Opinion ID: 2795683
Heading Depth: 2
Heading Rank: 2

Heading: Development of the Challenged Orders

Text: In 2007, FERC adopted a number of reliability standards proposed by NERC. See Mandatory Reliability Standards for the Bulk‐Power System, Order No. 693, 118 FERC ¶ 61,218 (2007). In so doing, however, FERC expressed concern that NERC’s proposed method for identifying facilities subject to the new standards—which involved deferring to the determinations of various regional councils—left gaps in coverage that would defeat the Electricity Modernization Act’s goal of ensuring a stable and reliable nationwide power grid. See id. ¶ 61,218, at ¶¶ 75–81. FERC therefore directed NERC to revise its proposed definition of the bulk electric system3 to eliminate regional discretion and, instead, to establish a uniform set of rules that include an operating voltage threshold, specific facility configurations to be included or excluded from the bulk electric system notwithstanding their operating voltage, and a process for 3 “Bulk electric system” is an industry term of art that differs slightly from the statutory “bulk‐power system,” but not in ways relevant to this opinion. See Order No. 693, 118 FERC ¶ 61,218, at ¶ 76. 7 facilities to seek exemptions from the regulations. See Revision to Electric Reliability Organization Definition of Bulk Electric System, Order No. 743, 133 FERC ¶ 61,150, at ¶ 30 (2010). Various entities, including New York, argued that FERC’s directive would result in the agency exceeding its regulatory jurisdiction by presumptively subjecting local distribution facilities operating above a default voltage threshold to federal regulation. FERC rejected this argument and proceeded with its directive, clarifying that NERC would also develop criteria for determining which facilities operating above the default threshold might nevertheless qualify for the local distribution exclusion, and that FERC itself would conduct a factual inquiry on exemption where specified criteria failed to yield a determinative answer as to whether a facility was engaged in local distribution. See Revision to Electric Reliability Organization Definition of Bulk Electric System, Order No. 743‐A, 134 FERC ¶ 61,210, at ¶¶ 18–25 (2011). In early 2012, NERC submitted its new proposed standards and procedures for identifying facilities within the bulk electric system, which FERC proceeded to publish for industry and public comment. See Revision to Electric Reliability Organization Definition of Bulk Electric System and Rules of Procedure, Notice of Proposed Rulemaking, 139 FERC ¶ 61,247 (2012). 8 Approximately 60 persons and entities commented, including New York, which again voiced objections. Nevertheless, in December 2012, FERC issued Order 773, the first of the orders here at issue. That order essentially adopts NERC’s proposed standards and procedures for identifying power transmission facilities that are part of the bulk electric system subject to federal regulation. See Order No. 773, 141 FERC ¶ 61,236, at ¶¶ 1–4. These standards and procedures may be grouped into three categories. First, any facility with an operating voltage at or exceeding 100 kilovolts (“kV”) is presumed to be part of the nation’s bulk electric system, while any facility with a lower operating voltage is presumed to be engaged in local distribution. See id. ¶ 61,236, at ¶ 67 (observing that “this threshold will remove from the bulk electric system the vast majority of facilities that are used in local distribution, which tend to be operated at lower, sub‐100 kV voltages”). Second, notwithstanding these presumptions, the order specifies five facility configurations that are to be included in the bulk electric system, and four configurations that are to be excluded therefrom, regardless of their operating voltages. See id. One exclusion in particular, “E3,” identifies facilities that operate at over 100 kV but, nevertheless, constitute a local network. The 9 descriptions of the inclusions and exclusions, which are detailed and quite technical, are reproduced in the margin.4 4 The five inclusions are as follows: I1 – Transformers with the primary terminal and at least one secondary terminal operated at 100 kV or higher unless excluded under Exclusion E1 or E3. I2 – Generating resource(s) with gross individual nameplate rating greater than 20 MVA or gross plant/facility aggregate nameplate rating greater than 75 MVA including the generator terminals through the high‐side of the step‐up transformer(s) connected at a voltage of 100 kV or above. I3 – Blackstart Resources identified in the Transmission Operator’s restoration plan. I4 – Dispersed power producing resources with aggregate capacity