridors for New York City. Specifically, the City of New York 
recommended a National Corridor between the New Jersey segment of PJM 
and New York City.\52\ The City of New York also recommended a National 
Corridor north and northwest of New York City within New York State. 
The City of New York further cited a recently enacted New York State 
statute that would deny the use of eminent domain powers to NYRI even 
if its proposed transmission project were to obtain a State permit as 
illustrative of the type of parochial concerns that may impede needed 
energy infrastructure improvements and that FPA section 216 was 
designed to address.
---------------------------------------------------------------------------

    \52\ See also comments of U.S. Rep. Hinchey (Recommending 
National Corridor between PJM and New York City as an alternative to 
National Corridor recommended by NYRI).
---------------------------------------------------------------------------

    NYISO commented that the Congestion Study correctly included 
metropolitan New York within the Critical Congestion Area, and 
correctly identified the general location and direction of congestion 
in New York. NYISO explained that it conducts a Comprehensive 
Reliability Planning Process to assess reliability needs and that while 
its analysis indicates a reliability need for additional resources in 
southeast New York starting in 2008, sufficient market-based generation 
solutions have been submitted so that reliability criteria will be met 
through 2014. Thus, according to NYISO there is no need for a National 
Corridor from a reliability standpoint. However, NYISO also noted that 
``New York's comprehensive and effective generation siting law expired 
in December 2002 and has not been re-enacted.'' NYISO further noted 
that while it provides up-to-date data to assist stakeholders in 
evaluating investments to address the economic effects of congestion, 
``by design, the NYISO leaves the decision making on economic solutions 
for the Market Participants.''

[[Page 25861]]

    Numerous commenters recommended against one or more National 
Corridor designations for the Mid-Atlantic Critical Congestion Area. 
The Governor of the Commonwealth of Virginia commented that no National 
Corridor designations should be made before there had been adequate 
consultation with States.\53\ PAPUC commented that while the 
preliminary data show that there is chronic congestion in some portions 
of the Mid-Atlantic region that deserves close attention by Federal and 
State regulators, additional analysis in consultation with States is 
needed before any National Corridor designation is made.\54\ NYPSC and 
NJBPU opposed National Corridor designations, raising concerns about 
the data and methodology used in the Congestion Study and arguing that 
further analysis was needed.\55\
---------------------------------------------------------------------------

    \53\See DOE response, Section IV.B. above.
    \54\See DOE response, Section II.A, II.D, and IV.A above.
    \55\See DOE response, Sections II.B, II.D, IV.A, VII.A, and 
VII.B above.
---------------------------------------------------------------------------

    Many commenters recommended against designation of the National 
Corridor proposed by Allegheny,\56\ and many commenters recommended 
against designation of the National Corridor proposed by NYRI.\57\ 
These commenters raised concerns about the environmental and landowner 
effects of the particular projects proposed by Allegheny and Dominion 
and by NYRI and argued for consideration of non-transmission solutions 
to congestion.\58\
---------------------------------------------------------------------------

    \56\See, e.g., comments of Citizens for Fauquier County, Clarke 
County Board of Supervisors, Fauquier County Architectural Review 
Board, Fauquier County Board of Supervisors, Fauquier County 
Historical Society, Foundation of the State Arboretum, Goose Creek 
Association, Historic Long Branch, Route 50 Corridor Coalition, 
Shenandoah Valley Network, Unison Preservation Society, Valley 
Conservation Council, Sierra Club, Virginia Local and Regional 
Organizations, Virginia Outdoors Federation, U.S. Rep. Wolf, VA Sen. 
Herring, Toll Brothers, and many individuals.
    \57\See, e.g., comments of ConEd, U.S. Rep. Hinchey, NY Sen. 
Bonacic, Delaware River Commenters, Upper Delaware Council, CARI, 
and many individuals.
    \58\See DOE response, Sections II.B, III, and V above.
---------------------------------------------------------------------------

    After reviewing the alternatives and recommendations provided, the 
Department believes that designation of a National Corridor for the 
Mid-Atlantic Critical Congestion Area may be warranted. In the 
following sections, the Department will detail its factual finding of 
the existence of constraints or congestion that adversely affects 
consumers in the Mid-Atlantic Critical Congestion Area and explain the 
considerations that it believes warrant designation of a National 
Corridor for this area. Finally, the Department will delineate and 
explain the specific boundaries of the draft National Corridor.

B. Finding of Constraints or Congestion That Adversely Affects 
Consumers

    The Congestion Study identified the Atlantic coastal area from 
metropolitan New York southward through northern Virginia as a Critical 
Congestion Area based on evidence of historical, persistent congestion 
caused by numerous well-known constraints that are projected to 
continue and worsen unless addressed through remedial measures. In 
conducting the Congestion Study, the Department identified these well-
known constraints based on a review of extant transmission studies and 
expansion plans available prior to the publication of the Study. These 
constraints are listed in Table VIII-1, in no particular order, and 
their approximate locations are shown in Figures VIII-1 and VIII-2.
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[[Page 25862]]


[GRAPHIC] [TIFF OMITTED] TN07MY07.006


[[Page 25863]]


[GRAPHIC] [TIFF OMITTED] TN07MY07.007

    Many of these constraints were binding, and thus produced 
congestion in years 2004, 2005, and 2006. (See Tables VIII-2 and VIII-3 
for summaries of hourly data reported by PJM and NYISO.) Further, from 
2004 through

[[Page 25864]]

2005 in the PJM footprint, a total of 19 constraints were binding more 
than 5 percent of the time (438 hours/year) in the day-ahead market, 
and six constraints were binding more than 5 percent of the time in the 
real-time market.\59\ (See Table VIII-4.) In New York over the same 
period, 18 constraints were binding in the day-ahead market more than 5 
percent of the time, and 62 constraints were binding more than 5 
percent of the time in the real-time market. (See Table VIII-5.)
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    \59\ Like NYISO, PFM operates both a day-ahead LMP-based energy 
market and a real-time LMP-based energy market.

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[[Page 25865]]

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[[Page 25866]]


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[[Page 25867]]


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[[Page 25868]]


[GRAPHIC] [TIFF OMITTED] TN07MY07.011

    The modeling directed by DOE for the Congestion Study projected 
that some of these constraints will continue to be problems in 2008, 
along with other additional constraints. DOE found that looking across 
the several Congestion Study scenarios, 12 constraints were of 
particular interest in the PJM footprint and 21 in New York. These 
constraints are listed in Tables VIII-6 and VIII-7 respectively. DOE's 
analysis indicates that five of the ten most problematic constraints in 
the Eastern Interconnection are in New York, and the other five are in 
the PJM footprint.

[[Page 25869]]

[GRAPHIC] [TIFF OMITTED] TN07MY07.012


[[Page 25870]]


[GRAPHIC] [TIFF OMITTED] TN07MY07.013

    The existence of constraints causing persistent congestion is 
further evidenced by regional differences in generation capacity 
factors within the PJM and NYISO footprints. In a regional-scale 
electricity market, generators producing electricity at lower costs 
will typically be used at higher capacity factors than generators with 
higher production costs, except when such efficient use of resources is 
not feasible due to transmission limitations and the need to operate 
some generation capacity close to load centers to ensure voltage 
stability in those areas.\60\ Accordingly, the Department undertook an 
analysis to identify areas within or near the PJM footprint and New 
York State with underutilized lower cost generation, and to identify 
the constraints that limit flows of lower-priced electricity from 
generation-rich areas to generation-short areas with higher prices.
---------------------------------------------------------------------------

    \60\ Regulations governing the mix of generation supplied by 
load-serving entities to consumers, such as State renewable 
portfolio standards, could also affect the capacity factors for 
higher cost generation, but do not appear relevant here.
---------------------------------------------------------------------------

    PJM data for 2004, 2005, and 2006 show that the utilization rate 
(or capacity factor) for large generators (>200MW) in the $30-40/MWh 
cost category in the western portion of PJM's footprint was 63, 61, and 
67 percent on average respectively (Table VIII-8); DOE projections show 
a slightly higher figure for 2008 (also Table VIII-8). By comparison, 
the average capacity factor for generation in the same cost class in 
the eastern portion of PJM's footprint was 74, 79, and 77 percent in 
2004, 2005, and 2006 respectively and is projected by DOE at over 79 
percent for 2008. (See Table VIII-9.) In DOE's projections for 2008, 
similar differentials in capacity factor are seen between the western 
and eastern portions of PJM's footprint for higher cost groups of 
generators (i.e., $40-50/MWh, $50-60/MWh, $60-80/MWh, and $80-90/MWh). 
The western portion of PJM's footprint has no operating units above 
$100/MWh; the eastern portion does, and they are used when needed. (See 
Figure VIII-3.)
BILLING CODE 6450-01-P

[[Page 25871]]

[GRAPHIC] [TIFF OMITTED] TN07MY07.014

[GRAPHIC] [TIFF OMITTED] TN07MY07.015


[[Page 25872]]


[GRAPHIC] [TIFF OMITTED] TN07MY07.016

    These historical data and projections confirm that there are 
differences in capacity factors between the eastern and western 
portions of PJM's footprint, and that the eastern portion consistently 
relies on a more-expensive-to-run mix of

[[Page 25873]]

generation sources than the western portion. This is a direct result of 
transmission constraints that prevent lower-priced electricity from the 
western portion of the PJM footprint from reaching load centers in the 
eastern portion during the hours the constraints are binding.
    DOE also examined the data from its projections for 2008 to 
identify the transmission constraints that most limited flows from the 
western portion of PJM's footprint (and from the eastern portion of the 
Midwest ISO's footprint) to serve loads in the eastern portion of PJM's 
footprint. The constrained facilities are listed in Table VIII-10, and 
the approximate locations of those constraints are shown in Figure 
VIII-4.

[[Page 25874]]

[GRAPHIC] [TIFF OMITTED] TN07MY07.017


[[Page 25875]]


[GRAPHIC] [TIFF OMITTED] TN07MY07.018

    A somewhat similar situation exists in New York State. For purposes 
of this analysis, DOE divided the State into three geographic areas: 
Upstate West (NYISO zones A through E), Upstate East (NYISO Zones F 
through I), and

[[Page 25876]]

Downstate (NYISO Zones J and K). (See Figure VIII-5.) Downstate has 
almost no thermal capacity below $60/MW, whereas Upstate West has about 
5750 MW and Upstate East has about 2600 MW at $60/MW or lower. (See 
Figure VIII-6.) In DOE's projections for 2008, however, the below-$60/
MW thermal units are shown as operating at very high capacity factors 
already. (See Figure VIII-7.) The effects of transmission congestion 
start to become apparent in the $60-70/MW class, where lower-cost 
capacity in Upstate East is available but its output is not always 
deliverable to Downstate. Downstate has more than 14,250 MW of capacity 
with production costs of $70/MW or higher (up to more than $200/MW), 
whereas Upstate East and Upstate West combined have only about 5100 MW 
at $70/MW or higher. Further, according to both historical data and 
DOE's projections for 2008, the units in Downstate in all classes with 
production costs above $70/MW almost always operate at higher capacity 
factors than in the other two areas. (See Table VIII-11.)

