believe that the discussion above illustrates that the requirements of
the pro forma OATT are inadequate to ensure the development of more
efficient or cost-effective solutions to regional needs. As we
explained in section II above, while transmission planning processes
have improved since the issuance of Order No. 890, we are concerned
that the existing Order No. 890 requirements regarding transmission
planning, as well as cost allocation, are insufficient to ensure that
the evolution of transmission planning processes will occur in a manner
that ensures that the rates, terms and conditions of jurisdictional
services are just and reasonable and not unduly discriminatory or
preferential. At the same time, in response to North Carolina Agencies,
we do not intend our reforms to preclude the ability of states to
actively plan at the local level.
---------------------------------------------------------------------------

    \75\ See discussion supra section II.C.
---------------------------------------------------------------------------

2. Legal Authority for Transmission Planning Reforms \76\
---------------------------------------------------------------------------

    \76\ As noted above, because the legal authority concerns raised
by commenters with regard to both our regional transmission planning
reforms and our interregional transmission coordination reforms are
so closely related, we address these concerns together in this
section of the Final Rule.
---------------------------------------------------------------------------

a. Commission Proposal
    85. In the Proposed Rule, the Commission explained that the
proposed reforms in the areas of regional transmission planning and
interregional transmission coordination are intended to correct
deficiencies in transmission planning and cost allocation processes so
that the transmission grid can better support wholesale power markets
and thereby ensure that Commission-jurisdictional services are provided
at rates, terms and conditions that are just and reasonable and not
unduly discriminatory or preferential. The Commission also noted that
the Proposed Rule builds on Order No. 890, in which the Commission
required each public utility transmission provider to have a
coordinated, open, and transparent regional transmission planning
process, among other things, in order to remedy opportunities for undue
discrimination in the provision of transmission services.\77\
---------------------------------------------------------------------------

    \77\ Proposed Rule, FERC Stats. & Regs. ] 32,660 at P 1-2.
---------------------------------------------------------------------------

b. Comments
    86. Several commenters argue that the Commission has adequate
statutory authority to undertake the planning reforms in the Proposed
Rule.\78\ Iberdrola Renewables contends that the Commission has a firm
legal basis to adopt the proposed reforms and has already relied on its
authority to require regional transmission planning efforts in Order
No. 890. In response to comments arguing that the Proposed Rule
oversteps the Commission's authority, Exelon states that the proposed
coordination reforms are well within the Commission's statutory
authority to remedy the potential for undue discrimination in
transmission planning activities, citing FPA sections 205 and 206, as
well as New York v. FERC.\79\ ITC Companies' reply comments also argue
that the Commission has the legal authority to implement its proposals,
citing the Commission's plenary authority over interstate transmission
under FPA section 201 and noting that courts have broadly defined
transmission in interstate commerce due to the interconnected nature of
the transmission grid. Multiparty Commenters agree that the proposed
reforms are within the Commission's plenary authority, and they believe
that the Proposed Rule properly identifies deficiencies in transmission
planning and cost allocation, and that requirements for transmission
planning and cost allocation are necessary for fully competitive
wholesale markets and thus fall squarely within the Commission's
jurisdiction.
---------------------------------------------------------------------------

    \78\ E.g., Iberdrola Renewables; 26 Public Interest
Organizations; Exelon; ITC Companies; LS Power; and Multiparty
Commenters.
    \79\ 535 U.S. 1 (2002).
---------------------------------------------------------------------------

    87. In response to those asserting that the Commission cannot
require interregional agreements to coordinate planning because of
section 202(a)'s voluntary coordination language, commenters assert
that such arguments are contrary to precedent affirming Order Nos. 888
and 2000. Exelon notes that Public Utility District No. 1 of Snohomish
County v. FERC,\80\ which affirmed Order No. 2000, found that mandatory
RTO rules did not run afoul of section 202(a). ITC Companies also
assert that section 202(a) does not prohibit interregional planning
agreements, contrary to some comments. Multiparty Commenters also argue
that section 202 does not impose a limitation on the Commission's
section 206 jurisdiction. In addition, commenters such as ITC Companies
and Multiparty Commenters argue that the proposals do not preempt state
jurisdiction over siting decisions. Twenty-six Public Interest
Organizations argue that the FPA requires the Commission to address
identified transmission planning deficiencies.
---------------------------------------------------------------------------

    \80\ 272 F.3d 607 (DC Cir. 2001).
---------------------------------------------------------------------------

    88. Some commenters argue that the Commission may consider public
policy requirements. Exelon disagrees with those asserting that the
Commission cannot require public utility transmission providers to
consider the impacts of public policies under federal and state laws
and regulations, and argues that the Commission is not establishing an
independent obligation to satisfy such public policy requirements.
Exelon states that courts have consistently recognized the Commission's
need to adjust its regulation under the FPA to meet the changing needs
of the industry.\81\ LS Power explains that the proposal regarding
public policy requirements is not an effort to pursue those goals but
rather to ensure that transmission service is offered at just and
reasonable rates. EarthJustice argues that, contrary to commenters
challenging the Proposed Rule with respect to the consideration of
public policy requirements, the Commission did not propose to infringe
on state jurisdiction. EarthJustice argues that there is substantial
evidence to support the Commission's conclusions in the Proposed
Rule.\82\
---------------------------------------------------------------------------

    \81\ Exelon (citing New York v. FERC, 535 U.S. 1 (2002)),
Transmission Access Policy Study Group v. FERC, 225 F.3d 667 (DC
Cir. 2000), and Public Util. Dist. No. 1 of Snohomish Cty v. FERC,
272 F.3d 607 (DC Cir. 2001).
    \82\ EarthJustice (citing Louisiana Pub. Serv. Comm'n v. FERC,
551 F.3d 1042, 1045 (DC Cir. 2008)).
---------------------------------------------------------------------------

    89. Some commenters, however, assert that the Commission lacks
jurisdiction to mandate the transmission planning reforms included in
the Proposed Rule.\83\ These commenters cite to section 202(a) of the
FPA, which provides that coordination and interconnection arrangements
are to be left to the voluntary action of public utilities. California
ISO points to Central Iowa Power Coop. v. FERC,\84\ which held that, in
light of the voluntary nature of coordination under FPA section 202(a),
the Commission's authority under FPA section 206 does not include the
authority to require modifications to an otherwise just and reasonable
tariff or jurisdictional agreement simply because the Commission has
concluded that

alternative terms and conditions would better promote the
interconnection and coordination of transmission facilities.
---------------------------------------------------------------------------

    \83\ E.g., Ad Hoc Coalition of Southeastern Utilities;
California ISO; ColumbiaGrid; Nebraska Public Power District; North
Carolina Agencies; and Sacramento Municipal Utility District.
    \84\ 606 F.2d 1156 n. 36 (DC Cir. 1979) (Central Iowa).
---------------------------------------------------------------------------

    90. Several commenters state that the Commission's statutory
authority is limited with respect to transmission siting decisions.\85\
North Carolina Agencies assert that, with the exception of the
Commission's limited backstop authority under FPA section 216,
transmission planning and expansion fall strictly within the purview of
state regulatory agencies and the Proposed Rule takes into account
neither the Commission's lack of authority nor the long-standing
authority of the states. Some commenters also explain that the states
have authority with respect to integrated resource planning.\86\
---------------------------------------------------------------------------

    \85\ E.g., North Carolina Agencies; Florida PSC; Illinois
Commerce Commission; and Nebraska Public Power District.
    \86\ E.g., Alabama PSC; Ad Hoc Coalition of Southeastern
Utilities; Nebraska Public Power District; Florida PSC; and
Commissioner Skop.
---------------------------------------------------------------------------

    91. Several others state that the Commission should confirm that
transmission planning, even with the reforms adopted by this Final
Rule, continues to be driven by the needs of load-serving entities.\87\
Entities such as Ad Hoc Coalition of Southeastern Utilities, APPA, and
Nebraska Public Power District point to FPA section 217(b)(4) as the
only provision in the FPA that charges the Commission with transmission
planning responsibilities, expressing concern that the proposed
transmission planning reforms might be read to imply a greater focus on
interests of stakeholders other than load-serving entities. National
Rural Electric Coops argue that Order No. 890 struck an appropriate
balance among interests and should be preserved.\88\ APPA argues that
the failure to address section 217 makes the Proposed Rule legally
deficient. Additionally, several commenters contend the Commission's
proposal is inconsistent with section 217, which they state recognizes
the primacy of a franchised utility's obligation to do what is needed
to fulfill its obligation to service, including the implementation of
state-authorized plans for transmission construction.\89\
---------------------------------------------------------------------------

