FERC Order No State Siting and Construction Requirements. White Paper Published by: SPP Legal/Regulatory

FERC Order No. 1000 State Siting and Construction Requirements White Paper Published by: SPP Legal/Regulatory For the SPP Strategic Planning Committee Final December 8, 2011 1

TABLE OF CONTENTS 1. HISTORY AND BACKGROUND... 3 2. DEFINITIONS... 3 3. ORDER NO. 1000 REQUIREMENTS REGARDING NONINCUMBENT TRANSMISSION DEVELOPER PARTICIPATION IN REGIONAL TRANSMISSION PLANNING... 4 4. OVERVIEW OF STATE CONSTRUCTION AND SITING REQUIREMENTS... 4 5. STATE-BY-STATE CITING LAWS AND REQUIREMENTS... 5 A. Arkansas... 5 B. Kansas... 7 C. Louisiana... 8 D. Missouri... 9 E. Nebraska... 11 F. New Mexico... 12 G. Oklahoma... 14 H. Texas... 15 6. CONCLUSION... 17 2

1. HISTORY AND BACKGROUND On July 21, 2011, the Federal Energy Regulatory Commission ( FERC ) issued Order No. 1000, Transmission Planning and Cost Allocation by Transmission Owning and Operating Public Utilities. 1 Order No. 1000 requires all public utility transmission providers to (among other things) facilitate nonincumbent transmission developer participation in regional transmission planning by removing from FERC-approved tariffs and agreements any language creating a federal right of first refusal ( ROFR ) for an incumbent transmission provider to construct transmission facilities selected in a regional transmission plan for cost allocation. 2 Compliance filings to address this requirement are due October 11, 2012. During its August 30, 2011 meeting, the Strategic Planning Committee ( SPC ) directed Southwest Power Pool ( SPP ) staff to develop a series of white papers examining the various compliance requirements of Order No. 1000 and proposing possible modifications to the SPP Open Access Transmission Tariff ( OATT ) and other SPP documents and processes to comply with Order No. 1000. This white paper examines state laws and regulations governing the construction and siting of transmission facilities in the SPP Region. As a multi-state Regional Transmission Organization ( RTO ), SPP will need to examine state laws and regulations governing siting and authority to construct transmission facilities when determining how to address the requirement to eliminate federal ROFR from the SPP OATT and agreements. 2. DEFINITIONS Order No. 1000 uses the following terminology relevant to this white paper: Incumbent transmission developer/provider: An entity that develops a transmission project within its own retail distribution service territory or footprint. Nonincumbent transmission developer: An entity that either: (1) does not have a retail distribution service territory or footprint; or (2) is a public utility transmission provider that proposes a transmission project outside of its existing retail distribution service territory or footprint, where it is not the incumbent for purposes of the project. Transmission facility selected in a regional transmission plan for purposes of cost allocation: A transmission facility that has been selected, pursuant to a Commission-approved regional transmission planning process, as a more efficient or cost-effective solution to regional transmission needs. This term does not include: (1) facilities planned by local planning process that are rolled-up into regional plans; and (2) facilities for which the sponsor does not intend to 1 2 136 FERC 61,051 (FERC Docket No. RM10-23-000). Order No. 1000 indicates that the elimination of federal ROFR from FERC-approved tariffs and agreements does not: (1) apply to transmission facilities not selected in a regional transmission plan for purposes of cost allocation; (2) apply to upgrades to existing transmission facilities, such as tower change outs or reconductoring; (3) affect existing rights-of-way; and (4) affect state or local laws or regulations regarding the construction or siting of transmission facilities. 3

seek cost allocation under the regional cost allocation methodology (i.e., merchant transmission facilities). Transmission planning region: The region in which a public utility transmission provider, in consultation with stakeholders and affected states, has agreed to participate for purposes of regional transmission planning and development of a single regional transmission plan. For RTO members, the transmission planning region is the RTO region. 3. ORDER NO. 1000 REQUIREMENTS REGARDING NONINCUMBENT TRANSMISSION DEVELOPER PARTICIPATION IN REGIONAL TRANSMISSION PLANNING Order No. 1000 requires public utility transmission providers to remove from their OATTs and other FERC-jurisdictional tariffs and agreements any provisions that grant a federal ROFR to incumbent transmission owners to construct transmission facilities that are selected in a regional transmission plan for purposes of cost allocation. 3 The focus of this requirement is transmission facilities that are evaluated at the regional level and selected in the regional plan for purposes of cost allocation, as opposed to facilities that are planned exclusively in the public utility transmission provider s local planning process and simply rolled-up and listed in the regional transmission plan for informational purposes and analysis. This requirement does not apply to the right of an incumbent utility to build, own, and recover costs for upgrades to its existing transmission facilities, and does not alter an incumbent transmission provider s use and control of existing rights of way, even if such upgrades or facilities on existing rights-of-way are selected in the regional transmission plan for purposes of cost allocation. In Order No. 1000, FERC expressly indicated that its requirement to eliminate federal ROFR from all FERC-approved tariffs and agreements was not intended to limit, preempt, or otherwise affect state or local laws or regulations with respect to construction of transmission facilities, including but not limited to authority over siting or permitting of transmission facilities. Moreover, Order No. 1000 does not require public utility transmission providers to remove from FERC-approved tariffs and agreements references to state or local laws or regulations that address ROFR. 4. OVERVIEW OF STATE CONSTRUCTION AND SITING REQUIREMENTS As discussed above, FERC s mandate to eliminate federal rights of first refusal for incumbent transmission owners to construct facilities selected in the regional transmission plan for cost 3 Order No. 1000 at P 313. Order No. 1000 continues to permit incumbent transmission providers to meet their reliability needs or service obligations by choosing to build new transmission facilities that are located solely within their retail distribution service territory or footprint and that are not included in the regional transmission plan for cost allocation. Id at P 262. 4