[[Page 25877]]

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[[Page 25878]]


[GRAPHIC] [TIFF OMITTED] TN07MY07.020


[[Page 25879]]


[GRAPHIC] [TIFF OMITTED] TN07MY07.021


[[Page 25880]]


[GRAPHIC] [TIFF OMITTED] TN07MY07.022

    DOE reviewed both historical data and its projections for 2008 to 
identify the constraints that appear most critical in limiting the use 
of generation in upstate New York, Ontario, and Pennsylvania to serve 
downstate New York loads. The constraints thus identified are listed in 
Table VIII-12, and their approximate locations are shown in Figures 
VIII-8A and VIII-8B.

[[Page 25881]]

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[[Page 25882]]


[GRAPHIC] [TIFF OMITTED] TN07MY07.024


[[Page 25883]]


[GRAPHIC] [TIFF OMITTED] TN07MY07.025


[[Page 25884]]


    Further, PJM notes in its comments that total congestion costs in 
its growing footprint rose from $65 million in 1999 to more than $2.09 
billion in 2005.\61\ (See Table VIII-13.) These figures are similar to 
the results from the Department's modeling for 2008, which show that 
the top constraints in this region account for $1.57 billion (20 
percent) of the $8 billion of total congestion rent for the entire 
Eastern Interconnection. The Department's projections for 2008 show 
that the top constraints in New York account for $0.98 billion (12 
percent) of the $8 billion of total congestion rent for the entire 
Eastern Interconnection. As discussed in Section VII.A.2 above, while 
financial transmission rights protect load-serving entities in PJM and 
NYISO from paying congestion costs or congestion rents, congestion 
costs and congestion rents are nonetheless useful indicators of the 
persistence and pervasiveness of congestion within a transmission 
system.
---------------------------------------------------------------------------

    \61\ Whenever a constraint is binding in real time, PJM assesses 
a transactional congestion charge to those customers whose power is 
transmitted over the constraint. The charge is the difference in LMP 
on either side of the constraint multiplied times the amount of 
power transmitted.
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BILLING CODE 6450-01-P
[GRAPHIC] [TIFF OMITTED] TN07MY07.026

    Thus, the Department has documented the existence of persistent 
congestion into and within the Mid-Atlantic Critical Congestion Area, 
as well as the constraints causing that persistent congestion. As 
discussed in Section II.A above, whenever there is persistent 
congestion, buyers must rely on power from less-preferred generating 
sources, a smaller range of generators is able to serve load, and grid 
operators have fewer options for dealing with adverse circumstances or 
unanticipated events, all of which adversely affects consumers. 
Therefore, the Department finds under FPA section 216(a)(2) that there 
are ``constraints or congestion that adversely affects consumers'' in 
the Mid-Atlantic Critical Congestion Area.

C. Determination That Designation of a Mid-Atlantic Area National 
Corridor Would Be Warranted

    Given the presence of constraints or congestion that adversely 
affects consumers in the Mid-Atlantic Critical Congestion Area, the 
Secretary has the discretion to consider designation of a National 
Corridor. As discussed above in Section II.A, the Secretary will 
determine whether to exercise his discretion based on the totality of 
the information developed, taking into account relevant considerations, 
including the considerations identified in FPA section 216(a)(4), as 
appropriate. In this section, the Department discusses the 
considerations that it believes warrant designation of the Mid-Atlantic 
Area National Corridor.
1. Economic Development Considerations
    Data from January 2004 through December 2006 confirm that despite 
the fact that PJM has been operating as a single market, transmission 
constraints result in major and persistent disparities in wholesale 
electricity prices within the market. (See Figure VIII-9.) As a result 
of these fundamental price disparities, electricity consumers in the 
eastern portion of PJM's footprint consistently end up paying higher 
electricity bills than consumers in the western portion.\62\
---------------------------------------------------------------------------

    \62\ In this analysis, the eastern portion of PJM's footprint 
includes the service areas of Pepco, Baltimore Gas & Electric 
Company, Dominion, Atlantic City Electric, PSEG, Rockland Electric 
Co., Delmarva Power, Jersey Central Power & Light, Met-Ed, PECO, and 
PPL Electric Utilities. The western portion of PJM's footprint 
includes the service areas of AEP, Commonwealth Edison (ComEd), The 
Dayton Power & Light Company (DP&L), and Duquesne Light Company 
(Duquesne).

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[[Page 25885]]

[GRAPHIC] [TIFF OMITTED] TN07MY07.027



[[Page 25886]]

    As shown in Figure VIII-10 \63\, the price disparity in monthly 
average day-ahead LMPs between the Pepco and Duquesne zones was as much 
as $45/MWh from August 2005 through October 2005 and again in August 
2006. More generally, consistently higher prices were experienced in 
the zones of eastern PJM that serve Washington, DC, Baltimore,\64\ 
Philadelphia, and northern New Jersey. Further, the basic price 
disparity between the eastern and western parts of PJM's footprint 
occurred regardless of the time of day. A similar pattern was observed 
when the data were divided into on-peak and off-peak periods, and when 
data from PJM's real-time market for the same period were examined.\65\ 
As one might expect, the price disparity widened considerably when the 
electricity supply system was working close to its physical limits, as 
on hot summer days. Figure VIII-11 shows hourly day-ahead LMPs for 
August 8, 2005, when the differential reached its maximum ($270/MWh) 
for that calendar year.
---------------------------------------------------------------------------

    \63\ Note that the incomplete price data shown in Figure VIII-10 
in 2004 and 2005 are the result of new members joining the PJM 
market: ComEd joined in May 2004; AEP and DP&L joined in October 
2004; Duquesne joined in January 2005; and Dominion joined in May 
2005.
    \64\ According to a staff report published by the Maryland 
Public Service Commission (MPSC): Maryland offers a first-hand look 
at the pricing impacts of congestion. Frederick County is a key 
congestion point on the west-to-east transmission import path. Three 
years ago, locational marginal prices (LMPs) for electricity in 
Maryland west of that point averaged $2.90 per megawatt-hour (MWh) 
less than prices in Maryland east of that point. By 2006, that gap 
had risen to $9.43 per MWh. The gap is likely to continue to 
increase until additional generation becomes available to serve 
central and southern Maryland and the Eastern Shore, or additional 
transmission capacity becomes available to import electricity into 
those regions.
    MPSC Staff Report, Electric Supply Adequacy Report of 2007, p. 3 
(Jan. 2007) (MPSC Report). The report continues ``Maryland is 
directly affected by transmission congestion, particularly since it 
and neighboring states (including the District of Columbia) have to 
import a large proportion of their energy needs. * * * LMPs in 
Maryland are among the very highest in PJM.'' Id., p. 11.
    \65\ See Appendix A for additional detail. Appendix A is 
available at http://nietc.anl.gov.
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[[Page 25887]]

[GRAPHIC] [TIFF OMITTED] TN07MY07.028


[[Page 25888]]


[GRAPHIC] [TIFF OMITTED] TN07MY07.029

    For the area served by NYISO, historical electricity price data 
from 2004 through 2006 show a persistent pattern of substantially lower 
wholesale electricity prices in the day-ahead market for the western 
and upstate

[[Page 25889]]

zones than in New York City and Long Island. (See Figure VIII-12.) As a 
result of this persistent disparity, electricity consumers in the area 
north of New York City, the City itself, and on Long Island end up 
paying higher electricity bills than consumers in the rest of the State 
of New York.

[[Page 25890]]

[GRAPHIC] [TIFF OMITTED] TN07MY07.030

    As shown in Figure VIII-12, the difference in monthly average 
wholesale day-ahead prices between the highest and lowest zones was as 
much as $44/MWh. A similar pattern is seen if one looks only at the 
day-ahead on-peak

[[Page 25891]]

hours and only at the day-ahead off-peak hours, sometimes with a re-
ordering of the zones with intermediate prices. Similar price patterns 
are also seen in the real-time data.\66\ As one might expect, the price 
disparity widened considerably when the electricity supply system was 
working close to its physical limits, as on hot summer days. Figure 
VIII-13 shows hourly day-ahead LBMPs for August 5, 2005, when the 
differential reached its maximum ($325/MWh) for that calendar year.
---------------------------------------------------------------------------

    \66\ See id.

---------------------------------------------------------------------------

[[Page 25892]]

[GRAPHIC] [TIFF OMITTED] TN07MY07.031

    In addition, the constraints in New York result in consumers in 
downstate New York paying disproportionate generation capacity costs. 
If local load-serving entities were to contract for their electricity 
supply needs across New

[[Page 25893]]

York without regard to the location of the generation capacity, 
reliability could be imperiled because there would be no assurance that 
all of the electricity required could actually be delivered to the load 
centers when needed. To avoid such situations, the New York State 
Reliability Council has established locational ICAP requirements, 
according to which generation capacity must be located within New York 
City sufficient to meet 80 percent of the City's forecast annual peak 
load. Similarly, 99 percent of Long Island's forecast annual peak load 
must be located on the Island. Load-serving entities are free to buy 
their electricity supplies from distant sources when those sources are 
accessible, but the load-serving entities must also ensure that they 
have adequate local capacity available at all times. The locational 
ICAP system enables reliability requirements to be met, but at 
additional cost to consumers.
    To ensure that the locational ICAP requirements are met, NYISO 
operates an ICAP market. The ICAP market involves the sale of 
generation capacity, unlike NYISO's day-ahead and real-time markets, 
which involve the sale of energy. Load-serving entities that have not 
met their full ICAP requirements through contracts with local 
generators must participate in NYISO's ICAP market. The ICAP market 
consists of periodic auctions for three areas: New York City, Long 
Island, and the New York Control Area (which is all of NYISO).
    The amount of capacity that a generator is qualified to provide 
through the ICAP market is determined by an Unforced Capacity (UCAP) 
methodology, which accounts for the possibility of forced outages, thus 
the prices set in the ICAP market are referred to as UCAP prices. As 
shown in Figure VIII-14, UCAP prices for New York City and Long Island 
were consistently higher than UCAP prices for the entire New York 
Control Area over the 26-month period from September 2004 to October 
2006, sometimes dramatically so. The substantial differentials between 
the State-wide UCAP prices and UCAP prices in New York City and Long 
Island represent a premium the load-serving entities in the City and on 
Long Island (and their retail customers) must pay to ensure reliability 
by maintaining local generation capacity instead of improving the 
transmission system sufficiently to be able to rely more extensively on 
distant generation sources. This premium is in addition to the higher 
costs the load-serving entities and their customers pay for electric 
energy because they are relying to a greater extent on generation 
sources with higher production costs.\67\
---------------------------------------------------------------------------