    \87\ E.g., Ad Hoc Coalition of Southeastern Utilities; National
Rural Electric Coops; Transmission Access Policy Study Group; and
APPA.
    \88\ Additionally, National Rural Electric Coops request that
the Commission to confirm that transmission planning, even with any
reforms the Commission adopts in this rulemaking, will continue to
be driven in the first instance by the needs of load-serving
entities. Transmission Access Policy Study Group makes a similar
request.
    \89\ E.g., Edison Electric Institute; Large Public Power
Council; Nebraska Public Power; and Xcel.
---------------------------------------------------------------------------

    92. In response, ITC Companies contend that the Proposed Rule is
compatible with section 217 regarding the needs of load-serving
entities to fulfill their service obligations. They note that section
217 does not mandate the planning of transmission in interstate
commerce based on state integrated resource plans or require that the
Commission disregard the needs of renewable power producers or other
generators.
    93. Some commenters argue that the Commission lacks statutory
authority to consider broad public policies.\90\ Several commenters
cite to NAACP v. FPC \91\ for the proposition that the primary purpose
of the Commission's statutory mission is to ensure reliable service at
just and reasonable rates, and that Congress' direction to the
Commission to act in furtherance of the public interest was not a broad
license to promote the general welfare. Nebraska Public Power District
and Ad Hoc Coalition of Southeastern Utilities add that the Commission
has recognized this limitation in addressing its responsibility to
consider environmental policy objectives under the National
Environmental Policy Act.\92\ PSEG Companies argue that the
Commission's proposed reforms related to Public Policy Requirements are
legally flawed. PSEG Companies state that the Commission's section 206
authority is not unbounded, citing to California Independent System
Operator Corp. v. FERC,\93\ where the court held that the Commission
was not empowered to remove members of CAISO's board of directors under
section 206. Further, PSEG Companies
---------------------------------------------------------------------------

    \90\ E.g., Southern Companies; Ad Hoc Coalition of Southeastern
Utilities; Nebraska Public Power District; and Large Public Power
Council.
    \91\ National Ass'n for the Advancement of Colored People v.
FPC, 425 U.S. 662 (1976).
    \92\ Nebraska Public Power District.
    \93\ 372 F.3d 395 (DC Cir. 2004) (CAISO v. FERC).
---------------------------------------------------------------------------

    argue that there is no evidence to support the Commission's claims
of undue discrimination under section 206.
    94. Some commenters state that the Commission has not provided
enough reasoning or adequate detail for the Proposed Rule so that
parties can comment meaningfully on it, as required by section 553 of
the Administrative Procedure Act (APA).\94\ The commenters who argue
this make three basic claims. They maintain that it is unclear from the
Proposed Rule: (1) Whether the Commission proposes that regional and
interregional plans will serve as the basis for (a) future orders
requiring utilities to undertake construction consistent with the plans
or (b) orders compelling utilities to defer to nonincumbent utilities
in connection with the construction of transmission facilities needed
for reliability purposes; (2) what public policies must be incorporated
in transmission plans, or in what manner such policies should be
reflected; and (3) what rate mechanism the Commission would employ to
allocate costs incurred by nonincumbent transmission providers to
entities with whom they have no service or contractual
relationship.\95\
---------------------------------------------------------------------------

    \94\ E.g., Nebraska Public Power District Comments (citing 5
U.S.C. 553, Florida Power & Light Co. v. U.S., 846 F.2d 765, 771 (DC
Cir. 1988), Connecticut Light and Power Co. v. NRC, 673 F.2d 525,
530 (DC Cir. 1982)); Large Public Power Council; Salt River Project
Comments (citing United Mine Workers or America v. MSHA, 407 F.3d
1250, 1259 (DC Cir. 2005)).
    \95\ E.g., Large Public Power Council and Nebraska Public Power
District.
---------------------------------------------------------------------------

    95. In addition, Electricity Consumers Resource Council and the
Associated Industrial Groups argue that the Proposed Rule may represent
a departure from the Commission's regulations under section
35.35(i)(ii), which establishes a rebuttable presumption that ``[a]
project that has received construction approval from an appropriate
state commission or state siting authority,'' applying the specified
criteria, qualifies as being prudently incurred.\96\ Southern Companies
argue that, because the Proposed Rule did not identify what it would
take to satisfy the public policy requirement, the proposal would
violate the Due Process Clause's ``fair notice'' requirement.
---------------------------------------------------------------------------

    \96\ 18 CFR 35.35(i)(ii).
---------------------------------------------------------------------------

    96. Indianapolis Power & Light questions whether the Commission has
satisfied FPA section 206 requirements, arguing that the Commission has
not yet found that existing transmission planning (and cost allocation)
provisions are unjust and unreasonable and that it has not ``fixed''
the rate or practice that it finds to be unjust and unreasonable.\97\
---------------------------------------------------------------------------

    \97\ Indianapolis Power & Light (citing Electrical Dist. No. 1
v. FERC, 774 F.2d 490, 492-93 (DC Cir. 1985)).
---------------------------------------------------------------------------

    97. To ensure that any Final Rule will not directly or indirectly
require a state or municipality to impair or violate private activity
bond rules under section 141 of the Internal Revenue Code, City of Los
Angeles Department of Water and Power urges the Commission to include
in the Final Rule the following statement: ``All regional and
interregional transmission plans and cost allocation methodologies must
include a statement that municipal and public power participants are
not required to take any action that would violate or impair a private
activity bond rule for purposes of section 141 of the Internal Revenue
Code of 1986, or any successor statute or regulation.'' Large

Public Power Council makes a similar comment. In its reply comments,
APPA states that City of Los Angeles Department of Water and Power
raises a practical and legal issue regarding the participation of
public power systems in transmission planning and cost allocation
activities, and APPA agrees that the statement suggested by City of Los
Angeles Department of Water and Power would foster public power
systems' participation in such processes.
    98. Nebraska Public Power District states that as long as it
participates in regional and interregional transmission planning
through the SPP, it is able to commit to enter into regional planning
through the SPP tariff, but cannot make such commitments outside of its
present RTO membership. Nebraska Public Power District states that it
is unclear what commitments may be called for in any transmission
planning agreements, such as whether these agreements: (1) Will carry
with them specified or unanticipated liability; and/or (2) may include
an obligation to defer to regional or interregional transmission plans
that could, in Nebraska Public Power District's judgment, interfere
with what must be done to remain compliant with state law.
c. Commission Determination
    99. We conclude that we have authority under section 206 of the FPA
to adopt the reforms on transmission planning in this Final Rule. These
reforms are intended to correct deficiencies in transmission planning
and cost allocation processes so that the transmission grid can better
support wholesale power markets and thereby ensure that Commission-
jurisdictional services are provided at rates, terms and conditions
that are just and reasonable and not unduly discriminatory or
preferential. Moreover, these reforms build on those of Order No. 890,
in which the Commission reformed the pro forma OATT to, among other
things, require each public utility transmission provider to have a
coordinated, open, and transparent regional transmission planning
process. As we explained in Order No. 890, we found that the existing
pro forma OATT was insufficient to eliminate opportunities for undue
discrimination, including such opportunities in the context of
transmission planning.\98\ We conclude that the reforms adopted in this
Final Rule are necessary to address remaining deficiencies in
transmission planning and cost allocation processes so that the
transmission grid can better support wholesale power markets and
thereby ensure that Commission-jurisdictional transmission services are
provided at rates, terms and conditions that are just and reasonable
and not unduly discriminatory or preferential. We note that no party
sought judicial review of the Commission's authority under Order No.
890 to adopt those reforms that we seek to enhance and improve upon
here.
---------------------------------------------------------------------------

    \98\ See, e.g., Order No. 890, FERC Stats. & Regs. ] 31,241 at P
422.
---------------------------------------------------------------------------

    100. We disagree that section 202(a) of the FPA precludes us from
adopting the transmission planning reforms contained in this Final
Rule. Section 202(a) reads, in relevant part, as follows:

    For the purpose of assuring an abundant supply of electric
energy throughout the United States with the greatest possible
economy and with regard to the proper utilization and conservation
of natural resources, the Commission is empowered and directed to
divide the country into regional districts for the voluntary
interconnection and coordination of facilities for the generation,
transmission, and sale of electric energy. * * * \99\
---------------------------------------------------------------------------

    \99\ 16 U.S.C. 824(a).
---------------------------------------------------------------------------

