Agencies’ Joint Comment Urges the FERC Not to Restore Incumbent Transmission Owners’ Right of First Refusal for New Facilities
The Department of Justice and the Federal Trade Commission yesterday submitted to the Federal Energy Regulatory Commission (FERC) a joint comment urging it not to restore a right of first refusal that would enable incumbent electricity transmission owners to block competitors from bidding to design, construct, and own certain new interstate transmission facilities.
The FERC is considering reinstating the right of first refusal, or ROFR – which was eliminated in certain instances in 2011 – as long as incumbent transmission owners agree to a joint ownership structure with one or more unaffiliated, non-incumbent partners. FERC issued a Notice of Proposed Rulemaking on April 21, 2022. This could mean that the design and construction of certain transmission facilities is less competitive, resulting in higher prices or lower quality.
“We commend FERC for undertaking this rulemaking, which is aimed at encouraging needed regional transmission planning and construction,” said Assistant Attorney General Jonathan Kanter of the Justice Department’s Antitrust Division. “The rulemaking comes at a critical time, when the nation is undertaking major grid modernization efforts, and competition can make transmission design and construction less costly, more resilient, and more innovative for the American consumer. Thus, we urge FERC not to abandon competition, through the reinstatement of a federal right of first refusal, but to first evaluate the effects of its other proposals, which are consistent with competition, on achieving its goals.”
The joint comment addresses the benefits and importance of competition and new entry for the design and construction of interstate electric transmission facilities. These facilities are necessary to ensure robust wholesale electricity markets and interconnect renewable generation facilities. The comment notes that when FERC eliminated the ROFR under certain circumstances in 2011, it recognized the benefits to consumers of having competition for transmission design and construction. The comment urges FERC not to abandon competition, and it cites examples of where competition for transmission design and construction has resulted in lower costs and innovation.
The comment also supports proposals made in FERC’s Notice of Proposed Rulemaking to require that regional transmission planning be done on a sufficiently long-term basis, that planning involve state regulators to reduce disputes over cost allocation, that transmission planning for local projects be more transparent, and that neighboring utilities improve their interregional coordination. The comment also notes other procompetitive solutions offered by stakeholders in the ongoing proceeding, including creating an independent transmission monitor (or regional monitors) to limit the influence of incumbent utilities over the planning process.