allocation was not intended to affect state or local laws governing the construction, siting, or permitting of transmission facilities. In developing its compliance filing to remove ROFR for such facilities, it is useful for SPP to examine the relevant state laws and regulations governing the construction of transmission facilities in the SPP Region. Specifically, state statutes and regulations addressing the siting and/or permitting of new transmission facilities and state laws governing the types of entities that are permitted to construct transmission facilities are particularly relevant to the Order No. 1000 requirement to eliminate federal ROFR. With respect to siting of transmission facilities, state laws in Arkansas, Kansas, Missouri, Nebraska, New Mexico, and Texas contain some requirements for public utilities to seek state commission approval for the siting of transmission facilities. In these states, the laws vary from requiring siting approval for each individual transmission facility to requiring that an entity obtain certification to construct in a service territory or area. Louisiana and Oklahoma do not require entities to obtain siting approval before constructing transmission facilities. Several states also place limits on the types of entities that are eligible to construct transmission facilities or require entities to obtain a certificate prior to engaging in transmission construction and ownership activities in the state. Such states include Arkansas, Kansas, Missouri, Nebraska, and Texas. Section 5 of this White Paper examines the specific state-by-state construction and siting requirements, with citation to relevant statutes and regulations. 5. STATE-BY-STATE CITING LAWS AND REQUIREMENTS A. Arkansas The Arkansas Code, as interpreted by the Arkansas Public Service Commission ( APSC ), authorizes only entities that are currently public utilities certificated by the APSC to construct and own transmission facilities in the state. 4 The Arkansas Code states that [n]ew construction or operation of equipment or facilities for supplying a public service or the extension of a public service shall not be undertaken without first obtaining from the Arkansas Public Service Commission a certificate that public convenience and necessity require or will require the construction or operation. 5 The APSC has interpreted the Arkansas Code to limit its ability to grant such certificates to public utilities, 6 and that the definition of public utility requires owning or operating in this state equipment or facilities for... transmitting... power to or for the public for compensation. 7 The APSC acknowledged the circularity involved in requiring an entity to own or operate transmission facilities prior to being able to become 4 5 6 7 In re Application of Plains and Eastern Clean Line LLC for a Certificate of Public Convenience and Necessity to Construct, Own and Operate as an Electric Transmission Public Utility in the State of Arkansas, Docket No. 10-041-U, Order No. 9 (APSC Jan. 11, 2011) ( Clean Line Order ). Ark. Code Ann. 23-3-201(a). Clean Line Order at 9. Id. at 10-11 (citing Ark. Code Ann. 23-1-101(9)(A)). 5

certificated to construct transmission facilities, but declined a nonincumbent transmission developer s request for certification based on this interpretation of its statutory authority. 8 For transmission siting authorizations, Arkansas Law distinguishes between major utility facilities (transmission lines and associated facilities with a design voltage of at least 100-kV if the transmission line is more than 10 miles in length, or transmission lines and associated facilities with a design voltage of at least 170-kV for lines more than one mile in length), 9 and other, non-major transmission facilities. Major transmission facilities undergo more rigorous review than non-major projects; however, modifications to existing facilities to replace, upgrade, or modernize existing lines and associated equipment do not require additional authorizations if they do not exceed existing rights-of-way. 10 Applicants are required to submit information showing: (1) that the proposed construction is or will be required by the public convenience and necessity; (2) the proposed location or route; (3) maps specifying the route to be followed in constructing the new transmission line, the location of nearby airports, and applicable allocation boundaries; (4) cost estimates and related data; and (5) the proposed method of financing. 11 Applicants seeking to construct major utility facilities are also required to submit information regarding: (1) a general description of the location and type of transmission line and associated facilities; (2) a general description of any reasonable alternative locations or routes considered; (3) the need and reasons for construction of the transmission line and associated facilities; (4) the estimated construction cost; (5) the method of financing and reasonable alternative methods of financing, including the comparative merits and demerits of each alternative financing method; (6) the projected economic and financial impact on the applicant and the local community; (7) the estimated effects on energy costs to the consumer; (8) an environmental impact statement setting forth the environmental impact, any adverse environmental effects that cannot be avoided, a statement of the reasons why the proposed location and production processes were chosen over the identified alternatives, and any irreversible and irretrievable commitments of resources that would be involved in the proposed construction; (9) if the facilities are to be located within a national interest electric transmission corridor, the expected interstate benefits to be achieved by the proposed transmission line and associated facilities; and (10) such other information of an economic or environmental nature that the applicant may consider relevant. 12 Applicants seeking to construct transmission lines and related facilities in a national interest electric transmission corridor are also required to submit a discussion of the interstate benefits to be achieved by the proposed construction. 13 8 9 10 11 12 13 Id. at 11. Ark. Code Ann. 23-18-503(6)(B). Id. 23-3-201(a)(2), 23-18-510(a). Arkansas Public Service Commission Rules of Practice and Procedure 7.04 (Certificates of Public Convenience and Necessity Electric Utilities). Ark. Code Ann. 23-18-511. Id. 23-18-511(9). 6