    \67\ DOE does not mean to imply that large load centers, such as 
New York City, Long Island, or the major cities in the eastern 
portion of PJM's footprint could rely entirely on distant generation 
if sufficient transmission capacity were available. DOE recognizes 
that some level of local generation is needed to maintain voltage 
support and stability.
---------------------------------------------------------------------------

BILLING CODE 6450-01-P

[[Page 25894]]

[GRAPHIC] [TIFF OMITTED] TN07MY07.032

    The data detailed above indicate that consumers in the Mid-Atlantic 
Critical Congestion Area now pay high electricity prices because their 
electricity suppliers are unable to access low-cost supplies due to 
insufficient

[[Page 25895]]

transmission capacity. Reasonably priced electricity supplies are vital 
to the economic and social well-being of any metropolitan area. High 
electricity prices add to the cost of living or doing business in the 
area, and retard the area's economic growth and competitiveness. 
Further, one of the considerations identified in FPA section 216(a)(4) 
is whether ``the economic vitality and development of the corridor, or 
the end markets served by the corridor, may be constrained by lack of 
adequate or reasonably priced electricity.'' FPA section 216(a)(4)(A); 
16 U.S.C. 824p(a)(4)(A) (emphasis added).
    Therefore, the Department believes that economic development 
considerations warrant designation of a National Corridor for the Mid-
Atlantic Critical Congestion Area.
2. Reliability Considerations
    The constraints limiting delivery of electricity to the eastern 
portion of PJM's footprint pose a threat to reliability given the 
steady growth in electricity demand in that area, the area's aging 
generation fleet with recent retirements of significant amounts of 
capacity, the slow pace of development of new local generation capacity 
in that area, and the uncertainties associated with increasing demand 
response.
    Weather-normalized summer peak load for the PJM footprint as a 
whole is projected to grow at an average rate of 1.6 percent per year 
for the period 2006 through 2016. However, projected annual growth 
varies widely among the utilities in PJM's footprint, ranging from 0.7 
percent to 2.4 percent, and much of the most rapid growth is 
concentrated in the eastern portion, and particularly in the Baltimore-
Washington-Northern Virginia area.\68\
---------------------------------------------------------------------------

    \68\ Comments of PJM, p. 28.
---------------------------------------------------------------------------

    Between 2003 and 2006, a total of 582 MW of generating capacity in 
the Baltimore-Washington-northern Virginia area was retired or put on a 
restricted-use status for environmental reasons.\69\ About 200 MW has 
been added in the area since 2000, and about 20 MW is now under 
construction. An additional 5600 MW is now proposed for the area, but 
only 14 MW of it would go into service before 2009, and about 5000 MW 
is associated with three new nuclear units that would not become 
available before 2015 or 2016.\70\ PJM estimates that 2500 MW of net 
new generation would need to be installed east of its Loudon substation 
in northern Virginia to avoid the need for additional transmission in 
the western portion of its footprint.\71\
---------------------------------------------------------------------------

    \69\ Id., p. 30. In Maryland, recently enacted environmental 
legislation will cause: Owners of at least two Maryland coal-fired 
power plants to consider whether it is possible, or worthwhile, to 
install the necessary [control] equipment. Any existing Maryland 
coal plants that may have to be retired will exacerbate the existing 
reliability challenges and increase the possibility of supplies 
during peak periods not being able to meet the demand for 
electricity. The consequences could include periods of voltage 
reductions and/or rolling outages during peak periods to keep the 
system from collapsing.
    MPSC Report, p. 23.
    \70\ Comments of PJM, p. 32.
    \71\ Id., p. 38.
---------------------------------------------------------------------------

     Further, while efforts are being made to increase the 
participation of demand-side resources in the PJM wholesale electricity 
markets, it does not appear that such efforts are capable of producing 
near-term results on the scale needed to forestall the need for 
additional transmission.\72\
---------------------------------------------------------------------------

    \72\ PJM says that:
    [F]or purposes of long-term planning for total system adequacy, 
substituting [demand response] for incremental transmission 
capability would require, at best, several times the equivalent 
amount of new generation that would be needed to offset the new 
transmission capacity. [Demand response] does not produce a steady 
stream of MW equivalent output because it is normally cycled over a 
given time period (i.e., load would be switched off and on to ensure 
minimal impact to the [demand response] provider, rather than 
switched off for the entire duration of the system need). Also, 
[demand response] is produced in a variety of diverse programs, 
which also result in divergent measurements. Within PJM, [demand 
response] participants may be price responsive, contractually 
obligated, or directly controlled. Each category of [demand 
response] results in a variation of the expected amount, or 
``output,'' of [demand response] that is provided when called upon, 
thereby further complicating the difficulty of determining, for 
long-term planning purposes, the transmission or generation MW that 
are equivalent to a stated amount of [demand response].
    Id., pp. 38-40.
---------------------------------------------------------------------------

    Thus, PJM asserts:

additional transmission capability is essential in [the western 
portion of PJM's footprint] to maintain reliable and economic 
service to the Baltimore-Washington-Northern Virginia urban load 
center. Unless a major new, high-voltage transmission circuit is 
constructed * * * by 2011, existing 500 kV transmission facilities 
serving this critical load center will become overloaded, in 
violation of NERC and PJM reliability and planning criteria * * * 
Additional transmission capability [in the eastern portion of PJM's 
footprint] will be needed, in this instance by 2014, to avoid 
numerous projected violations of NERC and PJM reliability and 
planning criteria in northern New Jersey.\73\
---------------------------------------------------------------------------

    \73\ Id., pp. 5-6.

    With regard to New York, since its submission of comments on the 
Congestion Study, NYISO has published a new Reliability Needs 
Assessment (2007 RNA) as part of its Comprehensive Reliability Planning 
Process.\74\ The 2007 RNA indicates that the constraints limiting 
delivery of electricity to southeast New York pose a threat to 
reliability by 2011, given the growth in electricity demand and the 
projected retirement of generating units.
---------------------------------------------------------------------------

    \74\ See NYISO, Comprehensive Reliability Planning Process 2007 
Reliability Needs Assessment (March 16, 2007).
---------------------------------------------------------------------------

    NYISO notes that load in southeast New York has been growing by 
over two percent per year.\75\ NYISO estimates that between 2007 and 
2009, 1,674.8 MW of generating capacity in New York will be retired, 
and only 1,203.9 MW of capacity will be added.\76\ NYISO describes the 
effects of these factors on the already constrained transmission system 
as follows:
---------------------------------------------------------------------------

    \75\ Id., p. 10.
    \76\ Id., p. 7.

    By 2011, the NYCA load forecast estimates that approximately two 
thirds of the NYCA load will be located in load Zones G through K 
which is downstream of the UPNY-SENY [Upstate New York-Southeast New 
York] transmission interface. In addition, approximately 52% of the 
NYCA load will be located in load Zones J and K, downstream of the 
Dunwoodie-South transmission interface, which is a slight increase 
from current load levels.
    The demands that are increasingly being placed on the 
transmission system in conjunction with other system changes, 
consisting primarily of generating units retirements * * *, load 
growth, neighboring system changes and the lack of new capacity or 
transmission resources downstream of the UPNY-SENY interface, have 
and will continue to result in voltage criteria violations at much 
lower transfer levels than have previously occurred. The result is 
that over time, transfers into and through SENY will increasingly be 
limited by voltage constraints rather than thermal constraints. This 
reduced capability of the bulk power system to make power transfers 
into SENY due to these voltage constraints, coupled with continuing 
load growth in SENY results in a resource adequacy criterion 
violation by 2011.\77\
---------------------------------------------------------------------------

    \77\ Id., p. 10.

    The data detailed above indicate that consumers in the Mid-Atlantic 
Critical Congestion Area face threats to reliability if existing 
congestion problems are not addressed. Reliable electricity supplies 
are vital to the economic and social well-being of any metropolitan 
area. Electricity supply disruptions may come in many forms, ranging 
from brief disturbances in power quality and localized outages to 
large-scale, cascading blackouts. The exact cost of electric supply 
disruptions is difficult to quantify and varies depending upon the 
specific circumstances. However, such disruptions can impose enormous 
costs on consumers and may also, under

[[Page 25896]]

certain circumstances, pose dangers to public health and safety.
    For example, estimates of the total cost of the eastern blackout of 
August 14, 2003 range between $4 billion and $10 billion (U.S. $) for 
the United States; in Canada, the same event led to a reduction in 
gross domestic product of 0.7 percent in August, a net loss of 18.9 
million work hours, and manufacturing shipments in Ontario were down 
$2.3 billion (Canadian $).\78\
---------------------------------------------------------------------------

    \78\ U.S.-Canada Power System Outage Task Force, Final Report on 
the August 14, 2003 Blackout in the United States and Canada: Causes 
and Recommendations, p. 1 (April 2004).
---------------------------------------------------------------------------

    Further, one of the considerations identified in FPA section 
216(a)(4) is whether ``the economic vitality and development of the 
corridor, or the end markets served by the corridor, may be constrained 
by lack of adequate or reasonably priced electricity.'' FPA section 
216(a)(4)(A); 16 U.S.C. 824p(a)(4)(A) (emphasis added).
    Therefore, the Department believes that reliability considerations 
warrant designation of a National Corridor for the Mid-Atlantic 
Critical Congestion Area.
3. Supply Diversity and Energy Independence Considerations
    Much of the existing generation fleet in the eastern portion of 
PJM's footprint is fueled by oil or natural gas. For example, about 28 
percent of the installed generation capacity in Maryland and the 
District of Columbia is either solely oil-fired or capable of using 
both oil and natural gas as fuels, as is 35 percent of the installed 
capacity in Delaware. Further, more than 75 percent of the generation 
capacity that has been added in recent years in Delmarva, Maryland, the 
District of Columbia, and New Jersey has been fueled by natural 
gas.\79\ By contrast, the overall generation mix in PJM's footprint is 
41 percent coal and 9 percent oil; coal provides more than 56 percent 
of total output from PJM units. Further,
---------------------------------------------------------------------------

    \79\ Comments of PJM, p. 51.