    Section 202(a) requires that the interconnection and coordination,
i.e., the coordinated operation, of facilities be voluntary. That
section does not mention planning, and nothing in it can be read as
impliedly establishing limits on the Commission's jurisdiction with
respect to transmission planning.
    101. Transmission planning is a process that occurs prior to the
interconnection and coordination of transmission facilities. The
transmission planning process itself does not create any obligations to
interconnect or operate in a certain way. Thus, when establishing
transmission planning process requirements, the Commission is in no way
mandating or otherwise impinging upon matters that section 202(a)
leaves to the voluntary action of public utility transmission
providers. As we discuss herein, section 202(a) refers to the
coordinated operation of facilities.
    102. Several commenters who argue that section 202(a) prohibits our
proposal rely primarily on Central Iowa for support.\100\ In Central
Iowa, a party argued that the Commission should have used its authority
under section 206 of the FPA to compel greater integration of the
utilities in the Mid-Continent Area Power Pool (MAPP) than MAPP members
had proposed. In seeking this goal, the party in question sought to
have the Commission require MAPP participants ``to construct larger
generation units and engage in single system planning with central
dispatch.'' \101\ The court held that given ``the expressly voluntary
nature of coordination under section 202(a),'' the Commission was not
authorized to grant that request.\102\
---------------------------------------------------------------------------

    \100\ E.g., ColumbiaGrid; Sacramento Municipal Utility District;
and California ISO.
    \101\ Central Iowa, 606 F. 2d 1156 at 1166.
    \102\ Id. at 1168.
---------------------------------------------------------------------------

    103. The court in Central Iowa was thus presented with a request
that the Commission require an enhanced level of, or tighter, power
pooling. Section 202(a) was relevant to the problem at issue in Central
Iowa because the operation of the system through power pooling is its
central subject matter. We, on the other hand, are focused in this
proceeding on the transmission planning process, which is distinct from
any specific system operations. Nothing in this Final Rule is tied to
the characteristics of any specific form of system operations, and
nothing in it requires any changes in the way existing operations are
conducted. This Final Rule simply requires compliance with certain
general principles within the transmission planning process regardless
of the nature of the operations to which that process is attached. The
court's interpretation of section 202(a) with respect to system
operations is therefore irrelevant here.
    104. Commenters point to dicta in Central Iowa based on section
202(a)'s legislative history that, they state, suggests that Congress
intended that any coordination by public utilities with respect to
transmission planning be voluntary. Central Iowa cites to, but does not
quote directly, the legislative history to support the conclusion that
``Congress was convinced that `enlightened self-interest' would lead
utilities to engage voluntarily in power planning arrangements, and it
was not willing to mandate that they do so.'' \103\ The language from
the legislative history is as follows:
---------------------------------------------------------------------------

    \103\ Id.

    The committee is confident that enlightened self-interest will
lead the utilities to cooperate with the commission and with each
other in bringing about the economies which can alone be secured
through the planned coordination which has long been advocated by
the most able and progressive thinkers on this subject.\104\
---------------------------------------------------------------------------

    \104\ See Otter Tail Power Co. v. United States, 410 U.S. 366,
374 (1973) (citing S.Rep. No. 621, 74th Cong., 1st Sess. 49).

    105. In response, we note that section 202(a) does not mention the
transmission planning process, and nothing in that section causes one
to conclude that it was intended to address the transmission planning
process that is the subject of this proceeding. There is thus no basis
to resort to legislative

history for further clarification.\105\ Moreover, even if resorting to
legislative history was appropriate in this context, we note that this
passage from the legislative history also does not refer to the
transmission planning process that is the subject of this Final Rule.
Instead, the legislative history refers to ``planned coordination,''
i.e., to the pooling arrangements and other aspects of system operation
that are the underlying focus of section 202(a). It is in this sense
that Central Iowa must be understood when it refers to engaging
``voluntarily in power planning arrangements.'' The ``planned
coordination'' mentioned in the legislative history cited in Central
Iowa means ``planned coordination'' of the operation of facilities, not
the planning process for the identification of transmission facilities.
In short, neither Central Iowa nor the legislative history cited in
that case involves or applies to the planning process for transmission
facilities. Rather they deal with the coordinated, i.e., shared or
pooled, operation of facilities after those facilities are identified
and developed. By contrast, this Final Rule deals with the planning
process for transmission facilities, a separate and distinct set of
activities that occur before the operational activities that are the
underlying focus of section 202(a).
---------------------------------------------------------------------------

    \105\ See, e.g., Connecticut Nat'l Bank v. Germain, 503 U.S.
249, 253-54 (1992) (``[I]n interpreting a statute a court should
always turn first to one, cardinal canon before all others. We have
stated time and again that courts must presume that a legislature
says in a statute what it means and means in a statute what it says
there.'' (citations omitted)).
---------------------------------------------------------------------------

    106. Similarly, section 202(a) has no bearing on whether the
Commission can mandate requirements on regional and interregional cost
allocation. The cost allocation requirements of this Final Rule do not
mandate that any entity engage in any interconnection or coordination
of facilities in contravention of the requirement in section 202(a)
that these matters be left to the voluntary decisions of the entities
in question. Section 202(a) does not address matters involved in cost
allocation.
    107. We acknowledge that there is longstanding state authority over
certain matters that are relevant to transmission planning and
expansion, such as matters relevant to siting, permitting, and
construction. However, nothing in this Final Rule involves an exercise
of siting, permitting, and construction authority. The transmission
planning and cost allocation requirements of this Final Rule, like
those of Order No. 890, are associated with the processes used to
identify and evaluate transmission system needs and potential solutions
to those needs. In establishing these reforms, the Commission is simply
requiring that certain processes be instituted. This in no way involves
an exercise of authority over those specific substantive matters
traditionally reserved to the states, including integrated resource
planning, or authority over such transmission facilities. For this
reason, we see no reason why this Final Rule should create conflicts
between state and federal requirements.
    108. We disagree with the commenters who argue that this Final Rule
is inconsistent with or precluded by, or legally deficient for failing
to rely on, section 217 of the FPA.\106\ Our approach in this Final
Rule is to build on the requirements of Order No. 890 of ensuring open
and transparent transmission planning processes to evaluate proposed
transmission projects, a goal that does not conflict with FPA section
217. Indeed, we believe that this Final Rule is consistent with section
217 because it supports the development of needed transmission
facilities, which ultimately benefits load-serving entities. The fact
that this Final Rule serves the interests of other stakeholders as well
does not place it in conflict with section 217. We thus cannot agree
with Ad Hoc Coalition of Southeastern Utilities that we should ensure
that our transmission planning and cost allocation reforms give
systematic preference to any particular set of interests. Section 217
does not require this result. It only requires that we use our
authority in a way that facilitates planning and expansion of
transmission facilities to meet the reasonable needs of load-serving
entities. We have indicated that we will follow a flexible approach
that accommodates the needs and characteristics of particular regions,
and we are confident that this approach can address the needs of load-
serving entities in the Southeast and elsewhere.
---------------------------------------------------------------------------

    \106\ Section 217(b)(4) of the FPA specifies that: ``The
Commission shall exercise the authority of the Commission under this
Act in a manner that facilitates the planning and expansion of
transmission facilities to meet the reasonable needs of load-serving
entities to satisfy the service obligations of the load-serving
entities, and enables load-serving entities to secure firm
transmission rights (or equivalent tradable or financial rights) on
a long-term basis for long-term power supply arrangements made, or
planned, to meet such needs.'' 16 U.S.C. 824q(b)(4).
---------------------------------------------------------------------------

    109. We also disagree with commenters who argue that we lack
jurisdiction to require the consideration of transmission needs driven
by Public Policy Requirements in the transmission planning process. In
requiring the consideration of transmission needs driven by Public
Policy Requirements, the Commission is not mandating fulfillment of
those requirements. Instead, the Commission is acknowledging that the
requirements in question are facts that may affect the need for
transmission services and these needs must be considered for that
reason. Such requirements may modify the need for and configuration of
prospective transmission facility development and construction. The
transmission planning process and the resulting transmission plans
would be deficient if they do not provide an opportunity to consider
transmission needs driven by Public Policy Requirements.
    110. Our disagreement with commenters on this point can be best
explained by considering the case that they use to support their
arguments, NAACP v. FPC. In that case, the Court found that the
Commission did not have power under the FPA or the Natural Gas Act
(NGA) to construe its obligation to promote the public interest under
those statutes as creating ``a broad license to promote general public
welfare.'' \107\ Specifically, the Court found that the Commission's
duty to promote the public interest under the FPA and NGA ``is not a
directive to the Commission to seek to eradicate discrimination,'' and
it thus did not authorize the Commission to promulgate rules
prohibiting the companies it regulates from engaging in discriminatory
employment practices merely because the statutes pertain to matters
affected with a public interest.\108\ The Commission is doing nothing
analogous when specifying that transmission needs driven by Public
Policy Requirements be taken into account in the transmission planning
process.
---------------------------------------------------------------------------

    \107\ NAACP v. FERC, 425 U.S. 662 at 668.
    \108\ Id. at 670.
---------------------------------------------------------------------------