In approving an application for siting and construction of a major utility facility, the APSC is required to make findings and issue an order determining: (1) the basis of the need for the transmission project; (2) that the transmission line will serve the public interest, convenience, and necessity; (3) the nature of probable environmental impacts; (4) that construction and the location of the proposed transmission line represents an acceptable adverse environmental impact; (5) the nature and extent of probable economic impact of the construction and siting of the proposed transmission line and associated facilities; (6) that the financing method represents an acceptable economic impact; (7) that construction of the proposed project is not inconsistent with the filed and known plans of other electric utilities serving the state; (8) that the energy efficiency of the facility has been given significant weight in the decision-making process; and (9) that the proposed location or route conforms as closely as practicable to applicable state, regional, and local laws. 14 For projects proposed in national interest electric transmission corridors, the APSC is also required include in its order an assessment: (1) of the interstate benefits expected to be achieved by the proposed construction or modification of the major electric transmission facility; and (2) that any conditions attached to a certificate for construction or modification of transmission facilities to be located within a national interest electric transmission corridor do not interfere with the reduction of electric transmission congestion in interstate commerce and do not render the project economically infeasible. 15 The APSC is required hold a public hearing on an application no sooner than 40 days and no later than 180 days after the filing of the application; and is required to issue an order on the application as expeditiously as practicable. 16 B. Kansas Pubilc utilities seeking to construct transmission facilities in Kansas are required to obtain a certificate from the Kansas Corporation Commission ( KCC ) prior to transacting business in Kansas. Under the Kansas Statutes, [n]o common carrier or public utility... shall transact business in the state of Kansas until it shall have obtained a certificate from the [OCC] that public convenience will be promoted by the transaction of said business.... 17 Public utilities are defined as (among other things) all companies for the production, transmission, delivery or furnishing of heat, light, water or power, 18 and the Kansas Statutes addressing the siting of transmission facilities define the term electric utility to include every public utility, as defined by K.S.A. 66-104, which owns, controls, operates or manages any equipment, plant or generating machinery for the production, transmission, delivery or furnishing, of electricity or 14 15 16 17 18 Id. 23-18-519(b). Id. 23-18-519(b)(11) (12). Id. 23-18-516(a)(1). KSA 66-131. Id. 66-104. 7

electric power. 19 The KCC has relied on these statutory provisions in granting certificates to nonincumbent transmission developers seeking authorization to operate in the state. 20 Electric utilities seeking authority for construction of transmission facilities in Kansas are required 21 to submit an application to the KCC prior to beginning site preparation or construction, detailing: (1) the proposed location; (2) the names and addresses of the landowners of record whose land is proposed to be acquired in connection with the construction of or is located within 660 feet of the center line of the easement where the line is proposed to be located; and (3) such other information as may be required by the KCC. 22 The KCC is required to conduct a public hearing in one of the counties through which the proposed transmission line is expected to traverse within 90 days after receiving an application, to determine the necessity for and reasonableness of the location of the proposed electric transmission line. 23 The KCC must issue a final order on the application within 120 days of the filing of the application, 24 taking into consideration the benefit to both consumers in Kansas and consumers outside the state, as well as economic development benefits in Kansas. 25 C. Louisiana Louisiana state law does not require a public utility 26 to obtain siting approval from the Louisiana Public Service Commission ( LPSC ) prior to constructing a transmission facility in 19 20 21 22 23 24 25 26 Id. 66-1,177(a). See, e.g., In the Matter of the Application of ITC Great Plains, LLC for a Limited Certificate of Public Convenience to Transact the Business of an Electric Public Utility in the State of Kansas, Order Approving Stipulation and Agreement and Addressing Application of Statutes, KCC Docket No. 07-ITCE-380-COC, at para. 35 (June 5, 2007). The KCC has subsequently indicated that will continue to certify companies seeking to build transmission lines citing its authority under KSA 66-131 and other statutory provisions. See, e.g., In the Matter of the Application of ITC Great Plains, LLC to Amend Its Certificate of Public Convenience and Authority to Transact the Business of an Electric Public Utility in the State of Kansas (Ford, Kiowa, Clark and Comanche Counties), Order Granting Joint Motion to Approve Stipulation and Agreement and Denying CURB s Objection, Kansas Corporation Commission Docket Nos. 08-ITCE-936- COC, et al., at para. 74 (Oct. 5, 2009) The Kansas Siting Act does not apply to: (1) portions of any electric transmission line to be constructed on an easement where there currently exists one or more electric transmission lines if the easement is not within the corporate limits of any city; (2) portions of any electric transmission line to be constructed on property adjacent to a right-of-way along a four-lane controlled access highway; or (3) any electric utility that complies with the provisions of the National Environmental Policy Act of 1969 regarding the siting of electric transmission lines. KSA 66-1,182. Id. 66-1,178(a). Id. 66-1,178(b). Id. 66-1,178(d). Id. 66-1,180. The KCC may issue or withhold the permit or condition the permit to protect the rights of all parties and the general public. Id. The term electric public utility refers to any person furnishing electric service within Louisiana, the parish of Orleans excepted, including any electric cooperative transacting business in this state. La. Rev. Stat. Ann. 45:121. 8