    More than 6000 MW of additional coal-fired generation, some 
utilizing clean-coal technology, is currently under construction or 
active in PJM's interconnection queue. All of this capacity is or 
will be located far from the Baltimore-Washington-Northern Virginia 
load centers. Moreover, approximately 12,000-15,000 MW of additional 
wind-powered generation is either under construction or under active 
study in PJM's interconnection queue. With the exception of one 
plant under construction on the New Jersey coast, all of these 
facilities are or will be located west of the [eastern] load 
centers.\80\
---------------------------------------------------------------------------

    \80\ Id., pp. 52 and 78.

    Accordingly, one of the consequences of transmission congestion in 
the eastern portion of PJM's footprint is that it prolongs and 
exacerbates the area's existing use of oil and natural gas as 
generation fuels.
    Most of the existing generation fleet in the downstate portion of 
New York is fueled by oil or natural gas. On a State-wide basis, about 
39 percent of the electricity used in New York in 2005 came from oil or 
gas units, and 32 percent came from coal or hydroelectric capacity.\81\ 
The absence of transmission facilities that would enable more hydro-, 
wind-, or coal-based electricity to reach the downstate load centers 
prolongs the area's current relatively high dependence on oil and 
natural gas as fuel sources.
---------------------------------------------------------------------------

    \81\ NYISO presentation prepared for Sept. 11, 2006, meeting 
with DOE.
---------------------------------------------------------------------------

    Oil and natural gas are relatively high in price and must be 
purchased in markets that are highly volatile and subject to 
unanticipated international trends and adverse events. Inadequate 
transmission capacity leaves consumers in the Mid-Atlantic Critical 
Congestion Area exposed, perhaps increasingly, to the higher prices and 
higher price volatility associated with these generation fuels, with a 
resulting impact on business certainty, especially for industrial 
consumers. Lack of adequate transmission capacity also limits the Mid-
Atlantic Critical Congestion Area's access to generation fueled by 
domestic sources that could displace generation fueled by foreign 
sources. Thus, economic growth may be jeopardized and energy 
independence is compromised. Further, one of the considerations 
identified in FPA section 216(a)(4) is whether ``(i) economic growth in 
the corridor, or the end markets served by the corridor, may be 
jeopardized by reliance on limited sources of energy; and (ii) a 
diversification of supply is warranted.'' FPA section 216(a)(4)(B); 16 
U.S.C. 824p(a)(4)(B). Another consideration identified in that statute 
is whether ``the energy independence of the United States would be 
served by the designation.'' FPA section 216(a)(4)(C); 16 U.S.C. 
824p(a)(4)(C).
    Therefore, the Department believes that supply diversity and energy 
independence considerations warrant designation of a National Corridor 
for the Mid-Atlantic Critical Congestion Area.
4. National Defense and Homeland Security Considerations
    The Mid-Atlantic Critical Congestion Area is home to 55 million 
people (19 percent of the Nation's 2005 population)\82\ and is 
responsible for $2.3 trillion of gross state product (18 percent of the 
2005 gross national product).\83\ Given the large number of military 
and other facilities in the Mid-Atlantic Critical Congestion Area that 
are extremely important to the national defense and homeland security, 
as well as the vital importance of this populous area to the Nation as 
an economic center, any deterioration of the electric reliability or 
economic health of this area would constitute a serious risk to the 
well-being of the Nation. Further one of the considerations identified 
in FPA section 216(a)(4) is whether ``the designation would enhance 
national defense and homeland security.'' FPA section 216(a)(4)(E); 16 
U.S.C. 824p(a)(4)(E).
---------------------------------------------------------------------------

    \82\ U.S. Census Bureau, Population Estimates Program, http://factfinder.census.gov/
    \83\ See Bureau of Economic Analysis, National Economic 
Accounts, http://www.bea.gov/bea/dn/home/gdp.htm.
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    Therefore, the Department believes that national defense and 
homeland security considerations warrant designation of a National 
Corridor for the Mid-Atlantic Critical Congestion Area.

D. Boundaries of the Draft Mid-Atlantic Area National Corridor

    In this section, the Department first explains how it determined 
the general extent of the draft Mid-Atlantic Area National Corridor 
using a source-and-sink approach. Then the Department explains how it 
delineated specific boundaries for the draft Mid-Atlantic Area National 
Corridor.
1. General Extent of the Draft Mid-Atlantic Area National Corridor
    In order to set the boundaries of the draft Mid-Atlantic Area 
National Corridor, DOE used the general source-and-sink approach 
described in Section III above. The sink areas are the locations of the 
consumers adversely affected by the persistent congestion documented in 
Section VIII.B above. Specifically, the sink areas are the areas 
downstream of the constraints identified in Section VIII.B above, from 
metropolitan New York City south along the Atlantic coast to northern 
Virginia.

[[Page 25897]]

    With regard to selecting source areas, as discussed in Section III 
above, the Department was guided by the considerations identified in 
FPA section 216(a)(4). In particular, the Department focused on the 
considerations of ensuring adequate supplies of reasonably priced 
power,\84\ diversifying supply,\85\ and furthering energy 
independence.\86\ Applying those considerations, DOE selected as source 
areas locations of substantial amounts of existing, under-used economic 
generation capacity, as well as locations with the potential for 
substantial development of wind generation capacity. The existing 
under-used economic generation capacity could readily ensure adequate 
supplies of reasonably priced power if additional transmission capacity 
were made available. In addition, increased access to this under-used 
economic generation capacity, which is predominantly coal-fired, as 
well as to the wind generation capacity would help diversify supply and 
increase energy independence for the Mid-Atlantic Critical Congestion 
Area. Figure VIII-15 indicates the locations of the source areas in 
upstate New York, western New York, western Pennsylvania, western 
Maryland, West Virginia, Ohio, Indiana, and Kentucky.\87\
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    \84\ See FPA sec. 216(a)(4)(A).
    \85\ See FPA sec. 216(a)(4)(B).
    \86\ See FPA sec. 216(a)(4)(C).
    \87\ The existing, under-used economic generation capacity used 
to establish the source areas was identified through the analysis 
summarized in Appendix A (available at http://nietc.anl.gov). The 
potential wind generation capacity used to establish the source 
areas was identified through State-level maps of potential wind 
resources. Those maps are provided in Appendix B, which is available 
at http://nietc.anl.gov.

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[[Page 25898]]

[GRAPHIC] [TIFF OMITTED] TN07MY07.033


[[Page 25899]]


    Having identified the source and sink areas, DOE next sought to 
determine which transmission constraints most limit the delivery of 
electricity from the source areas to the sink areas. The results of 
this inquiry are shown in Figure VIII-16.
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[[Page 25900]]

[GRAPHIC] [TIFF OMITTED] TN07MY07.034

    In the PJM footprint, the major obstacles to increased west-to-east 
flows are three groups of heavily loaded large high-voltage 
transmission lines. One group extends from northern West Virginia and 
western Maryland into

[[Page 25901]]

northern Virginia and central Maryland; a second group extends from 
western Pennsylvania into central Pennsylvania; and the third is a 
cluster of lines located mostly in eastern Pennsylvania but also 
extending into northeastern Maryland, northern Delaware, and northern 
New Jersey. The net effect of these constraints is to prevent the 
delivery of increased amounts of electricity in bulk from the source 
areas in the Midwest to the load centers in the Baltimore-Washington-
Northern Virginia area, Philadelphia, Wilmington, the Delmarva 
peninsula, and the urban centers in central and northern New 
Jersey.\88\
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    \88\ Figures VIII-15 and -16 present results of additional 
analysis, using outputs from the simulation of 2008 generation and 
power flows prepared for the Congestion Study. For additional 
detail, see Appendix A (available at http://nietc.anl.gov).
---------------------------------------------------------------------------

    Somewhat similarly, providers of electricity to consumers in the 
New York City area have limited access to the source areas in upstate 
New York and in the western part of the State, due to several clusters 
of transmission constraints within New York State.\89\ Conceivably, New 
York City's needs might be satisfied to some degree through increased 
transmission access to PJM, but that could exacerbate the existing and 
projected congestion problems in the PJM footprint--unless it were done 
as part of some larger, well-coordinated plan between PJM and NYISO and 
their respective members. The constraints of particular interest in New 
York State are: a group between New York City and the existing 
substations at Marcy and Edic (near the city of Utica); a group to the 
south and east of the city of Massena; and a group in the western part 
of the State, between the cities of Buffalo and Syracuse.\90\
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    \89\ These constraints also happen to limit access to additional 
generation capacity located outside New York State, in Quebec, 
Ontario, and Michigan.
    \90\ See Appendix A (available at http://nietc.anl.gov) for 
additional detail.
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    Thus, within PJM's footprint, the draft National Corridor 
encompasses the problematic existing west-to-east transmission lines; 
further, the draft National Corridor is broad enough, north-to-south, 
to encompass a range of potential projects and a range of potential 
routes to facilitate additional west-to-east flows. In addition, the 
draft National Corridor includes the sink areas as well, because it is 
frequently the case that the full potential benefits associated with a 
major new line will not be gained unless key improvements are made in 
the area to which the electricity is to be delivered. Somewhat 
similarly, the draft National Corridor extends far enough into the 
source areas to encompass a number of possible strong points on the 
transmission network that serves those areas.
    In New York, the draft National Corridor extends northward from the 
area immediately north of New York City to the vicinity of Utica; then 
it divides into two legs, one to the Massena area and one to the 
Buffalo area. As with the section in the PJM footprint, this section of 
the draft National Corridor is broad enough to encompass a range of 
potential projects and a range of potential routes, and it includes the 
sink areas as well to encompass appropriate upgrades there. Further, as 
shown in Figure VIII-17, there are several important transmission 
constraints between New York City and Long Island. As a result, no 
solutions to New York City's congestion problems should be planned 
without considering Long Island, and thus the draft National Corridor 
includes Long Island.