    111. Requiring the development of a regional transmission plan that
considers transmission needs driven by Public Policy Requirements
cannot be construed as pursuing broad general welfare goals that extend
beyond matters subject to our authority under the FPA. Public Policy
Requirements can directly affect the need for interstate transmission
facilities, which are squarely within the Commission's jurisdiction.
Moreover, we are not specifying the Public Policy Requirements that
must be considered in individual local and regional transmission
planning processes.\109\ This further confirms that, in requiring that
the transmission planning process

include the evaluation of potential solutions to identified
transmission needs driven by Public Policy Requirements, the Commission
is simply requiring the consideration of facts that are relevant to the
transmission planning process. In doing so, it is neither pursuing nor
enforcing any specific policy goals.
---------------------------------------------------------------------------

    \109\ See infra section III.A.4.
---------------------------------------------------------------------------

    112. Other commenters cite CAISO v. FERC for the proposition that
the Proposed Rule extends beyond our authority under the FPA. In that
case, the court found that the Commission did not have authority under
section 206 of the FPA to direct the California ISO to alter the
structure of its corporate governance, concluding that the choosing and
appointment of corporate directors is not a ``practice * * * affecting
[a] rate'' within the meaning of the statute.\110\ The court explained
that the Commission is empowered under section 206 to assess practices
that directly affect or are closely related to a public utility's rates
and ``not all those remote things beyond the rate structure that might
in some sense indirectly or ultimately do so.'' \111\ Unlike the
corporate governance matters at issue in that proceeding, the
transmission planning activities that are the subject of this Final
Rule have a direct and discernable affect on rates. It is through the
transmission planning process that public utility transmission
providers determine which transmission facilities will more efficiently
or cost-effectively meet the needs of the region, the development of
which directly impacts the rates, terms and conditions of
jurisdictional service. The rules governing the transmission planning
process are therefore squarely within our jurisdiction, whether the
particular transmission facilities in question are planned to meet
reliability needs, address economic considerations, or meet
transmission needs driven by a Public Policy Requirement.
---------------------------------------------------------------------------

    \110\ CAISO v. FERC, 372 F.3d 395 at 403.
    \111\ Id.
---------------------------------------------------------------------------

    113. We disagree with the commenters who argue that the Proposed
Rule does not comply with the APA because the Proposed Rule does not
provide enough reasoning or adequate detail to permit parties to
comment meaningfully on it. Section 553(b)(3) of the APA requires that
a notice of proposed rulemaking contain ``either the terms or substance
of the proposed rule or a description of the subjects and issues
involved.'' \112\ The purpose of the requirement is to ensure that
``persons are `sufficiently alerted to likely alternatives' so that
they know whether their interests are `at stake.' '' \113\ Courts have
held in this connection that a ``[n]otice of proposed rulemaking must
be sufficient to fairly apprise interested parties of the issue
involved * * *, but it need not specify every precise proposal which
[the agency] may ultimately adopt as a rule.'' \114\ We disagree with
commenters arguing that this requires us to identify the issues that
might be raised in future orders by the Commission should disputes
arise as to the construction of transmission facilities in the regional
transmission planning process. This Final Rule is focused on ensuring
that there is a fair regional transmission planning process, not
substantive outcomes of that process.
---------------------------------------------------------------------------

    \112\ 5 U.S.C. 553(b)(3).
    \113\ Spartan Radiocasting Co., v. FCC, 619 F.2d 314, 321 (4th
Cir. 1980) (citing South Terminal Corp. v. EPA, 504 F.2d 646, 659
(1st Cir. 1974)).
    \114\ Id. 321-22 (citing Consolidation Coal Co. v. Costle, 604
F.2d 239, 248 (4th Cir. 1979)).
---------------------------------------------------------------------------

    114. We disagree with Southern Companies' argument that the
Proposed Rule violated the fair notice requirement of the Due Process
Clause because it did not identify how the Public Policy Requirements
in the transmission planning process would be satisfied. As explained
above, fair notice requires that we apprise parties of the issues
involved. In this respect, all interested parties have had fair notice
and an opportunity to comment on the Commission's proposed requirement
regarding the consideration of transmission needs driven by Public
Policy Requirements in the transmission planning process and to provide
their perspectives, consistent with the notice and comment requirements
of the APA. Moreover, the case that Southern Companies cite in support
of their argument, Trinity Broadcasting of Fla., Inc. v. FCC,\115\ is
not on point. That case involved a denial by the Federal Communications
Commission (FCC) of an application to renew a commercial television
broadcast license that could have been renewed under a statutory
preference in favor of minority-controlled firms. A majority of the
applicant's board was made up of members of minority groups, but the
FCC denied the application because the applicant had not satisfied its
interpretation of minority control as de facto or ``actual'' control of
operations. The court found that the agency had not given sufficient
notice of its interpretation of minority control to justify punishment
in the form of denial of the application. Nothing analogous is
occurring here. Trinity Broadcasting did not involve a rulemaking
proceeding, as is the case here, but rather an adjudication that raised
the issue of ``[w]hat constitutes sufficiently fair notice of an
agency's interpretation of a regulation to justify punishing someone
for violating it?'' \116\ A rulemaking such as the present proceeding
does not involve the assessment of penalties for failure to comply with
a particular regulation, and therefore the notice that is required
before penalties can be assessed has no relevance here.
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    \115\ 211 F.3d 618, 628 (DC Cir. 2000) (Trinity Broadcasting).
    \116\ Trinity Broadcasting, 211 F.3d 618 at 619.
---------------------------------------------------------------------------

    115. We also disagree that this Final Rule may represent a
departure from section 35.35(i)(ii) of the Commission's regulations,
which establishes a rebuttable presumption that a transmission project
that has received construction approvals from relevant state regulatory
agencies satisfies Order No. 679's \117\ requirement that the
transmission project is needed to ensure reliability or reduce the cost
of delivered power by reducing congestion. The rebuttable presumption
of prudent investment provided for in section 35.35(i)(ii) applies only
to Commission determinations with respect to incentive-based rate
treatments for investment in transmission infrastructure. The Proposed
Rule does not ``represent a departure'' from this provision because the
provision deals with matters that are not covered or affected by the
Proposed Rule. Electricity Consumers Resource Council and Associated
Industrial Groups therefore have not adequately explained why they
believe the Proposed Rule represented such a departure.
---------------------------------------------------------------------------

    \117\ Promoting Transmission Investment through Pricing Reform,
Order No. 679, FERC Stats. & Regs. ] 31,222 (2006), order on reh'g,
Order No. 679-A, FERC Stats. & Regs. ] 31,236, order on reh'g, 119
FERC ] 61,062 (2007).
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    116. With respect to Indianapolis Power & Light's assertion that
the Commission has failed to satisfy FPA section 206, we conclude that
we have met section 206's burden. Our review of the record demonstrates
that existing transmission planning processes are unjust and
unreasonable or unduly discriminatory or preferential. Specifically, we
conclude that the record shows that, for the pro forma OATT (and,
consequently, public utility transmission providers' OATTs) to be just
and reasonable and not unduly discriminatory or preferential, it must
be revised in the context of transmission planning to include the
requirement that regional transmission planning processes result in the
production of a regional transmission plan using a process that
satisfies the specified Order No. 890 transmission planning

principles and that provides an opportunity to consider transmission
needs driven by Public Policy Requirements. We conclude that these
reforms satisfy the section 206 standard because they help ensure just
and reasonable rates and remove those remaining opportunities for undue
discrimination.
    117. Finally, with respect to the concerns raised by City of Los
Angeles Department of Water and Power, APPA, Nebraska Public Power
District, and others regarding the legal issues associated with public
power participation in the regional transmission planning processes, we
make the following observations. First, as discussed in the section of
this Final Rule addressing reciprocity, we reiterate that this Final
Rule simply applies the reciprocity principles set forth in Order Nos.
888 and 890 regarding non-public utility transmission provider
participation in transmission planning processes. Second, non-
jurisdictional entities, unlike public utilities, may choose whether to
join a regional transmission planning process and, to the extent they
choose to do so, they may advocate for those processes to accommodate
their unique limitations and requirements.
3. Regional Transmission Planning Principles
a. Commission Proposal
    118. The Proposed Rule would require that each public utility
transmission provider participate in a regional transmission planning
process that produces a regional transmission plan and that meets the
following transmission planning principles: (1) Coordination; (2)
openness; (3) transparency; (4) information exchange; (5)
comparability; (6) dispute resolution; and (7) economic planning
studies. This proposal did not include two of the Order No. 890
transmission planning principles, namely the cost allocation
transmission planning principle and the regional participation
transmission planning principle. More specifically, the Commission
would require that each regional transmission planning process consider
and evaluate transmission facilities and other non-transmission
solutions that may be proposed and develop a regional transmission plan
that identifies the transmission facilities that more efficiently or
cost-effectively meet the needs of public utility transmission
providers, their customers and other stakeholders.\118\
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    \118\ Proposed Rule, FERC Stats. & Regs. ] 32,660 at P 51.
---------------------------------------------------------------------------