the state, and, while state courts have determined that the LPSC has broad plenary authority over electric utilities, 27 the LPSC has not issued regulations requiring utilities to seek approval for transmission siting. 28 However, construction of electric public utility facilities is limited by the statutory three hundred foot rule, which indicates that electric public utilities cannot construct or extend facilities, or furnish or offer to furnish electric service, to any point of connection that is being served by another electric public utility or within three hundred feet of an existing electric line of another electric public utility. 29 Additionally, public utilities are prohibited from constructing new facilities or extending existing facilities in cities unless and until the governing authority of the city certifies that public convenience and necessity require the same. 30 Although this requirement remains on the books, in practice the utility has a franchise and no certification takes place. It is rare for a city to certify a new facility. Utilities are required to obtain property or rights-of-way either from landowners through voluntary agreement or eminent domain, which could further involve state and local government agencies in the process. D. Missouri The Missouri Public Service Commission ( MoPSC ) is empowered with issuing certificates of convenience and necessity for the construction of electric plants, including electric transmission facilities ( line certificate authority ), 31 and for electric utility franchise areas ( area certificate authority ). 32 Line certificates may be granted without a local franchise being granted, and area certificates entitle the electric utility to construct transmission lines within the 27 28 29 30 31 32 See, e.g., La. Power & Light Co. v. La. Pub. Serv. Comm n, 609 So. 2d 797, 800 (La. 1992) (citing La. Const. art. IV, 21(B)). Although there is no current requirement for approval, Docket No. R-26018, In Re: Determination As To Whether the Commission Should Issue A General Order Asserting Jurisdiction Over the Certification Of Utility Transmission Projects And The Determination Of Whether These Projects Are In the Public Interest, has been pending before the LPSC since January 2007. La. Rev. Stat. Ann. 45:123. Under the statute, electric line means both transmission and distribution lines. Id. 45:123(B). Given that the three hundred foot rule applies to electric service furnished to points of connection, it generally does not preclude the building of transmission lines located within three hundred feet of other existing transmission lines. Id. 33:4406. City approval for extensions of existing facilities are only required where the extension will cost over two per cent of the rate-making value of the property at the time the extension or addition is made. Id. Id. 393.170(1) ( No gas corporation, electrical corporation, water corporation or sewer corporation shall begin construction of a gas plant, electric plant, water system or sewer system without first having obtained the permission and approval of the commission. ). The term electric plant includes facilities operated or used for the transmission of electricity. Id. 386.020(14). An electric corporation is defined as every corporation, company.. owning, operating, controlling or managing any electric plant. Id. 386.020(15). Id. 393.170(2). 9

certificated franchise area without having to obtain separate line certificates or additional approval from the MoPSC. Upon application for a certificate of convenience and necessity, the MoPSC is authorized to grant approval if, after due hearing, it determines that the construction or exercise of the right, privilege, or franchise sought is necessary or convenient for the public service. 33 MoPSC may also impose conditions upon the certificate as it may deem reasonable and necessary. 34 The Missouri Revised Statutes do not specify any criteria for the MoPSC to consider or define what is necessary or convenient, 35 nor do they impose any deadline for MoPSC action on an application. The MoPSC s procedural rules outline certain criteria an applicant must include in its application for an area or line certificate. For area certificates, the applicant must include: (1) a statement regarding other similar utility service provided in the area; (2) information regarding the identity of landowners and residents in the proposed franchise area; (3) a legal description of the area to be certificated; (4) a plat of the proposed area; (5) a feasibility study containing plans and specifications for the utility system and estimated cost of the construction of the utility system during the first three years of construction; (6) plans for financing; and (7) proposed rates and charges and an estimate of the number of customers, revenues, and expenses during the first three years of operations. 36 For line certificates, the MoPSC requires: (1) a description of the route of construction and a list of all electric and telephone lines, railroad tracks, and underground facilities that the proposed construction will cross; (2) construction cost information and specifications; and (3) plans for financing. 37 Applications for both area and line certificates also must present facts demonstrating that the granting of the application is required by the public convenience and necessity. 38 Missouri statutory provisions do not preclude nonincumbent transmission developers from constructing new transmission facilities but require them to obtain authorization from the MoPSC before constructing such facilities. 39 The MoPSC has granted certificates of 33 34 35 36 37 38 39 Id. 393.170(3). Id. Missouri courts, however, have determined that a finding that a facility or franchise is necessary and convenient requires at least a determination that the facility or franchise is adequate, which includes assessing the relative experience of competing suppliers of the service. State ex rel. Ozark Elec. Coop. v. Pub. Serv. Comm n of the State of Mo., 527 S.W.2d 390, 394 (Mo. Ct. App. 1975). Mo. Code Regs. Ann. tit. 4 240-3.105(1)(A). Id. 240-3.105(1)(B). Id. 240-3.105(1)(E). Section 393.170 RSMo, as interpreted by case law, See State ex rel. Harline v. Public Service Commission of Missouri, 343 S.W.2d 177, 180-83 (Mo. App. K.C.D. 1960); Public Service Commission v. Kansas City Power & Light Company, 31 S.W.2d 67, 71 (Mo. Banc 1930); State ex rel. Utility Consumers Council of Missouri v. Public Service Commission, 562 S.W.2d 688, 690 (Mo. App. St.L.D.1978), cert. denied, 439 U.S. 866, 99 S.Ct. 192, 58 L.Ed.2d 177 (1978). 10