[[Page 25902]]

[GRAPHIC] [TIFF OMITTED] TN07MY07.035

    Finally, although for ease of presentation the discussion thus far 
has focused on a draft National Corridor in the PJM footprint and a 
draft National Corridor in New York, the two areas are contiguous along 
a part of the shared border between the PJM and NYISO footprints. 
Accordingly, the draft National Corridor for the Mid-Atlantic Critical 
Congestion Area is a single Corridor--the draft Mid-Atlantic Area 
National Corridor--covering part of the

[[Page 25903]]

PJM footprint and part of New York, partly because some of the 
transmission planning that is needed should involve both PJM and NYISO, 
and also because transmission projects may be proposed that would cross 
their common boundary.
2. Specific Boundaries of the Draft Mid-Atlantic Area National Corridor
    Having identified the sink and source areas on which to base the 
draft Mid-Atlantic Area National Corridor, as well as the constraints 
that must be encompassed in the National Corridor, DOE then delineated 
the specific boundaries of the draft Mid-Atlantic Area National 
Corridor. Again, for ease of presentation, the Department will discuss 
the draft Mid-Atlantic Area National Corridor in terms of a section 
within the PJM footprint and a section in New York; however, the 
Department notes that it is a single draft Mid-Atlantic Area National 
Corridor that is under consideration.
    For the section within the PJM footprint, DOE first identified some 
general boundary points, and then linked certain of these points by 
means of straight lines to form a polygon. It would be impractical, 
however, to treat the polygon as this section of the draft Mid-Atlantic 
Area National Corridor, because that would not enable precise, easily 
identified boundaries in all areas. Accordingly, if the polygon 
includes some part of a county (or a city not included within a 
county), the Department has included all of that county or city in the 
draft National Corridor. This approach enlarges the draft Mid-Atlantic 
Area National Corridor but, in addition to establishing readily 
identifiable boundaries, helps ensure that the draft National Corridor 
encompasses a range of potential projects and a range of potential 
routes, as discussed in Section III above.
    The western margin of the section of the polygon within the PJM 
footprint, in functional terms, is the eastern edge of the existing 765 
kV transmission network in the Midwest, beginning with the South Canton 
substation, located near Canton, Ohio, continuing on to other 
substations to the south located on one side or the other of the Ohio 
River (which forms the boundary between Ohio and West Virginia), and 
ending with the John Amos substation near Charleston, West Virginia. 
Tapping into this network with new west-to-east transmission lines 
would enable access to generation capacity throughout the source areas.
    The eastern margin of the section of the polygon within the PJM 
footprint is a straight line from the Calvert Cliffs substation in 
southern Maryland due east to the Atlantic shoreline, and then 
generally northward following the Atlantic shoreline and then up the 
Hudson River to the northeastern corner of New Jersey. The area around 
the Calvert Cliffs substation is of interest because if additional 
nuclear generating capacity is developed at the Calvert Cliffs nuclear 
plant or at nearby Virginia plants, additional transmission capacity 
would be needed to enable the electricity output to be moved from the 
Calvert Cliffs substation (or other relevant substations within the 
polygon) to the load centers in the sink area. If the nuclear capacity 
is not developed, the sink area could still benefit from development of 
additional west-to-east transmission capacity across the PJM footprint.
    The Department has extended the draft National Corridor to the 
actual shoreline not because major new transmission lines are likely to 
be sited in such areas, but rather because these areas are sink areas, 
and transmission upgrades in some locations within these areas may be 
needed to gain the full benefit of improving their access to the source 
areas.
    The southern margin of the section of the polygon within the PJM 
footprint is a straight line between the John Amos substation and the 
Calvert Cliffs substation.
    The northern margin of the section of the polygon within the PJM 
footprint is: a straight line between the South Canton substation and 
the Susquehanna substation (which is the northernmost 500 kV substation 
in eastern PJM); a straight line from the Susquehanna substation due 
north to the Pennsylvania-New York border; the Pennsylvania-New York 
border east and southeast to the border between Pennsylvania and New 
Jersey; and then the border between New York and New Jersey southeast 
to the northeast corner of New Jersey.
    Connecting the points described above produces the polygon shown in 
Figure VIII-18. Defining the draft National Corridor boundaries as 
including all of the partially enclosed cities or counties, as shown in 
Figure VIII-19, establishes the portion of the draft Mid-Atlantic Area 
National Corridor within the PJM footprint.

[[Page 25904]]

[GRAPHIC] [TIFF OMITTED] TN07MY07.036


[[Page 25905]]


[GRAPHIC] [TIFF OMITTED] TN07MY07.037

    For the section of the draft Mid-Atlantic Area National Corridor 
within New York, DOE has adopted a somewhat simpler approach based more 
directly on county boundaries. DOE has identified four areas within New 
York

[[Page 25906]]

for inclusion in the draft Mid-Atlantic Area National Corridor.
    The first area is New York City and Long Island. This area is 
included because it is a sink area.
    Second is a central upstate area, extending from New York City 
northward to include an area around the city of Saratoga Springs, and 
westward to include an area around the city of Utica. This central 
upstate area encompasses a number of the existing constraints that 
limit the delivery of additional electricity in bulk from the source 
areas to the sink areas. Although easing the constraints in this area 
could provide benefits in the sink areas, these benefits could be 
limited unless some of the key constraints further to the north and to 
the west were also addressed. Therefore, the Department has included 
the following two additional areas in the draft National Corridor.
    The draft National Corridor includes an area to the south and east 
of the city of Massena, New York. This area encompasses several 
transmission constraints that may frequently prevent electricity flows 
from the source areas to the sink areas.
    Finally, the draft National Corridor includes an area between the 
city of Buffalo and the city of Syracuse. This area is a major 
electricity pathway that is frequently constrained, preventing 
electricity flows from the source areas to the sink areas.
    The resulting New York section of the draft Mid-Atlantic Area 
National Corridor, based on the boundaries of the affected counties, is 
shown in Figure VIII-20. The entire draft Mid-Atlantic Area National 
Corridor is shown in Figure VIII-21.
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[[Page 25907]]

[GRAPHIC] [TIFF OMITTED] TN07MY07.038


[[Page 25908]]


[GRAPHIC] [TIFF OMITTED] TN07MY07.039


[[Page 25909]]


    The list of the counties and cities that comprise the draft Mid-
Atlantic Area National Corridor is as follows:
Delaware
    Counties: All are included--Kent, New Castle, and Sussex.
District of Columbia
    City: Washington.
Maryland
    Counties: All are included except Somerset. Those included are 
Allegany, Anne Arundel, Baltimore, Calvert, Caroline, Carroll, Cecil, 
Charles, Dorchester, Frederick, Garrett, Harford, Howard, Kent, 
Montgomery, Prince George's, Queen Anne's, St. Mary's, Talbot, 
Washington, Wicomico, and Worcester.
    City: Baltimore.
New Jersey
    Counties: All are included--Atlantic, Bergen, Burlington, Camden, 
Cape May, Cumberland, Essex, Gloucester, Hudson, Hunterdon, Mercer, 
Middlesex, Monmouth, Morris, Ocean, Passaic, Salem, Somerset, Sussex, 
Union, and Warren.
New York
    Counties: Albany, Bronx, Broome, Cayuga, Chenango, Clinton, 
Columbia, Delaware, Dutchess, Erie, Franklin, Fulton, Genesee, Greene, 
Herkimer, Jefferson, Kings, Lewis, Livingston, Madison, Monroe, 
Montgomery, Nassau, New York, Niagara, Oneida, Onondaga, Ontario, 
Orange, Orleans, Otsego, Putnam, Queens, Renssalaer, Richmond, 
Rockland, St. Lawrence, Saratoga, Schenectady, Schoharie, Seneca, 
Suffolk Sullivan, Ulster, Wayne, Westchester, and Wyoming.
Ohio
    Counties: Belmont, Carroll, Columbiana, Harrison, Jefferson, and 
Stark.
Pennsylvania
    Counties: Adams, Allegheny, Armstrong, Beaver, Bedford, Berks, 
Blair, Bradford, Bucks, Butler, Cambria, Centre, Chester, Clearfield, 
Clinton, Columbia, Dauphin, Delaware, Fayette, Franklin, Fulton, 
Greene, Huntingdon, Indiana, Jefferson, Juniata, Lackawanna, Lancaster, 
Lebanon, Lehigh, Luzerne, Mifflin, Monroe, Montgomery, Montour, 
Northampton, Northumberland, Perry, Philadelphia, Pike, Schuylkill, 
Snyder, Somerset, Susquehanna, Union, Wayne, Washington, Westmoreland, 
Wyoming, and York.
Virginia
    Counties: Arlington, Clarke, Culpeper, Fairfax, Fauquier, 
Frederick, Loudon, Madison, Page, Prince William, Rappahannock, 
Rockingham, Shenandoah, Stafford and Warren.
    Cities: Alexandria, Harrisonburg, Fairfax, Falls Church, Manassas, 
Manassas Park, and Winchester.
West Virginia
    Counties: Barbour, Berkeley, Braxton, Brooke, Calhoun, Clay, 
Doddridge, Gilmer, Grant, Hampshire, Hancock, Hardy, Harrison, Jackson, 
Jefferson, Lewis, Marion, Marshall, Mineral, Monongalia, Morgan, 
Nicholas, Ohio, Pendleton, Pleasants, Pocahontas, Preston, Randolph, 
Ritchie, Roane, Taylor, Tucker, Tyler, Upshur, Webster, Wetzel, Wirt, 
and Wood.