    119. The Proposed Rule also would provide that a merchant
transmission developer that does not seek to use the regional cost
allocation process would not be required to participate in the regional
transmission planning process, although such a developer would be
required to comply with all reliability requirements applicable to
transmission facilities in the transmission planning region in which
its transmission project would be located.\119\ To reiterate, merchant
transmission projects are defined as those for which the costs of
constructing the proposed transmission facilities will be recovered
through negotiated rates instead of cost-based rates. The Proposed Rule
states that such a merchant transmission developer would not be
prohibited from participating--and, indeed, is encouraged to
participate--in the regional transmission planning process.\120\
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    \119\ Proposed Rule, FERC Stats. & Regs. ] 32,660 at n.23.
    \120\ Id. P 99.
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b. Comments
    120. Many commenters agree that the Commission should require
public utility transmission providers to produce a regional
transmission plan using a process that complies with the Order No. 890
transmission planning principles.\121\ NextEra supports the
Commission's proposal provided that a regional transmission planning
process produces a regional transmission plan with identified
transmission facilities to be built in the near-term. Iberdrola
Renewables contends that the current piecemeal, generation-driven
approach to transmission development is inefficient and ineffective and
hinders development of renewable energy resources. Duke states that it
supports the requirement that a regional transmission plan be produced
through a regional transmission planning process. Maine PUC believes
that in New England, the distinction between different types of
transmission projects (i.e., reliability and market efficiency
transmission facilities) has impeded the development of transmission
facilities that would reduce congestion costs and provide greater
access to low-cost supply, including renewable resources, and suggests
that the Commission consider eliminating this distinction.
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    \121\ E.g., Anabaric and PowerBridge; AWEA; City and County of
San Francisco; DC Energy; Duke; Duquesne Light Company; East Texas
Cooperatives; Energy Future Coalition Group; LS Power; MISO;
National Grid; NEPOOL; New England States' Committee on Electricity;
New England Transmission Owners; NextEra; Northern Tier Transmission
Group; Ohio Consumers' Counsel and West Virginia Consumer Advocate
Division; Wilderness Society and Western Resource Advocates; and
Wisconsin Electric Power Company.
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    121. Most commenters addressing the proposed transmission planning
reforms support the Commission's proposal to require public utility
transmission providers to adopt several of the Order No. 890
transmission planning principles for the regional transmission planning
process.\122\ Some commenters ask the Commission to clarify that the
existing Order No. 890 transmission planning principles would remain
applicable to regional transmission planning processes.\123\ Some
commenters also seek clarification that individual transmission owners
must comply with Order No. 890 transmission planning principles and
have an OATT Attachment K on file with the Commission.\124\
Transmission Dependent Utility Systems state that transmission owners
must comply with Order No. 890 transmission planning principles even if
they are planning local transmission projects in an RTO.
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    \122\ E.g., ISO New England and SPP.
    \123\ E.g., East Texas Cooperatives and Champlain Hudson.
    \124\ E.g., Transmission Dependent Utility Systems and Old
Dominion.
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    122. Several supporting the Proposed Rule stress that fair process,
transparency, and robust stakeholder participation are important
components of the transmission planning process.\125\ PPL Companies
state that all interested parties, especially those that may be
allocated costs for a particular transmission project, should have an
opportunity to provide meaningful input into the regional transmission
planning process, and urge the Commission to require that historical
and real-time data be made available to interested stakeholders.
Transmission Dependent Utility Systems contend that transmission
customers need to play an integral role in the regional transmission
planning process. 26 Public Interest Organizations, Green Energy and
21st Century, and Western Independent Transmission Group state that
transparency in transmission planning and access to models and data are
critical to nonincumbent resources and grid infrastructure providers if
these entities are to be effective participants in regional
transmission plan development. Independent Energy Producers Association
urges the Commission to emphasize that the

openness, transparency, and inclusiveness criteria of Order No. 890
should apply to all phases of the transmission planning process. New
Jersey Board suggests that transmission providers be required to state
the baseline methodology on which load forecasts are based. However,
Anbaric and PowerBridge suggest consideration of internal procedures to
treat transmission project information as confidential, including
protections to ensure that transmission projects that are not selected
in the regional transmission plan will remain confidential.
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    \125\ E.g., PPL Companies; DC Energy; Direct Energy; 26 Public
Interest Organizations; Green Energy and 21st Century; Western
Independent Transmission Group; City of Santa Clara; Natural
Resources Defense Council; New Jersey Division of Rate Counsel; and
Iberdola Renewables.
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    123. Some commenters also address dispute resolution issues in the
regional transmission planning process. City of Santa Clara believes
that transmission planning processes should include an effective and
meaningful dispute resolution process, including the ability to request
Commission resolution of unresolved disputes. Transmission Access
Policy Study Group argues that guidance from the Commission is needed
to ensure that the dispute resolution process is useful, suggesting
that use of reasonable, nondiscriminatory criteria to minimize the
potential for discriminatory results, particularly with regard to the
inclusion or exclusion of project proposals in a regional transmission
plan and the consideration of public policy objectives in the
transmission planning process. Transmission Access Policy Study Group
suggests that the Commission establish a backstop dispute resolution or
expedited complaint process to have a forum for addressing disputes
regarding transmission projects selected or not selected in regional
transmission plans.
    124. Some commenters recommend that the Commission continue to
recognize regional flexibility with respect to transmission planning
processes.\126\ Kansas City Power & Light and KCP&L Greater Missouri
supports the Proposed Rule's suggestion that the Commission would defer
to each region to develop transmission planning processes that address
regional needs, noting that each region has developed differently and
that not all regions are at the same level of maturity. Northern Tier
Transmission Group states that the Commission should provide
flexibility as to the manner in which regional plans are produced,
emphasize expected results rather than process, and clarify that the
region may continue to rely on a ``bottom-up'' process in developing
the plan. SPP recommends that transmission planning authorities be
permitted to develop, through their stakeholder processes and in
consultation with state regulatory commissions, strategies and metrics
to achieve region-appropriate compliance with the Final Rule.
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    \126\ E.g., Kansas City Power & Light and KCP&L Greater
Missouri; Edison Electric Institute; and WIRES.
---------------------------------------------------------------------------

    125. Many entities that support the Proposed Rule believe that the
regional transmission planning process in which they participate
already satisfies the proposed requirements.\127\ ISO/RTO Council asks
that the Final Rule reflect that ISOs and RTOs already satisfy the
requirements and that no further demonstration or tariff language be
required in a future compliance filing with the exception of any new or
altered requirements imposed by the Final Rule. In response, 26 Public
Interest Organizations agree that the proposed reforms should not
modify or interfere with progress being made by transmission planners
with transmission planning processes that comply with or exceed Order
No. 890 requirements and that only those tariff provisions that are
affected by the Final Rule need to be filed.
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    \127\ E.g., Bonneville Power; Duke; Massachusetts Departments;
California ISO; Sunflower and Mid-Kansas; MISO Transmission Owners;
California Commissions; MISO; New England States' Committee on
Electricity; Indianapolis Power & Light; Northeast Utilities; ISO
New England; New York ISO; Southern Companies; and Long Island Power
Authority.
---------------------------------------------------------------------------

    126. On the other hand, Iberdrola Renewables states that the
Commission should make clear that reliance on existing institutions and
approaches would be adequate only if they can effectively implement the
Commission's goals of driving needed transmission infrastructure
investment. To that end, it states that in areas not covered by RTOs or
ISOs, new regional agreements would be needed to ensure that the
transmission providers in the region have a governance structure for
undertaking the regional and interregional transmission planning
obligations and a workable mechanism for sharing costs consistent with
the cost allocation guidelines, and clarify the factors it would
consider in determining whether a particular regional proposal or
compliance filing has sufficiently broad regional support to merit any
deference.
    127. Some commenters ask the Commission to clarify the term
``transmission planning region'' as it relates to the requirements of
the Proposed Rule.\128\ Indianapolis Power & Light and Powerex ask the
Commission to define ``region'' in a Final Rule and include a
definition of transmission planning region in whatever regulations are
promulgated. California Municipal Utilities state that they believe
regional consolidation of transmission planning regions should not be
forced and that more detail is needed from the Commission for its
members to determine if current transmission planning processes meet
the requirements of the Proposed Rule. Solar Energy Industries and
Large-scale Solar contend that the Commission should ensure that, on
the review of compliance filings, the scope of the self-selected
planning regions does not create inadvertent planning seams that
inhibit the development of transmission projects needed to meet public
policy requirements established by state or federal laws or
regulations.
---------------------------------------------------------------------------