convenience and necessity to nonincumbent public utilities for transmission lines in two uncontested dockets considering the applications of IES Utilities, Inc and Westar Generating, Inc. 40 Although the issue was not raised in either docket, the Missouri Supreme Court has held that an electrical corporation is not subject to regulation by the MoPSC unless it is offering electricity for public use. 41 The issue of the MoPSC to grant certificates of convenience and necessity is a question that has not been addressed in a contested case. In the two uncontested dockets approving the applications for a certificate of convenience and necessity of IES Utilities, Inc. and Westar Generating, Inc., the MoPSC Staff asserted that an interconnection in Missouri with a Missouri regulated utility is enough to satisfy public use and result in MoPSC jurisdiction over the proposed line. E. Nebraska Nebraska electric service is provided exclusively by public power entities, which must have defined service territories 42 and be approved by the Nebraska Power Review Board ( NPRB ). 43 Although it is not specifically prohibited for private entities to build transmission facilities in the state, the NPRB s approval statutes are designed for applications filed by public power entities, and there is no separate process or criteria for applications filed by private entities. The NPRB has jurisdiction over certain aspects of transmission facility siting, while the Nebraska Public Service Commission ( NPSC ) has jurisdiction over compliance with safety code issues. A utility seeking to construct new transmission facilities in Nebraska is expected to first reach agreement with other affected transmission owners regarding what facilities are needed. 44 If an agreement cannot be reached, the matter will be set for hearing before the NPRB. The builder must then seek approval from the NPRB by applying for a certificate of convenience and necessity. 45 The NPRB Rules of Practice and Procedure outline the application requirements including: (1) a map showing all transmission and distribution lines within one mile of the proposed facility; (2) a statement of how the applicant will provide service at its low [sic] overall cost as possible consistent with sound business practices; and (3) construction cost 40 41 42 43 44 45 In the Matter of the Application of IES Utilities, Inc. for a Certificate of Public Convenience and Necessity Authorizing it to Construct, Install, Own, Operate, Control, Manage, and Maintain Electric Transmission Facilities in Clark County, Missouri and Request for Waiver, Missouri Public Service Commission Case No. EA-2002-296, April 18, 2002; and In the Matter of the Application of Westar Generating, Inc. for a certificate of Public Convenience and Necessity Authorizing it to Construct, Install, Own, Operate, Control, Manage, and Maintain Electric Transmission Facilities in Jasper County, Missouri Pursuant to the terms of A July 26, 1999, Agreement for the Construction, Ownership and Operation of a State Line Combined Cycle Generating Facility, Missouri Public Service Commission Case No. EA-2000-153 (consolidated with EA-2000-145), June 13, 2000. State ex rel. Danciger v. PSC of Missouri, 205 S.W. 36 (Mo. 1918). Neb. Rev. Stat. Ann. 70-1002(1). Id. 70-1007. Id. 70-1002.03. Id. 70-1012. Utilities are not required to apply for certificates to extend facilities within the supplier s own service area or within one-half mile outside its service area if all of the other owners of transmission facilities within one-half mile consent to the extension in writing. Id. 11

information, whether the cost will be paid in part by any customer, and if so, the amount of the customer s contribution. 46 The NPRB must schedule a hearing within 60 days (or within not more than 120 days if the applicant requests an extension and demonstrates good cause), and must render its decision within 60 days of the hearing. 47 To issue a certificate, the NPRB must determine that the facilities will serve the public convenience and necessity and that the applicant can most economically and feasibly supply the electric service without unnecessary duplication of facilities or operations. 48 NPSC approval is required for all transmission lines located outside of incorporated cities where the line crosses a highway or railroad track or is to be located within a certain distance (depending on the voltage of the proposed line) of existing electrical, communication, or railroad signal lines or airports. 49 In such instances, the applicant is required to provide maps and engineering specifications regarding the proposed facility. 50 F. New Mexico The New Mexico Public Utility Act 51 excludes entities that engage solely in interstate commerce from the definition of public utility and utility. 52 The New Mexico Public Regulation Commission ( PRC ) only has jurisdiction over public utilities. 53 In addition, the New Mexico Public Utility Act provides that [t]he business of any public utility other than of the character defined in Subsection G of Section 62-3-3 NMSA 1978 [which defines the retail activities of public utilities] is not subject to provisions of the Public Utility Act. 54 However, the New Mexico Public Utility Act grants the PRC location control authority over 300 MW or more of generation and 230 kv or more of transmission lines in connection with such generation, whether or not owned or operated by a public utility subject to regulation by the 46 47 48 49 50 51 52 53 54 285 Neb. Admin. Code 2-004. Neb. Rev. Stat. 70-1013. Id. 70-1014. The NPRB is responsible for approving the siting of transmission facilities but has no jurisdiction over rates. Id. 70-1002.03. Id. 75-701 724. 291 Neb. Admin. Code 7-002.02. N.M. Stat. Ann. 62-3-1, et seq. Id. 62-3-3.G ( [P]ublic utility and utility means every person not engaged solely in interstate business... may own, operate, lease or control: (1) any plant, property or facility for the generation, transmission or distribution, sale or furnishing to or for the public of electricity for light, heat or power or other uses. ). Id. 62-6-4.A. Id. 62-3-4. 12