IX. Draft Southwest Area National Corridor

A. Alternatives and Recommendations

    In response to the Congestion Study, the Department received a 
number of National Corridor alternatives and recommendations for the 
Southern California Critical Congestion Area.
    SCE recommended a National Corridor to encompass the general 
anticipated route of a transmission line it is proposing to build 
between the Palo Verde hub in Arizona and Palm Springs, California 
(Devers-Palo Verde 2 or DPV2). EEI supported SCE's recommended National 
Corridor, citing the need to remedy the existing and growing congestion 
problems in the Southern California Critical Congestion Area as well as 
the need for utilities in the State to meet renewable energy 
requirements.
    San Diego Gas and Electric Company (SDG&E) recommended a National 
Corridor to encompass the general anticipated route of a transmission 
line it is proposing to build through Imperial County, California to 
San Diego, California (Sunrise Powerlink).
    The Nevada Hydro Company, Inc. (Nevada Hydro) recommended a 
National Corridor to encompass the general anticipated route of a 
transmission line associated with its proposed Lake Elsinore Advanced 
Pumped Storage project (LEAPS) in southern California.
    Los Angeles Department of Water and Power (LADWP) noted that the 
Congestion Study had not mentioned LADWP's proposed Green Path North 
project (Green Path), which it regards as very important to relieving 
congestion, maintaining reliability in the area west of Devers, and 
diversifying generation sources by increasing access to 2000 MW of 
potential geothermal power in the Imperial Valley region. LADWP stated, 
``DOE may wish to consider the Green Path North project as a [National 
Corridor].''
    The California Independent System Operator (CAISO) \91\ recommended 
designation of a National Corridor in southern California, citing the 
current congestion problem in that area as well as the increased 
congestion expected as a result of high load growth and the potential 
development of significant wind generation in the Tehachapi area. CAISO 
stated that the boundaries of a National Corridor in southern 
California depend on the success of current planned transmission 
projects. Thus, according to CAISO, if either DVP2 or Sunrise Powerlink 
were to fail to materialize, there would be a critical need for another 
transmission link to one of the major substations in the southern part 
of the Southwest region and/or the Imperial Valley area. CAISO also 
recommended consideration of a National Corridor that would connect the 
broader Tehachapi area to the Los Angeles Basin.
---------------------------------------------------------------------------

    \91\ CAISO is the ISO serving most of California.
---------------------------------------------------------------------------

    CEC agreed with the classification of southern California as a 
Critical Congestion Area and noted that ``the San Diego region's 
transmission problems are acute and graphically illustrate the 
importance of adequate transmission.'' CEC commented that ``California 
interests could be served by the Federal [National Corridor] planning 
and permitting processes under certain limited conditions, given the 
State's history of impediments in developing needed transmission 
capacity.'' However, CEC stated that the focus of the Congestion Study 
was too narrow to accommodate State laws and policies on renewable 
portfolio standards.\92\ CEC further commented that because the 
Department has not discussed how it intends to address environmental 
assessments in the National Corridor designation process, it remains 
concerned whether DOE will designate a National Corridor in a manner 
that adequately considers California's environmental resources, 
legislation concerning State designation of electric transmission 
corridors, and use of existing rights of way.\93\
---------------------------------------------------------------------------

    \92\ See DOE response, Section II.A above.
    \93\ See DOE response, Section III above.
---------------------------------------------------------------------------

    IID acknowledged that the Congestion Study correctly identified the 
presence of congestion on the intertie between IID's control area and 
SCE's control area (Path 42). However, IID noted that it has already 
identified two feasible solutions to mitigate congestion on Path 42, 
and

[[Page 25910]]

is working on a 500 kV transmission project that would connect with 
SDG&E's Sunrise Powerlink to alleviate congestion elsewhere in southern 
California. IID believed that in light of these projects, as well as 
other efforts underway, it may not be necessary to designate a National 
Corridor in southern California at this time.
    CPUC recommended against any National Corridor designations in 
southern California at this time. Noting that skepticism about 
California's siting of infrastructure may have contributed to the 
identification of southern California as a Critical Congestion Area, 
CPUC argued that California stakeholders, including CPUC, CAISO, CEC, 
and the transmission owners, have worked closely together to achieve 
significant progress in transmission expansion, completing $1.8 billion 
worth of transmission projects between 2000 and 2004. CPUC noted that 
it would soon be considering the adoption of a proposed decision that 
would grant a rebuttable presumption in a CPUC siting proceeding to a 
CAISO determination that a proposed project is needed.\94\
---------------------------------------------------------------------------

    \94\ Since submission of its comments on the Congestion Study, 
CPUC issued a decision that created a rebuttable presumption in 
favor of certain economic evaluations by the CAISO. See Opinion on 
Methodology for Economic Assessment of Transmission Projects, CPUC 
D.06-11-018 (Nov. 9, 2006).
---------------------------------------------------------------------------

    CPUC further asserted that specific progress is being made in 
southern California: DPV2 is in the final stages of permitting; \95\ a 
final permitting decision on Sunrise Powerlink is expected the fourth 
quarter of 2007 or early in the first quarter of 2008; and the 
permitting processes for three segments of a transmission project 
related to wind development in the Tehachapi region (Antelope Segments 
1, 2, and 3) are close to completion.\96\ CPUC stated that National 
Corridor designation is unwarranted unless there is evidence that State 
and regional processes are not addressing the problem in a timely 
manner.\97\ CPUC also argued that the Congestion Study exaggerated the 
significance of congestion into southern California.\98\
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    \95\ Since submission of its comments on the Congestion Study, 
CPUC approved construction of the portion of DPV2 within California. 
See Opinion Granting a Certificate of Public Convenience and 
Necessity, CPUC D.07-01-040 (Jan. 25, 2007). The Arizona Commission 
has not yet ruled on SCE's application for the portion of the 
project that would be located in Arizona.
    \96\ Since submission of its comments on the Congestion Study, 
CPUC approved construction of Antelope Segments 1, 2 and 3. See 
Opinion Granting a Certificate of Public Convenience and Necessity, 
CPUC D.07-03-012 (Mar. 1, 2007); and Opinion Granting a Certificate 
of Public Convenience and Necessity, CPUC D.07-03-045 (Mar. 15, 
2007). In its comments on the Congestion Study, CPUC also notes the 
progress of two other projects, which are not subject to its 
jurisdiction, that would alleviate congestion in southern 
California: The Desert Southwest Project sponsored by a number of 
municipal utilities and LEAPS pending at FERC.
    \97\ See DOE response, Section II.D above.
    \98\ See DOE response, Section VII.C above. CPUC also argued 
that instead of designating National Corridors in California, the 
Department should make certain designations of energy corridors on 
Federal land under EPAct section 368. The Department will address 
these comments in the ongoing section 368 proceeding.
---------------------------------------------------------------------------

    After reviewing the alternatives and recommendations provided,\99\ 
the Department believes that designation of a National Corridor for the 
Southern California Critical Congestion Area may be warranted. In the 
following sections, the Department will detail its factual finding of 
the existence of constraints or congestion that adversely affects 
consumers in the Southern California Critical Congestion Area and 
explain the considerations that it believes warrant designation of a 
National Corridor for this area. Finally, the Department will delineate 
and explain the specific boundaries of the draft National Corridor.
---------------------------------------------------------------------------

    \99\ ACC commented on the Phoenix-Tucson Congestion Area of 
Concern identified in the Congestion Study as well as the Tucson to 
Nogales corridor, but did not comment on the Southern California 
Critical Congestion Area. ACC also emphasized the need for the 
Department to consult with it prior to designating any National 
Corridors in Arizona. See DOE response, Section IV.B above.
---------------------------------------------------------------------------

B. Finding of Constraints or Congestion That Adversely Affects 
Consumers

    The Congestion Study identified southern California as a Critical 
Congestion Area, based on evidence of historical, persistent congestion 
caused by numerous well-known transmission constraints into and within 
southern California. The congestion caused by these constraints is 
projected to continue or worsen unless it is addressed through remedial 
actions. In conducting the Congestion Study, the Department identified 
and assessed these constraints based on a review of the extant 
transmission studies and expansion plans available prior to the 
publication of the Congestion Study.
    DOE has assessed these constraints at two levels. In the Congestion 
Study, DOE assessed congestion at the WECC Path \100\ level. (See 
Figures IX-1, -2, and -3, which are taken from the Congestion Study.) 
More recently, DOE has reviewed congestion data provided by the Western 
Area Power Administration (WAPA), and branch group congestion data 
reported by CAISO. ``Branch groups,'' as defined by CAISO, consist of 
major groups of lines between CAISO and other areas, plus two large 
internal paths, WECC Path 15 and WECC Path 26. (See Figure IX-4).
---------------------------------------------------------------------------

    \100\ WECC is responsible for coordinating and promoting 
electric system reliability in all or part of the 14 western States 
and British Columbia, Canada. To facilitate analysis of grid 
operations, WECC and its members have defined and numbered a total 
of 67 major transmission paths in the Western Interconnection. A 
``path'' frequently consists of several related transmission 
elements from one important area of the grid to another, as opposed 
to a single transmission line.
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[[Page 25912]]


[GRAPHIC] [TIFF OMITTED] TN07MY07.041


[[Page 25913]]


[GRAPHIC] [TIFF OMITTED] TN07MY07.042


[[Page 25914]]


[GRAPHIC] [TIFF OMITTED] TN07MY07.043

    The historical review performed for the Congestion Study confirmed 
the presence of congestion in years 1999 through 2005 on Path 26 
(Northern--Southern California), Path 45 (San Diego County--Baja 
California Norte), Path 46

[[Page 25915]]

(West of the Colorado River), Path 49 (East of the Colorado River), and 
Path 65 (Pacific DC Inter-tie). Path 65 exceeded 75 percent of its flow 
limit 32 percent of the time and Paths 26, 45, and 49 exceeded 75 
percent of their flow limits between 15 to18 percent of the time. The 
modeling performed for the Congestion Study projected that several of 
these constraints will continue to cause congestion in 2008. These 
include Paths 42, 45, 49, and 65. Of these, Path 42 IID-SCE (near 
Riverside, California) had a projected U75 of 84 percent and a 
projected U90 of 65 percent.
    CAISO data document the presence of congestion on paths going into 
southern California. The CAISO footprint is divided into three zones. 
Based on the branch groups, CAISO manages congestion into and out of 
these zones through operation of a day-ahead and an hour-ahead 
market.\101\ At the CAISO branch group level, constraints were binding 
and thus produced congestion in both markets in calendar years 2004, 
2005, and 2006. (See Table IX-1.)
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    \101\ Unlike PJM's and NYISO's LMP day-ahead and hour-ahead 
markets, energy is not traded in CAISO's day-ahead and hour-ahead 
markets. Instead, market participants submit desired transmission 
schedules along with bids for adjusting those schedules. 
Transactions scheduled over congested inter-zonal interfaces are 
assessed a congestion charge based on these adjustment bids. The 
day-ahead and hour-ahead markets do not account for intra-zonal 
congestion, which CAISO must manage during real-time operations.
[GRAPHIC] [TIFF OMITTED] TN07MY07.044

    In the day-ahead market, the Adelanto, Blythe, Eldorado, Mead, and 
Palo Verde branch groups had the most binding hours of all the CAISO 
branch groups. The Palo Verde and Mead branch groups were the most 
congested in 2006 with binding hours of 15 and 13 percent respectively. 
Congestion on Palo Verde, in terms of binding hours, diminished 
somewhat in 2006 as compared to 2004 and 2005, but the congestion 
prices increased. On Mead, both binding hours and congestion prices 
were higher in 2006 than in 2004 and 2005. On Path 26, the congestion 
price diminished after its capacity limit was raised in late June 2005, 
but the number of binding hours increased. As shown in Table IX-1, 
these same branch groups are also congested in CAISO's hour-ahead 
market. The aggregate annual congestion revenues for several of these 
branch groups are shown in Table IX-2, and range from $122,000 to $17 
million in 2006.