    \128\ E.g., NextEra; Clean Line; California Municipal Utilities;
American Transmission; and Arizona Corporation Commission.
---------------------------------------------------------------------------

    128. Several commenters urge the Commission to clarify that
existing ISOs and RTOs are considered regions for purposes of
transmission planning.\129\ However, ITC Companies state that RTO
boundaries are not always the right ones for transmission planning, and
ITC Companies are concerned that, given the focus of RTOs on developing
and running energy markets, it might be difficult for RTOs to plan
transmission from a truly independent perspective. Instead, ITC
Companies suggest that the planning function be split off from the
market function so that there is a truly independent planning
authority. In reply, California ISO argues that ITC Companies'
recommendation is tantamount to mandating the creation of new entities,
which it argues the Commission cannot do. AWEA asks the Commission to
clarify that more than one organized market could form a single region
for transmission planning and cost allocation purposes.
---------------------------------------------------------------------------

    \129\  E.g., ISO/RTO Council; California ISO; MISO Transmission
Owners; Indianapolis Power & Light; and NextEra.
---------------------------------------------------------------------------

    129. Commenters express different views on defining transmission
planning regions outside of the ISO and RTO context. MISO Transmission
Owners suggest that, where ISOs or RTOs do not exist, the Commission
should allow each transmission provider to propose its own definition
of what it considers its transmission planning region. Further, they
state that the Commission should not define the term ``transmission
planning region'' to be any larger or broader than an RTO or ISO
region. MISO states that public utility transmission providers not
associated with existing RTOs should either be required to form
transmission regional planning areas with each other

or participate in regional transmission planning with an adjacent RTO.
Some commenters ask the Commission to determine that, in non-RTO
regions, a single transmission provider or utility family cannot serve
as a transmission planning region.\130\ Transmission Access Policy
Study Group urges the Commission to specify that transmission planning
regions in areas outside of RTOs include at least two transmission
providers and be at least as large as the smaller of a state or one of
NERC's Regional Entities. NextEra suggests that, in non-RTO areas,
geographic scope should be determined by factors such as the level of
interconnections between utilities, power flows, boundaries of existing
NERC regions, and historical coordination practices.
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    \130\ E.g., AWEA; Clean Line; G&T Cooperatives; Integrys; and
NextEra.
---------------------------------------------------------------------------

    130. Ad Hoc Coalition of Southeastern Utilities claim that the
Proposed Rule makes several incorrect statements concerning what
constitutes a region for transmission planning purposes in the
Southeast.\131\ They note that the Proposed Rule references both
regional and interregional organizations and processes (including NERC
regional entities) as being regional for purposes of the Proposed Rule
and assert that a holding that only RTO regions are sufficiently
encompassing to meet the proposed requirements would be arbitrary and
capricious. Given that the Commission has previously recognized that
the South Carolina Regional Transmission Planning (SCRTP) process
complies with Order No. 890, and as such is a ``regional transmission
planning process,'' South Carolina Electric & Gas asks the Commission
to clarify that the SCRTP constitutes a ``regional transmission
planning process'' as contemplated by the Proposed Rule. Colorado
Independent Energy Association supports the designation of WestConnect
as a regional transmission planning organization for the purposes of
transmission planning and development in Colorado and to make findings
to that effect in this Final Rule. Florida PSC and Commissioner Skop
argue that if the Commission adopts a definition of ``region'' that
does not recognize Florida as a distinct transmission planning region,
and Florida becomes part of a multistate region, then it is unclear
what role the Florida PSC would retain, if any, over the transmission
planning and cost allocation processes in Florida.\132\
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    \131\ In reply comments, South Carolina Office of Regulatory
Staff state that it concurs with Ad Hoc Coalition of Southeastern
Utilities' views regarding the uniqueness of transmission planning
in the Southeast.
    \132\ Additionally, Florida PSC and Commissioner Skop express
concern about the lack of Florida-based commenters, noting that
either Florida utilities joined a broader coalition of commenters
or, as in the case of NextEra, did not comment from the perspective
of its Florida-based utility. Florida PSC and Commissioner Skop ask
the Commission to take the lack of Florida-specific points of view
into account when it considers its proposals.
---------------------------------------------------------------------------

    131. Many commenters recommend that transmission providers should
evaluate both transmission and non-transmission solutions during the
regional transmission planning process.\133\ 26 Public Interest
Organizations and Dayton Power and Light assert that consideration of
non-transmission solutions with all other resource options is needed to
determine the most cost-effective way to meet grid needs. 26 Public
Interest Organizations ask the Commission to establish minimum
requirements for: what types of resources should be assessed; how
assessments should be conducted; and what types of modeling and
sensitivity analyses are needed to estimate and compare the costs and
benefits of option, implementation timelines, and relative risks of
various resource choices. New Jersey Board believes that transmission
providers should provide peak load reduction data that demonstrate the
effect of demand response and energy efficiency on baseline forecasts.
MISO supports the consideration of non-traditional solutions so long as
this process does not interfere with state authority over integrated
resource planning. Western Grid Group and Pattern Transmission suggest
that resource planning and transmission planning should be
reintegrated.
---------------------------------------------------------------------------

    \133\ E.g., AWEA; California Commissions; Wisconsin Electric;
Omaha Public Power District; Dayton Power and Light; Eastern
Environmental Law Center; Environmental NGOs; NRG; Vermont Electric;
EarthJustice; and SPP.
---------------------------------------------------------------------------

    132. On the other hand, Ad Hoc Coalition of Southeastern Utilities
states that a requirement for regional transmission planning processes
to consider both transmission and non-transmission solutions is
inconsistent with transmission planning procedures in the Southeast. It
explains that non-transmission solutions are typically considered in
integrated resource planning and request for proposal processes during
the current ``bottom-up'' transmission planning process. It states that
including a generation resource as an alternative during the regional
transmission planning process would convey a right of generation
planning to the Commission that would be inconsistent with state law.
Accordingly, it states that there are no transmission planning gaps in
the Southeast that the Commission needs to address. In its reply
comments, Ad Hoc Coalition of Southeastern Utilities argues that such a
policy would be inappropriate because there would be winners and losers
in any given state, such a ``top-down'' process would risk losing the
emphasis on consumers that currently exists in the state-regulated
processes. Ad Hoc Coalition of Southeastern Utilities, in responding to
comments by Western Grid Group and Pattern Transmission, argues that
transmission planning and resource planning in the Southeast have not
diverged and that further reforms are unnecessary. Southern Companies
agree.
    133. MISO Transmission Owners ask the Commission to provide
additional guidance regarding the meaning of ``non-transmission
solutions'' and which of these solutions transmission providers are
required to include in their transmission planning processes. MISO
Transmission Owners state that if non-traditional solutions must be
considered, then the Commission should clarify that they are required
to participate in the transmission planning process on a similar basis
as transmission projects.
    134. Other commenters ask for clarification and guidance from the
Commission on other transmission planning-related issues associated
with the Proposed Rule. WIRES believes that the Commission should
consider additional rules that promote consistent transmission planning
cycles, stakeholder procedures, action timelines, and criteria for
evaluating project proposals. Transmission Access Policy Study Group
also suggests that the Commission require regular updating of regional
transmission plans, and require jurisdictional transmission providers
to file, for public comment, a ``planning report card'' identifying the
projects proposed during the transmission planning process, the
projects approved and included in the regional transmission plan, and
the projects that were proposed but excluded from the plan and the
reasons those proposed projects were rejected. Transmission Access
Policy Study Group states that the Final Rule should subject decisions
as to which facilities are included in a regional transmission plan to
justification and objective evaluation to prevent discrimination and
unjust and unreasonable rates.
    135. AEP asserts that a significant flaw in typical transmission
planning processes is the failure to consider benefits beyond the near-
term.