greater than 75 MVA (gross aggregate nameplate rating) utilizing a system designed primarily for aggregating capacity, connected at a common point at a voltage of 100 kV or above. I5 – Static or dynamic devices (excluding generators) dedicated to supplying or absorbing Reactive Power that are connected at 100 kV or higher, or through a dedicated transformer with a high‐side voltage of 100 kV or higher, or through a transformer that is designated in Inclusion I1. Order No. 773, 141 FERC ¶ 61,236, at ¶ 13. The four exclusions are as follows: 10 E1 – Radial systems: A group of contiguous transmission Elements that emanates from a single point of connection of 100 kV or higher and: a) Only serves Load. Or, b) Only includes generation resources, not identified in Inclusion I3, with an aggregate capacity less than or equal to 75 MVA (gross nameplate rating). Or, c) Where the radial system serves Load and includes generation resources, not identified in Inclusion I3, with an aggregate capacity of non‐retail generation less than or equal to 75 MVA (gross nameplate rating). Note – A normally open switching device between radial systems, as depicted on prints or one‐line diagrams for example, does not affect this exclusion. E2 – A generating unit or multiple generating units on the customer’s side of the retail meter that serve all or part of the retail Load with electric energy if: (i) the net capacity provided to the BES does not exceed 75 MVA; and (ii) standby, back‐up, and maintenance power services are provided to the generating unit or multiple generating units or to the retail Load by a Balancing Authority, or provided pursuant to a binding obligation with a Generator Owner or Generator Operator, or under terms approved by the applicable regulatory authority. E3 – Local networks (LN): A group of contiguous transmission Elements operated at or above 100 kV but less than 300 kV that distribute power to Load rather than transfer bulk‐power across the interconnected system. LN’s emanate from multiple points of connection at 100 kV or higher to improve the level of service to retail customer Load and not to accommodate bulk‐power transfer across the interconnected system. The LN is characterized by all of the following: 11 Third, even if, at the first two steps of analysis, a facility appears to come within FERC’s regulatory jurisdiction, the order affords two avenues for individualized review. One permits a facility falling within federal jurisdiction to seek a technical exemption from the reliability requirements, a case‐by‐case decision initially made by NERC but appealable on application to FERC. See id. ¶ 61,236, at ¶¶ 27, 238, 269. Separate and independent from that process, a facility that thinks it is engaged in local distribution, and that is not already a) Limits on connected generation: The LN and its underlying Elements do not include generation resources identified in Inclusion I3 and do not have an aggregate capacity of non‐retail generation greater than 75 MVA (gross nameplate rating); b) Power flows only into the LN and the LN does not transfer energy originating outside the LN for delivery through the LN; and c) Not part of a Flowgate or transfer path: The LN does not contain a monitored Facility of a permanent Flowgate in the Eastern Interconnection, a major transfer path within the Western Interconnection, or a comparable monitored Facility in the ERCOT or Quebec Interconnections, and is not a monitored Facility included in an Interconnection Reliability Operating Limit (IROL). E4 – Reactive Power devices owned and operated by the retail customer solely for its own use. Id. ¶ 61,236, at ¶ 18. 12 excluded from FERC jurisdiction at the first two steps of analysis, can petition FERC for an individualized determination of jurisdiction. That determination is made by reference to all relevant factors, including those set forth in the earlier seven‐factor test. Further, notice‐and‐comment procedures are employed in making the decision, thereby allowing all interested parties to be heard. See id. ¶ 61,236, at ¶¶ 66, 69–73. Challenged Order 773 is subject to a two‐year “grace period,” affording parties time to plan for and implement the reliability requirements, to request technical exemptions therefrom, and to petition for individualized jurisdictional review. A subsequent order has extended that grace period to July 1, 2016. See Revisions to Electric Reliability Organization Definition of Bulk Electric System and Rules of Procedure, 143 FERC ¶ 61,231 (2013). New York unsuccessfully sought rehearing on Order 773, see Order No. 773‐A, 143 FERC ¶ 61,053, whereupon it timely filed the instant petition for review of both Orders 773 and 773‐A.