[[Page 25916]]

[GRAPHIC] [TIFF OMITTED] TN07MY07.045

    CAISO data also demonstrate the existence of congestion on paths 
within southern California. When congestion arises in real time within 
one of the three CAISO zones, CAISO must engage in redispatch. CAISO 
draws from three sources for this redispatch: Reliability-must-run 
(RMR) units; \102\ long-start thermal units lined up day-ahead in 
return for minimum load cost compensation (MLCC); and other generators 
whose bids are accepted out of sequence (OOS). The Department 
recognizes that the magnitude of RMR, MLCC, and OOS costs is, in part, 
a function of CAISO's market design, and that CAISO is in the process 
of replacing its zonal congestion management system with an LMP 
congestion management system. Nevertheless, RMR, MLCC, and OOS costs 
are indicators of the presence and persistence of intra-zonal 
congestion. RMR, MLCC, and OOS costs were incurred in 2004, 2005, and 
2006.\103\ CAISO states further that ``[m]ost of the major points of 
intra-zonal congestion in 2005 were located in the CAISO's southern 
congestion zone (SP15).'' \104\
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    \102\ RMR units are generally local generators that would 
otherwise not be commercially viable, but are needed because 
transmission constraints prevent the use of other generating units. 
RMR units generally operate subject to cost-of-service contracts 
that ensure they will remain in business, available to operate when 
needed.
    \103\ See CAISO, 2006 Annual Report on Market Issues and 
Performance, p. 6-4, 6-5 (April 2006) (``Total estimated intra-zonal 
congestion costs for 2004, 2005, and 2006 were $426 million, $222 
million, and $207 million, respectively. These costs have been 
declining over the period due to installation of appropriately 
located new generation and transmission upgrades.'').
    \104\ CAISO, 2005 Annual Report on Market Issues and 
Performance, p. 6-2 (April 2006); see also CAISO, 2004 Annual Report 
on Market Issues and Performance, p. 6-13 (April 2005) (CAISO 2004 
Annual Report) (in 2004, ``the bulk of OOS dispatches of incremental 
energy (96 percent) are for locational constraints within the 
CAISO's southern zone (SP15)'').
---------------------------------------------------------------------------

    Data from WAPA also demonstrate that routes into SP15 via the 
Blythe, Gene, Marketplace, and Mead substations are frequently 
congested, as indicated by numerous denials of requests to reserve 
capacity for transfers of power into SP15. (See Table IX-3).
[GRAPHIC] [TIFF OMITTED] TN07MY07.046

    Thus, the Department has documented the existence of persistent 
congestion into and within the Southern California Critical Congestion 
Area, as well as the constraints causing that persistent congestion. As 
discussed in Section II.A above, whenever there is persistent 
congestion, buyers must rely on power from less-preferred generating 
sources, a smaller range of generators is able to serve load, and grid 
operators have fewer options for dealing with adverse circumstances or 
unanticipated events, all of which adversely affects consumers. 
Therefore, the Department finds under FPA section 216(a)(2) that there 
are ``constraints or congestion that adversely affects consumers'' in 
the Southern California Critical Congestion Area.

C. Determination That Designation of a Southwest Area National Corridor 
Is Warranted

    Given the presence of constraints or congestion that adversely 
affects consumers in the Southern California Critical Congestion Area, 
the Secretary has the discretion to consider designation of a National 
Corridor. As

[[Page 25917]]

discussed above in Section II.A, the Secretary will determine whether 
to exercise his discretion based on the totality of the information 
developed, taking into account relevant considerations, including the 
considerations identified in FPA section 216(a)(4), as appropriate. In 
this section, the Department discusses the considerations that it 
believes warrant designation of the Southwest Area National Corridor.
1. Reliability Considerations
    In recent years, southern California's electricity supply 
capability, combined with what supplies can be imported from external 
sources, has been barely enough to meet peak electricity demand. In the 
summer of 2005, CAISO declared two Stage 2 Emergencies in southern 
California (July 21 and 22) and a transmission emergency occurred on 
August 25 that resulted in the curtailment of 900 MW of firm load. In 
the summer of 2006, rolling blackouts were avoided during a period of 
extremely hot weather only through a combination of good fortune, 
extraordinary efforts by the utilities, CAISO, and the Bonneville Power 
Administration, and timely cooperation by electricity consumers to 
reduce electricity demand.
    In its comments to DOE, CAISO noted that load in southern 
California has been growing at a rate of approximately 1.5 percent 
annually, which translates into a total of approximately 657 MW of new 
load that needs to be served each year. CAISO notes that this rate of 
load growth, combined with the threat of extreme weather conditions, 
such as a 1-in-10-year heat wave, could mean that by 2015, the loss of 
a single critical transmission path could necessitate the curtailment 
of approximately 1,500 MW of load. CAISO notes that the San Diego area 
is projected to be deficient in overall generation capacity by the year 
2010 due to severe import limits. CAISO also notes looming reliability 
problems on the South of Lugo path, a major CAISO internal path that 
serves the Los Angeles Basin. CAISO states that in the event of a 
double-line contingency on that path at peak load, anywhere from 500 to 
1,000 MW of load would need to be curtailed.
    Since submission of its comments on the Congestion Study, CAISO has 
published additional analyses that identify potential reliability 
problems in southern California. In its assessment for the summer of 
2007, CAISO concludes that there is a 23 percent chance of entering 
into a Stage 1 emergency in the area south of Path 26 (SP26), and a 12 
percent chance of entering into a Stage 2 emergency.\105\ Further, 
according to CAISO's 2007 Transmission Plan, a number of transmission 
enhancements are needed in the Devers area to mitigate existing or 
projected reliability violations.\106\
---------------------------------------------------------------------------

    \105\ CAISO, 2007 Summer Loads and Resources Operations 
Assessment, p. 3 (March 7, 2007).
    \106\ CAISO, 2007 Transmission Plan, Table 2-4, item 7; Table 2-
5, item 8; and Table 2-6, items 1 and 3 (Jan. 2007).
---------------------------------------------------------------------------

    Similarly, LADWP stated in its comments to the Department that 
``Zone SP26 is a large load center that is currently experiencing 
reliability problems because of transmission constraints. * * * Zone 
SP26 will likely continue its dependence on imports, so transmission 
improvements are needed to avoid future violations of reliability 
standards. * * *''
    In its comments to DOE, SDG&E described the San Diego area's 
situation as follows:

    The San Diego region has only two points of interconnection to 
the interstate electric transmission grid: A 500 kV line at SDG&E's 
Miguel substation that delivers power from the east, and a series of 
230 kV lines connecting at the San Onofre Nuclear Generating Station 
(``SONGS'') switchyard to the north. Taken together, these two paths 
are capable of serving only a portion of the peak-load requirements 
of the SDG&E local reliability area. Neither of these paths is 
capable of serving the full peak-load requirements of the SDG&E 
local reliability area if the other is out of service. In fact, 
these two paths are barely sufficient to serve the average load of 
the region. As a result of growing loads in southern California, 
coupled with the addition of new generation in the desert southwest, 
the import capability into the San Diego area is often fully 
utilized.
    To put the San Diego constraints in perspective, there are more 
than forty-five 500 kV transmission lines in the state of 
California. The two major utilities serving the Los Angeles area 
have more than thirty 500 kV AC transmission lines as well as two +/
-500 kV DC lines. Phoenix, America's sixth largest city, has eight 
500 kV transmission lines and six 345 kV transmission lines. By 
comparison, among the large electric service areas in the State and 
the west, San Diego is extremely under-served in terms of high 
voltage access to the rest of the grid. [footnotes omitted]

    The data detailed above indicate that consumers in the Southern 
California Critical Congestion Area face threats to reliability if 
existing congestion problems are not addressed. Reliable electricity 
supplies are vital to the economic and social well-being of any 
metropolitan area. Electricity supply disruptions may come in many 
forms, ranging from brief disturbances in power quality and localized 
outages to large-scale, cascading blackouts. The exact cost of electric 
supply disruptions is difficult to quantify and varies depending upon 
the specific circumstances. However, such disruptions can impose 
enormous costs on consumers and may also, under certain circumstances, 
pose dangers to public health and safety.
    For example, on Saturday, August 10, 1996, a blackout affected 
several western States, including much of California, for several 
hours. CEC conducted a survey to gauge the effects and implications of 
the blackout. The outage affected slightly less than half of 
California's residential electricity customers, 20 percent of the 
commercial customers, and 25 percent of the industrial customers. 
Forty-one percent of the commercial respondents and 31 percent of the 
industrial respondents said that the outage was ``very disruptive'' to 
their operations. The losses reported ranged from $40 to $5 
million.\107\
---------------------------------------------------------------------------

    \107\ CEC, A Survey of the Implications to California of the 
August 10, 1996 Western States Power Outage, p. 43 (June 1997).
---------------------------------------------------------------------------

    Another California analysis provides further insights:

    Blackouts impose a wide range of costs on the economy, but these 
costs are incredibly difficult to quantify. The primary costs are 
direct and roughly proportional to the duration of the outage and 
the amount of undelivered power, including lost production and idled 
labor. Frequently, however, actual losses are much greater than 
this. For example, when production systems are shut down, it can 
take hours or days to restart them and return to full productivity. 
Often, information technology equipment and even basic manufacturing 
equipment is damaged when power is suddenly lost; and industries 
dependent on climate control (from bioscience labs to supermarkets) 
are threatened with damaged research or spoiled goods. Finally, 
power interruptions frequently result in lost data, which can be 
costly and sometimes impossible to reproduce.
    Loss of power can also impose longer-term costs by damaging 
external relationships and customer interactions. For example, a 
power interruption for an internet-based business can compromise 
security and harm its reputation, leading to lower sales in the 
future * * *. For a brick-and-mortar business, inadequate lighting 
and lack of power to security systems increase the potential 
likelihood of vandalism and theft. Loss of climate control and 
telecommunications capabilities makes it especially difficult for 
restaurants and retail establishments to attract and retain 
customers. However, all of these factors still only point to direct 
costs. Indirect costs multiply the impact several times over as the 
effects of a power interruption ripple through the economy; for 
example, lost sales by a

[[Page 25918]]

retailer can lead to reduced orders to suppliers, and so forth.\108\
---------------------------------------------------------------------------

    \108\ Bay Area Economic Forum, The Bay Area-- A Knowledge 
Economy Needs Power, pp. 25-26 (April 2001).