PRC. 55 Thus, there is a process requiring PRC approval for a nonincumbent transmission developer seeking to build an interstate transmission facility of 230 kv or more. 56 Unless the Commission finds that the location will unduly impair important environmental values, the Commission is required to approve an application for transmission line location. 57 The Public Utility Act lists the criteria the commission may consider in reaching this determination. 58 The PRC may approve an application filed without a formal hearing if no protest is filed within sixty days of the date of notice of the application and is required to issue an order within six month from the date the application is filed with the Commission. 59 Additionally, unless otherwise agreed to by the parties, the Public Utility Act prohibits any person from beginning the construction of any transmission line requiring a width for right of way of greater than one hundred feet without first obtaining from the Commission a determination of the necessary right of way width to construct and maintain the transmission line. 60 In this case, transmission is not limited to any threshold voltage. Thus there is a process requiring PRC approval for a nonincumbent transmission developer seeking to build an interstate transmission facility requiring right of way of greater than one hundred feet if width is not agreed to. An application, notice to property owners and hearing are required and the Commission is required to act upon an application within sixty days from the date the application is filed with the Commission or the application is deemed approved. 61 55 Id. 62-3-9.B ( No person, including any municipality, shall begin the construction of any plant designed for or capable of operation at a capacity of three hundred thousand kilowatts or more for the generation of electricity for sale to the public within or without this state, whether or not owned or operated by a person that is a public utility subject to regulation by the commission, or of transmission lines in connection with such plant, on a location within this state unless the location has been approved by the commission. For purposes of this section, transmission line means any electric transmission line and associated facilities designed for or capable of operations at a nominal voltage of two hundred thirty kilovolts or more, to be constructed in connection with and to transmit electricity from a new plant for which approval is required. ) 56 Id. 57 Id. 62-3-9(F). 58 Id. 62-3-9(M). 59 Id. 62-3-9(K). 60 61 Id. 62-9-3.2(A). Id. 62-9-3.2(D), (E) and (F). 13

With regard to public utilities regulated by the PRC, a certificate from the PUC is required prior to construction of any public utility plant or system outside that utility s service territory. 62 The PRC is required to act on an application for a certificate of public convenience and necessity and a location permit within nine months of submission of the application, but may grant itself a six-month extension for good cause shown. 63 Utilities are required to comply with all local permitting requirements; however, if the local authority does not act within 240 days or does not approve the permit application, the applicant may file for approval with the PRC. 64 The PRC cannot approve a permit for a project that violates existing state, county, or municipal land use statutes or administrative regulations unless the PRC finds that the regulation is unreasonably restrictive and compliance with the regulation is not in the interest of the public convenience and necessity. 65 G. Oklahoma The Oklahoma Corporation Commission ( OCC ) is a body of limited jurisdiction, with regulatory powers and responsibilities regarding public utilities. 66 Oklahoma Statutes do not require nonincumbent transmission developers to obtain certification or approval prior to developing and building transmission facilities in Oklahoma. The Oklahoma Statutes also do not require that a nonincumbent entity first obtain authorization from the OCC to operate as a public utility. 67 In 2008, in reviewing a request by a nonincumbent transmission developer for authority to operate as a transmission-only electric utility, the OCC adopted Administrative Law Judge ( ALJ ) findings that the nonincumbent transmission developer was not required to obtain OCC approval to start constructing, owning, operating, and maintaining transmission facilities in Oklahoma. 68 The nonincumbent transmission developer did not have an obligation to demonstrate that there will be a significant public benefit prior to its application being granted. 69 However, the OCC s decision in that case does not have precedential effect, 70 and 62 63 64 65 66 67 68 69 Id. 62-9-1. Id. 62-9-1(C) and 62-9-3(K). Id. 62-9-3(H). Id. 62-9-3(G). Okla. Const. Art. 9, 18 and 34, and Okla. Stat. Tit. 17 152. Public utilities include entities that now or hereafter may own, operate, or manage any plant of equipment, or any part thereof, directly or indirectly, for public use, or may supply any commodity to be furnished to the public... (c) For the production, transmission, delivery or furnishing electric current for light, heat or power. Okla. Stat. Tit. 17. 151(c). However, retail electric suppliers are allocated and restricted to specific territories and consumers in furnishing electric service, pursuant to the Retail Electric Supplier Certified Territory Act. Okla. Stat. Tit. 17 158.21 et seq. In addition, public utilities selling power in the retail market, must have approved tariffs. Okla. Stat. Tit. 17, 152 and Okla. Admin. Code 165:35-5-1. See In the Matter of the Application of ITC Great Plains, LLC to Conduct Business as an Electric Public Utility in the State of Oklahoma, Cause No. PUD 200700298, Final Order, Report and Recommendation of the Administrative Law Judge, at 9 (Okla. Corp. Comm n Sept. 11, 2008) ( ITC Great Plains Oklahoma Order ) Id. 14