Therefore, AEP recommends that the Commission direct each transmission
planning region to develop a long-term plan that utilizes a 20-30 year
planning horizon in the determination of need analysis (while still
permitting RTOs to annually evaluate shorter-term projects needed to
complement the long-term plan). AEP argues that the useful life of any
transmission facility is likely to exceed 40 years and, consequently,
the most efficient transmission planning process should cover a minimum
span of 20 years, and cites to SPP's and California ISO's transmission
planning processes, which use 20-year planning horizons.
    136. Primary Power supports the concept that every transmission
provider must participate in a regional transmission planning process
where specific projects are determined to be in the public convenience
and necessity, and urges the Commission to devise threshold
requirements ensuring that transmission planners have a degree of
independence from market participants that would promote equitable and
economically supportable results in terms of which transmission
facilities are built and who ultimately pays for them. Some commenters
also ask the Commission to clarify that least-cost planning is a driver
of the transmission planning process. Transmission Dependent Utility
Systems state that both the regional and interregional transmission
planning processes adopted by the Final Rule should include
clarification that coordination of reliability and economic
transmission planning includes identifying optimal solutions to
congestion for all transmission customers and load-serving entities
across the region. Transmission Dependent Utility Systems recommend
that the Commission clarify this concept in the Final Rule and
explicitly recognize a joint optimization requirement.
    137. Solar Energy Industries and Large-scale Solar suggest that the
Commission require holistic long-term planning on a regional basis, in
which the interaction of proposed projects with other projects across
the region, as well as the integration of renewable resources,
distributed generation, and demand response is considered. Transmission
Agency of Northern California asks the Commission to clarify that a
regional transmission planning ``process'' need not be narrowly defined
as participation in a single set of procedures and that the
transmission planning process need not serve every planning purpose.
Arizona Corporation Commission seeks clarification on who would
determine whether a transmission project is a reliability project
within the context of the regional transmission planning process.
Arizona Corporation Commission suggests that state-level entities, such
as state utility commissions, should continue to determine whether a
transmission project is a reliability project during line siting and/or
determination of need proceedings. Additionally, it states that all
proposed transmission projects should be freshly evaluated in each
transmission planning cycle so that projects are aligned with
transmission needs at the time and adequately incorporate current
public policy requirements.
    138. Some commenters seek assurance from the Commission that the
needs of states and load-serving entities would be considered in the
regional transmission planning process. NARUC states that the Final
Rule should identify the states as key players in any transmission
planning process, pointing to the primary role of states in
transmission siting. E.ON emphasizes that the Commission should work to
ensure that the Final Rule's planning requirements not give rise to new
impediments to a local transmission owning utility's ability to
efficiently satisfy customer needs under state service obligations.
E.ON suggests that the Commission incorporate the following
requirements in its Final Rule: regional and interregional transmission
planning processes should be sufficiently flexible to accommodate the
real-time requirements of a transmission owner and operator's native
load customers; and the transmission planning process should recognize
that the obligation to serve still exists in a number of jurisdictions
and that any regional plan or process needs to allow for the fact that
it is that obligation that drives transmission planning.
    139. Others are concerned about the applicability of the Proposed
Rule to currently pending transmission projects. Atlantic Wind
Connection seeks clarification that sponsored projects with a pending
request for inclusion in a regional transmission plan should be studied
under the requirements of the Final Rule without undue delay, including
delays resulting from any proposed procedural requirements. Edison
Electric Institute argues that the Final Rule should apply to projects
only on a going-forward basis, and a project identified in an existing
plan should not be subject to bumping in a revised transmission
planning process filed in compliance with a Final Rule. Northeast
Utilities states that the Final Rule should avoid harming projects
already included in the transmission planning process.
    140. Some commenters ask the Commission to establish a funding
mechanism to allow interested parties that are not market participants
to fully participate in the regional transmission planning process.
twenty-six Public Interest Organizations assert that an essential
element of robust and broadly supported regional planning is the
participation of non-market participants and that this requires ongoing
provider assistance. They state that, because non-market stakeholders
have neither the financial resources nor staff expertise to participate
effectively in regional transmission plan development processes without
special assistance, the Commission should direct transmission providers
to facilitate participation of these stakeholders through a funding
mechanism to cover reasonable technical assistance and other
participation costs. They conclude that these costs can be rolled into
the rates of the transmission service providers. Western Grid Group
offers suggestions as to how a funding mechanism could be implemented.
Additionally, EarthJustice and Environmental Groups urge the Commission
to encourage meaningful public participation in the regional
transmission planning process, arguing that non-market participation is
vital to achieving just, reasonable, and non-discriminatory system
plans, and explaining that substantial financial assistance is
necessary to assure such meaningful participation.
    141. Some commenters, such as AWEA and Transmission Access Policy
Study Group, support a requirement that there be an obligation to
construct projects identified in regional transmission plans. AWEA
recognizes that, while regional and interregional cost allocation
arrangements may alleviate some of the impediments to building
transmission facilities, an obligation to build projects identified in
the regional transmission plan in non-RTO regions would help ensure
that transmission facilities ultimately are constructed. In its reply
comments, First Wind supports AWEA's comments. Transmission Access
Policy Study Group suggests that the Commission can stimulate the
construction of new projects, without expanding transmission providers'
obligation to build. It suggests requiring development of a process to
obtain construction commitments, with accountability for those
commitments. Transmission Access Policy Study Group states that the
Final Rule should include a timely post-plan process for: (1) securing
commitments by transmission providers

(or others) to build the transmission facilities identified in the
regional plan; and (2) holding transmission providers and others that
commit to construct transmission facilities included in the regional
base model accountable for doing so.
    142. On the other hand, Edison Electric Institute argues that the
identification of transmission facilities in a transmission plan does
not impose an obligation to build them. In addition, Salt River Project
asserts that a transmission plan is not a specific blueprint of
projects that must be built and states that regional planning provides
the valuable service of comparing and contrasting individual potential
projects with the decision to build any given project coming after the
transmission planning process, with only those projects deemed superior
getting built. Salt River Project states that not all projects
identified by the plan should be or will be developed. Large Public
Power Council points to statements in the Proposed Rule providing that
the Commission's intention is not to require construction, and that
this decision not to compel construction is grounded in limitations on
the Commission's statutory authority.
    143. A number of commenters address the issue of whether merchant
transmission developers, i.e., those transmission developers that are
not seeking regional cost recovery for proposed transmission projects,
should be required to participate in the regional transmission planning
process. Some commenters state that the Commission should clarify in
the Final Rule that merchant transmission developers should not be
required to participate in the regional transmission planning
process.\134\ Clean Line states that, if ratepayers are not bearing
development risk and the developer is not seeking regional cost
allocation for its project, then it should not be required to
participate in the regional transmission planning process. Allegheny
Energy Companies note that, in PJM's regional transmission planning
process, such merchant transmission developers are not required to
participate if they do not wish to do so. New York ISO states that it
supports the proposal to not require transmission developers that do
not seek to take advantage of a regional transmission cost allocation
mechanism to participate in the regional transmission planning process.
LS Power states that it understands that merchant transmission
developers that did not participate in the regional transmission
planning process would still be required to provide to public utility
transmission providers the information that is needed, for example, for
the reliable operation of the transmission grid.
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    \134\ E.g., Allegheny Energy Companies; Champlain Hudson; Clean
Line; H-P Energy Resources; LS Power; and New York ISO.
---------------------------------------------------------------------------

    144. However, others support requiring merchant transmission
developers to participate in the regional transmission planning
process.\135\ APPA states that the reasons for engaging in coordinated
planning extend well beyond eligibility for inclusion in the regional
transmission cost allocation mechanisms, noting that the development of
transmission projects is a time-consuming and expensive endeavor. APPA
argues that it is important for transmission planners to know about and
fully analyze all of the various transmission alternatives to ascertain
the impact of existing and proposed projects on other regional
transmission facilities. Transmission Access Policy Study Group is
concerned that exempting merchant transmission developers from the
regional transmission planning process could cause the mandatory
process to plan around ad hoc merchant transmission projects and would
undermine the benefits of regional transmission planning, such as the
development of a right-sized grid, and creates the potential for free
ridership. In reply to Clean Line, Edison Electric Institute states
that viable merchant transmission projects must be included in the
regional transmission planning process, because such projects may have
significant reliability, operational, and economic impacts on the
transmission system.
---------------------------------------------------------------------------

    \135\ E.g., APPA; Large Public Power Council; Massachusetts
Municipal and New Hampshire Electric; MISO Transmission Owners;
National Rural Electric Coops; Nebraska Public Power District; New
England States Committee on Electricity; Northern Tier Transmission
Group; Ohio Consumers Counsel and West Virginia Consumer Advocate
Division; Old Dominion Electric Cooperative; Six Cities;
Transmission Agency of Northern California; Transmission Access
Policy Study Group; and Transmission Dependent Utility Systems.
---------------------------------------------------------------------------