    Further, one of the considerations identified in FPA section 
216(a)(4) is whether ``the economic vitality and development of the 
corridor, or the end markets served by the corridor, may be constrained 
by lack of adequate or reasonably priced electricity.'' FPA section 
216(a)(4)(A); 16 U.S.C. 824p(a)(4)(A) (emphasis added).
    Therefore, the Department believes that reliability considerations 
warrant designation of a National Corridor for the Southern California 
Critical Congestion Area.
2. Supply Diversity Considerations
    Much of the existing generation fleet on which southern California 
relies is fueled by natural gas. During 2005, about 38 percent of the 
electricity generated within California was produced from units fueled 
by natural gas, as compared with 20 percent from coal, 17 percent from 
large hydro, and 14 percent from nuclear.\109\ California's total 
annual consumption of natural gas, approximately 2.2 trillion cubic 
feet, would make this State the tenth largest natural-gas consuming 
``country'' in the world. The State's industrial and electricity-
generation sectors consume the most natural gas, approximately 66 
percent of the total amount. Natural gas used for electricity 
generation is the largest contributor to the State's growing demand 
rate, one percent per year.\110\ One of the consequences of congestion 
in southern California is that it prolongs and exacerbates the area's 
dependence on natural gas.
---------------------------------------------------------------------------

    \109\ CEC Report, Net System Power: A Small Share of 
California's Power Mix in 2005, Pub. No. CEC-300-2006-009-F, p. 4 
(April 2006).
    \110\ CEC Staff Report, Natural Gas Assessment Update: Executive 
Summary, Pub. No. CEC-600-2005-003, p. iv (Feb. 2005).
---------------------------------------------------------------------------

    Natural gas is relatively high in price and must be purchased in 
markets that are highly volatile and subject to unanticipated 
international trends and adverse events. Inadequate transmission 
capacity leaves consumers in the Southern California Critical 
Congestion Area exposed, perhaps increasingly, to the higher prices and 
higher price volatility associated with this generation fuel, with a 
resulting impact on business certainty, especially for industrial 
consumers. Thus, economic growth may be jeopardized.
    Moreover, the Department takes note that CPUC has adopted an 
interim Emissions Performance Standard, which is a facility-based 
emissions standard requiring that all new long-term commitments for 
base-load generation to serve California consumers be with power plants 
that have emissions no greater than a combined cycle gas turbine plant. 
In addition, the State of California has established standards 
requiring load-serving entities to meet 20 percent of their electricity 
needs through renewable-based generation capacity (wind, geothermal, 
and solar) by 2010, and 33 percent by 2020. In order to meet these 
goals and to provide for steady economic growth, consumers in the 
Southern California Critical Congestion Area will need additional 
transmission access to a range of sources of supply, particularly 
renewable energy.
    Further, one of the considerations identified in FPA section 
216(a)(4) is whether ``(i) economic growth in the corridor, or the end 
markets served by the corridor, may be jeopardized by reliance on 
limited sources of energy; and (ii) a diversification of supply is 
warranted.'' FPA section 216(a)(4)(B); 16 U.S.C. 824p(a)(4)(B).
    Therefore, the Department believes that supply diversity 
considerations warrant designation of a National Corridor for the 
Southern California Critical Congestion Area.
3. National Defense and Homeland Security Considerations
    The Southern California Critical Congestion Area is home to 20.7 
million people (7.0 percent of the Nation's 2005 population) \111\ and 
produces about $950 billion of gross state product (7.7 percent of the 
2005 gross national product).\112\ Given the large number of military 
and other facilities in the Southern California Critical Congestion 
Area that are extremely important to the national defense and homeland 
security, as well as the vital importance of this populous area to the 
Nation as an economic center, any deterioration of the electric 
reliability or economic health of this area would constitute a serious 
risk to the well-being of the Nation. Further one of the consideration 
identified in FPA section 216(a)(4) is whether ``the designation would 
enhance national defense and homeland security.'' FPA section 
216(a)(4)(E); 16 U.S.C. 824p(a)(4)(E).
---------------------------------------------------------------------------

    \111\ U.S. Census Bureau, State & County QuickFacts, http://quickfacts.census.gov/qfd/states/00000.html and http://quickfacts.census.gov/qfd/states/06/06073.html.
    \112\ See Northwest Midwest Institute, Total Gross State Product 
by State, 2001-2005, http://www.nemw.org/gsp.htm. Total gross state 
product attributable to southern California in 2005 was estimated by 
prorating the State total for 2005 according to the estimated 2005 
population in seven California counties: Imperial, Kern, Los 
Angeles, Orange, Riverside, San Bernardino, and San Diego.
---------------------------------------------------------------------------

    Therefore, the Department believes that national defense and 
homeland security considerations warrant designation of a National 
Corridor for the Southern California Critical Congestion Area.

D. Boundaries of the Draft Southwest Area National Corridor

    In this section, the Department first explains how it determined 
the general extent of the draft Southwest Area National Corridor using 
a source-and-sink approach. Then, the Department explains how it 
delineated specific boundaries for the draft Southwest Area National 
Corridor.
1. General Extent of the Draft Southwest Area National Corridor
    In order to set the boundaries of the draft Southwest Area National 
Corridor, DOE used the general source-and-sink approach described above 
in Section III. The sink areas are the locations of the consumers 
adversely affected by the persistent congestion documented in Section 
IX.B above. Specifically, the sink areas are the urban areas downstream 
of the constraints identified in Section IX.B above, including the 
cities of Los Angeles, San Bernardino, Riverside, Anaheim, San Diego, 
and other nearby municipalities.
    With regard to selecting source areas, as discussed in Section III 
above, the Department was guided by the considerations identified in 
FPA section 216(a)(4). In particular, the Department focused on the 
considerations of ensuring adequate supplies of power \113\ and 
diversifying supply.\114\ Applying those considerations, DOE identified 
as source areas locations with substantial amounts of existing, under-
used generation capacity (see Table IX-4), and locations with potential 
for substantial development of wind, geothermal, or solar generation 
capacity.\115\ The existing, under-used generation could readily 
provide additional power to the sink areas if the required transmission 
capacity were available. In addition, improved transmission access to 
the areas with renewable-based generation potential would diversify 
supply. Figure IX-5 indicates the locations of the source

[[Page 25919]]

areas in southern California and western Arizona.
---------------------------------------------------------------------------

    \113\ See FPA sec. 216(a)(4)(A).
    \114\ See FPA sec. 216(a)(4)(B).
    \115\ The potential wind, geothermal, and solar generation 
capacity used to establish the source areas was identified through 
State-level maps of potential wind, geothermal, and solar resources. 
Those maps are provided in Appendix B, which is available at http://nietc.anl.gov.
---------------------------------------------------------------------------

BILLING CODE 6450-01-P
[GRAPHIC] [TIFF OMITTED] TN07MY07.047


[[Page 25920]]


[GRAPHIC] [TIFF OMITTED] TN07MY07.048

    Having identified the source and sink areas, DOE sought to 
delineate a draft National Corridor that would connect those areas, 
encompass all of the relevant constraints contributing to congestion in 
southern California, and

[[Page 25921]]

encompass a range of potential transmission projects and a range of 
potential routes. The Department is also including the sink areas in 
the draft Southwest Area National Corridor, because it is frequently 
the case that local upgrades to the transmission system and related 
facilities are needed in such areas in order to achieve the full 
benefits of developing major new high-voltage transmission lines. 
Further, the Department has included the source areas in the draft 
Southwest Area National Corridor.
    Finally, the draft Southwest Area National Corridor includes the 
several substations and related transmission facilities between Los 
Angeles and the Hoover Dam area southeast of Las Vegas, Nevada. This 
area and the area around Palo Verde, Arizona are the two principal 
portals from the east for transferring bulk power into southern 
California. From both a transmission planning perspective and an 
operational perspective, it is useful to think of these two pathways as 
closely related. Adding facilities or changing the operating rules on 
one is almost certain to require changes in the other so as to maintain 
an appropriate balance between them.\116\
---------------------------------------------------------------------------

    \116\ For example, CAISO states that the Southern California 
Import Transmission (SCIT) operating nomogram: Places limits on 
imports into southern California based on a variety of conditions. 
They include power flows on five major paths into southern 
California, actual flow East of the River (EOR), and system inertia 
from generation within southern California. When the SCIT nomogram 
becomes binding, the CAISO must increment additional generation from 
a limited number of units in southern California to mitigate flows. 
Intra-zonal congestion initiating the SCIT nomogram often is due to 
the large quantity of low cost energy from imports from Arizona or 
Mexico being used to serve southern California load.
    CAISO 2004 Annual Report, p. 6-3.
---------------------------------------------------------------------------

2. Specific Boundaries of the Draft Southwest Area National Corridor
    After determining the general area to be covered by the draft 
National Corridor, DOE addressed the question of establishing its 
specific boundaries. DOE relied on county boundaries to determine the 
perimeter of the draft Southwest Area National Corridor. That is, if a 
portion of the general area identified in Section IX.D.1 above (i.e., 
the source areas, the sink areas, and the areas in between encompassing 
the constraints of concern) is located within a county, then the entire 
county is assumed to be within the draft National Corridor, and the 
outer perimeter of the group of counties thus identified defines the 
draft National Corridor as whole. This approach establishes boundaries 
that are precise and identifiable. Moreover, this approach helps ensure 
that the draft National Corridor encompasses a range of potential 
projects and a range of potential routes, as discussed in Section III 
above. The resulting draft Southwest Area National Corridor is shown in 
Figure IX-6.

[[Page 25922]]

[GRAPHIC] [TIFF OMITTED] TN07MY07.049


[[Page 25923]]


    The counties that comprise the draft Southwest Area National 
Corridor are as follows:
California
    Imperial, Kern, Los Angeles, Orange, Riverside, San Bernardino, and 
San Diego.
Arizona
    La Paz, Maricopa, and Yuma.
Nevada
    Clark.

    The Secretary of Energy has approved the publication of this 
notice.
    Issued in Washington, DC, on April 25, 2007.
Kevin M. Kolevar,
Director, Office of Electricity Delivery and Energy Reliability.
[FR Doc. 07-2115 Filed 5-4-07; 8:45 am]
BILLING CODE 6450-01-C


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