the sitting Commission members as of late October 2001 are/were deliberating a subsequent case brought by a non-incumbant transmission developer. 71 Additionally, the OCC does not oversee the siting of transmission facilities in the state. Under Oklahoma law, companies authorized to furnish electricity service in the state have the same right of eminent domain as applies to railroads operating in the state. 72 A party seeking to exercise eminent domain must petition the district court for the district in which the property is located, 73 and must include in its petition a statement indicating: (i) that it is authorized to exercise the power of eminent domain and it has been unable to make a voluntary purchase of the property or right-of-way in question; (ii) the owner of the property and the specific property in question; and (iii) that the specific property sought to be taken is necessary for a purpose for which the power of eminent domain may be exercised, (i.e., a public purpose and for public use). 74 Additionally, the OCC also has adopted ALJ findings that no determination by the [OCC] that additional transmission capacity is needed in Oklahoma is required, prior to any company building transmission lines in Oklahoma. 75 In 2010, the Oklahoma Legislature by statute declared the Legislature and OCC shall work with SPP to develop plans to expand transmission capacity in Oklahoma and to monitor construction of new transmission facilities in Oklahoma, indicating the State has not ceded any of its authority in this area to SPP and will participate in the process. 76 H. Texas Texas does not limit construction of transmission facilities to existing electric utilities; however, the Public Utility Regulatory Act ( PURA ) requires that an electric utility or other person may not directly or indirectly provide service... unless the utility or other person first obtains from the [Public Utilities Commission of Texas] a certificate. 77 The Public Utilities (... continued) 70 71 72 73 74 75 76 77 Okla. Stat. Tit. 75, 302(C). In the Matter of the Application of Plains and Eastern Clean Line, LLC, to Conduct Business as an Electric Utility in the State of Oklahoma, Cause No. PUD 201000075. Okla. Stat., tit. 27, 7. Id. at tit. 66, 53. See, e.g., McCrady v. W. Farmers Elec. Coop., 323 P.2d 356, 359 (Okla. 1958). Necessity has been determined by the Oklahoma Supreme Court to be reasonable necessity as opposed to absolute necessity. See Pub. Serv. Co. of Okla. v. Willis, 941 P.2d 995, 1000 (Okla. 1997). See ITC Great Plains Oklahoma Order, Report and Recommendation of the Administrative Law Judge, at 11. Okla. Stat., titl 17 287 Tex. Util. Code Ann. 37.051(a). 15

Commission of Texas ( PUCT ) will issue a certificate only if the commission finds that the certificate is necessary for the service, accommodation, convenience, or safety of the public. 78 Utilities are not required to obtain a certificate for: (1) extensions into contiguous territories that do not receive similar service from another electric utility and are not in another electric utility s certificated area; (2) extension in or to territory that the utility serves or is authorized to serve; or (3) operation, extension, or service in progress on September 1, 1975. 79 Moreover, an entity does not need to be an electric utility with a defined service area, or even already a utility, to be eligible for a certificate of convenience and necessity to construct or acquire transmission facilities. 80 In reviewing a certificate application, the PUCT considers: (1) the adequacy of existing service; (2) the need for additional service; (3) the effect of granting the certificate on the recipient and any electric utility service in the proximate area; (4) impacts to community values, recreation and park areas, historic and aesthetic values, and environmental integrity; (5) the probable improvement of service or lowering of costs to consumers; and (6) the effect of granting the certificate on the ability of the state to meet renewable energy goals. 81 Under its Substantive Rules, the PUCT also considers the needs of the interconnected transmission system to support a reliable and adequate network and to facilitate robust wholesale competition, and gives great weight to recommendations from essential organizations (i.e., independent system operators) or written documentation that the proposed facility is needed to connect a new transmission service customer. 82 PUCT transmission line routing decisions are based on whether the proposed route: (1) utilizes existing compatible rights-of-way, including vacant positions on existing multiple-circuit transmission lines; (2) parallels existing compatible rights-of-way; (3) parallels property lines or other natural or cultural features; and (4) conforms with the policy of prudent avoidance, which seeks to limit exposure to electric and magnetic fields. 83 The PUCT is required to render its certificate decision within one year of the application; 84 however, the PUCT has reserved the right to extend the one-year period for good cause. 85 Projects that have been formally designated by an essential organization as critical for 78 79 80 81 82 Id. 37.056(a); see also 16 Tex. Admin. Code 25.101(b). Tex. Util. Code Ann. 37.052(a). Extensions of service are only allowed to interconnect to existing facilities or solely to transmit electric utility services from an existing facility to a customer of retail electric utility service. Id. 37.052(b). Pub. Utils. of Tex. v. City of Harlingen, 311 S.W.3d 610, 617 (Tex. App. Austin 2010) ( [T]he Commission has been given the power to approve a [certificate of convenience and necessity] for a utility that provides only transmission services, provided that such services meet the applicable standards. ). Tex. Util. Code Ann. 37.056(c). PUCT Subst. R. 25.101(b)(3)(A). 83 Id. 25.101(b)(3)(B). otherwise. Id. These considerations are tempered where grid reliability or security dictate 84 85 Tex. Util. Code Ann. 37.057. PUCT Subst. R. 25.101(b). 16

the reliability of the transmission system must be considered on an expedited basis, with the PUCT issuing a decision within 180 days of receiving a completed application. 86 Expedited proceedings are also afforded to transmission lines serving competitive renewable energy zones designated by the PUCT 87 and to uncontested applications. 88 6. CONCLUSION As part of its filing to comply with the nonincumbent developer participation requirements of Order No. 1000, specifically, the elimination of federal ROFR for incumbent transmission owners to construct transmission facilities selected in the regional transmission plan for cost allocation, SPP must be mindful of the requirements and limitations on construction of transmission facilities imposed by state statutes and regulations in the SPP Region. Because FERC expressly indicated that its Order No. 1000 mandate was not intended to affect state or local laws with governing construction, siting, and permitting of transmission facilities, and many states in the SPP Region impose some limitations on construction and siting, SPP should consider consulting with its Regional State Committee in determining the most appropriate approach to complying with the Order No. 1000 nonincumbent transmission developer participation requirement. 86 87 88 Id. 25.101(b)(3)(D). Tex. Util. Code Ann. 39.203(e). PUCT Subst. R. 25.101(b)(3)(C). The PUCT must act on an uncontested application that is complete and meets all filing criteria within 80 days of filing. 17

California Independent System Operator Corporation Fifth Replacement FERC Electric Tariff the time, and is not intended to affect any rights provided under Existing Contracts or TORs. The CAISO s forecast of Total Transfer Capability for each Balancing Authority Area Transmission Interface will depend on prevailing conditions for the relevant Trading Day, including, but not limited to, the effects of parallel path (unscheduled) flows and/or other limiting operational conditions. This information will be posted on OASIS in accordance with this CAISO Tariff. The four categories are as follows: (a) (b) transmission capacity that must be reserved for firm Existing Rights; transmission capacity that may be allocated for use as CAISO transmission service (i.e., "new firm uses"); (c) transmission capacity that may be allocated by the CAISO for conditional firm Existing Rights; and (d) transmission capacity that may remain for any other uses, such as non-firm Existing Rights for which the Responsible PTO has no discretion over whether or not to provide such non-firm service. 24. Comprehensive Transmission Planning Process 24.1 Overview The CAISO will develop a comprehensive Transmission Plan and approve transmission upgrades or additions using the Transmission Planning Process set forth in this Section 24. The CAISO will analyze the need for transmission upgrades and additions in accordance with the methodologies and criteria set forth in this Section 24, the Transmission Control Agreement, and the applicable Business Practice Manuals. The comprehensive Transmission Plan will identify transmission upgrade or addition projects associated with Approved Project Sponsors that are Merchant Transmission Facilities or are needed: (1) to maintain System Reliability; (2) to satisfy the requirements of a Location Constrained Resource Interconnection Facility; (3) to maintain the simultaneous feasibility of allocated Long-Term CRRs; and (4) as LGIP Network Upgrades identified pursuant to Section 24.4.6.5. The comprehensive Transmission Plan will identify transmission addition and upgrade elements with no approved Project Sponsors needed to (1) meet state and federal policy requirements and directives that are not inconsistent with the Federal Power Act, including renewable portfolio standards policies; and (2) reduce congestion costs, production supply costs, transmission losses, or other electric supply costs resulting from improved access to cost- October 21, 2011

California Independent System Operator Corporation Fifth Replacement FERC Electric Tariff effective resources. For purposes of this Section 24, the term the year X/(X+1) planning cycle will refer to the Transmission Planning Process initiated during year X to complete a comprehensive Transmission Plan in year X+1. 24.1.1 [NOT USED] 24.1.2 [NOT USED] 24.1.3 [NOT USED] 24.1.4 [NOT USED] 24.2 Nature of the Transmission Planning Process The CAISO will develop the annual comprehensive Transmission Plan and approve transmission upgrades or additions using a shall perform the CAISO s Transmission Planning Process with three (3) phases. In Phase 1, the CAISO will develop and complete the Unified Planning Assumptions and Study Plan and, in parallel, begin development of a conceptual statewide plan. In Phase 2, the CAISO will complete the comprehensive Transmission Plan. In Phase 3, the CAISO will evaluate proposals to construct and own specific transmission upgrade or addition elements specified in the comprehensive Transmission Plan on an annual cycle in accordance with the terms of this CAISO Tariff, the Transmission Control Agreement, and the Business Practice Manual. The Transmission Planning Process shall, at a minimum: (a) Coordinate and consolidate in a single plan the transmission needs of the CAISO Balancing Authority Area for into a single plan, which will be assessed on the basis of maintaining the reliability of the CAISO Controlled Grid in accordance with Applicable Reliability Criteria and CAISO Planning Standards, in a manner that promotes the economic efficiency of the CAISO Controlled Grid and considers federal and state environmental and other policies affecting the provision of Energy. (b) Reflect a planning horizon covering a minimum of ten (10) years that considers previously approved transmission upgrades and additions transmission enhancements and expansions, Demand Forecasts, Demand-side management, October 21, 2011