    145. Finally, some commenters recommend that the Commission
strongly encourage nonincumbent participation even in cases where they
are not seeking regional cost recovery. California Commissions state
that nonincumbent transmission developers that seek cost recovery via
rolled-in rates should participate fully in the regional transmission
planning process but believes that participation by merchant
transmission developers that do not seek such cost recovery should be
strongly encouraged to the extent feasible with regard to planning, but
not to cost recovery. In its reply comments, Powerex notes that many
commenters were opposed to exempting merchant transmission developers
and thus recommended that the Commission encourage their participation
in the regional transmission planning process.
c. Commission Determination
    146. This Final Rule requires that each public utility transmission
provider participate in a regional transmission planning process that
produces a regional transmission plan and that complies with the
transmission planning principles of Order No. 890 identified below. We
determine that such transmission planning will expand opportunities for
more efficient and cost-effective transmission solutions for public
utility transmission providers and stakeholders. This will, in turn,
help ensure that the rates, terms and conditions of Commission-
jurisdictional services are just and reasonable and not unduly
discriminatory or preferential.
    147. Order No. 890 required public utility transmission providers
to coordinate at the regional level for the purpose of sharing system
plans and identifying system enhancements that could relieve congestion
or integrate new resources.\136\ The Commission did not specify,
however, whether such coordination with regard to identifying system
enhancements included an obligation for public utility transmission
providers to take affirmative steps to identify potential solutions at
the regional level that could better meet the needs of the region. As a
result, the existing requirements of Order No. 890 permit regional
transmission planning processes to be used as a forum merely to confirm
the simultaneous feasibility of transmission facilities contained in
their local transmission plans. Consistent with the economic planning
requirements of Order No. 890, regional transmission planning processes
also must respond to requests by stakeholders to perform studies that
evaluate potential upgrades or other investments that could reduce
congestion or integrate new resources or loads on an aggregated or
regional basis.\137\ Again, no affirmative obligation was placed on
public utility transmission providers within a region to undertake such
analyses in the absence of requests by stakeholders. There is also no
obligation for public utility transmission providers within

the region to develop a single transmission plan for the region that
reflects their determination of the set of transmission facilities that
more efficiently or cost-effectively meet the region's needs.
---------------------------------------------------------------------------

    \136\ Order No. 890, FERC Stats. & Regs. ] 31,241 at P 523.
    \137\ Id.
---------------------------------------------------------------------------

    148. We address these deficiencies in the requirements of Order No.
890 through this Final Rule, beginning with the requirement that public
utility transmission providers participate in a regional transmission
planning process that produces a regional transmission plan. Through
the regional transmission planning process, public utility transmission
providers will be required to evaluate, in consultation with
stakeholders, alternative transmission solutions that might meet the
needs of the transmission planning region more efficiently or cost-
effectively than solutions identified by individual public utility
transmission providers in their local transmission planning process.
This could include transmission facilities needed to meet reliability
requirements, address economic considerations, and/or meet transmission
needs driven by Public Policy Requirements, as discussed further below.
When evaluating the merits of such alternative transmission solutions,
public utility transmission providers in the transmission planning
region also must consider proposed non-transmission alternatives on a
comparable basis. If the public utility transmission providers in the
transmission planning region, in consultation with stakeholders,
determine that an alternative transmission solution is more efficient
or cost-effective than transmission facilities in one or more local
transmission plans, then the transmission facilities associated with
that more efficient or cost-effective transmission solution can be
selected in the regional transmission plan for purposes of cost
allocation.\138\
---------------------------------------------------------------------------

    \138\ As discussed in section IV.F.6, below, we conclude that
the issue of cost recovery associated with non-transmission
alternatives is beyond the scope of this Final Rule, which addresses
the allocation of the costs of transmission facilities.
---------------------------------------------------------------------------

    149. We acknowledge that public utility transmission providers in
some regions already meet or exceed this requirement.\139\ As with
other requirements in this Final Rule, our intent here is to establish
a minimum set of obligations for public utility transmission providers
that, as some commenters note, are not currently undertaking sufficient
transmission planning activities at the regional level. We decline,
however, to specify in this Final Rule a particular set of analyses
that must be performed by public utility transmission providers within
the regional transmission planning process. There are many ways
potential upgrades to the transmission system can be studied in a
regional transmission planning process, ranging from the use of
scenario analyses to production cost or power flow simulations. We
provide public utility transmission providers in each transmission
planning region the flexibility to develop, in consultation with
stakeholders, procedures by which the public utility transmission
providers in the region identify and evaluate the set of potential
solutions that may meet the region's needs more efficiently or cost-
effectively. We will review such mechanisms on compliance, using as our
yardstick the statutory requirements of the FPA, Order No. 890
transmission planning principles, and our precedent regarding
compliance with the Order No. 890 transmission planning principles, and
issue further guidance as necessary.\140\
---------------------------------------------------------------------------

    \139\ As noted above, to the extent existing transmission
planning processes satisfy the requirements of this Final Rule,
public utility transmission providers need not revise their OATTs
and, instead, should describe in their compliance filings how the
relevant requirements are satisfied by reference to tariff sheets
already on file with the Commission. Moreover, to the extent
necessary, we clarify that nothing in this Final Rule is intended to
modify or abrogate governance procedures of RTOs and ISOs.
    \140\ In developing their compliance filings, public utility
transmission providers and interested parties should review the
requirements as set forth in Order No. 890, Order No. 890-A, and our
orders on compliance filings submitted by public utility
transmission providers for guidance on what each of these
transmission planning principles requires. For example, as a
starting point, a public utility transmission provider should review
the orders addressing its own compliance filings and the compliance
filings for public utility transmission providers in its region. We
do not address these principles in detail here, except with respect
to the consideration of non-transmission alternatives in the
regional transmission planning process and other discrete issues
raised by commenters.
---------------------------------------------------------------------------

    150. Because of the increased importance of regional transmission
planning that is designed to produce a regional transmission plan,
stakeholders must be provided with an opportunity to participate in
that process in a timely and meaningful manner. Therefore, we apply the
Order No. 890 transmission planning principles to the regional
transmission planning process, as reformed by this Final Rule. This
will ensure that stakeholders have an opportunity to express their
needs, have access to information and an opportunity to provide
information, and thus participate in the identification and evaluation
of regional solutions. Ensuring access to the models and data used in
the regional transmission planning process will allow stakeholders to
determine if their needs are being addressed in a more efficient or
cost-effective manner. Greater access to information and transparency
also will help stakeholders to recognize and understand the benefits
that they will receive from a transmission facility in a regional
transmission plan. This consideration is particularly important in
light of our reforms that require that each public utility transmission
provider have a cost allocation method or methods for transmission
facilities selected in a regional transmission plan that reflects the
benefits that those transmission facilities provide.
    151. Specifically, the requirements of this Final Rule build on the
following transmission planning principles that we required in Order
No. 890: (1) Coordination; (2) openness; (3) transparency; (4)
information exchange; (5) comparability; (6) dispute resolution; and
(7) economic planning.\141\ In Order No. 890, we required that each
public utility transmission provider adopt these transmission planning
principles as part of its individual transmission planning process. In
this Final Rule, we expand the Order No. 890 requirements by directing
public utility transmission providers to adopt these requirements with
respect to the process used to produce a regional transmission plan. We
conclude that it is appropriate to do so to ensure that regional
transmission planning processes are coordinated, open, and
transparent.\142\ Accordingly, we require public utility transmission
providers to develop, in consultation with stakeholders,\143\
enhancements to their regional transmission planning processes,
consistent with these transmission planning principles.
---------------------------------------------------------------------------

    \141\ We do not include the regional participation transmission
planning principle and the cost allocation transmission planning
principle here because we address interregional transmission
coordination and cost allocation for transmission facilities
selected in a regional transmission plan for purposes of cost
allocation elsewhere in this Final Rule.
    \142\ Although the explicit requirement for a public utility
transmission provider to participate in a regional transmission
planning process that complies with the Order No. 890 transmission
planning principles identified above is new, we note that the
existing regional transmission planning processes that many
utilities relied upon to comply with the requirements of Order No.
890 may require only modest changes to fully comply with these Final
Rule requirements.
    \143\ The term ``stakeholder'' is intended to include any party
interested in the regional transmission planning process. This is
consistent with the approach taken in Order No. 890. See, e.g.,
Southern Co. Svcs., Inc., 127 FERC ] 61,282, at P 14-16 (2009).
---------------------------------------------------------------------------

    152. We conclude that, without the requirement to meet the Order
No. 890 transmission planning principles, a regional transmission
planning process will not have the information needed to

assess the impact of proposed transmission projects on the regional
transmission grid. Additionally, absent timely and meaningful
participation by all stakeholders, the regional transmission planning
process will not determine which transmission project or group of
transmission projects could satisfy local and regional needs more
efficiently or cost-effectively.
    153. A number of commenters specifically address the treatment of
non-transmission alternatives in the regional transmission planning
process. Order No. 890's comparability transmission planning principle
requires that the interests of public utility transmission providers
and similarly situated customers be treated comparably in regional
transmission planning.\144\ In response to Order No. 890, public
utility transmission providers have identified in their transmission
planning processes where, when, and how transmission and non-
transmission alternatives proposed by interested parties will be
considered. As noted in Order No. 890, the transmission planning
requirements adopted here do not address or dictate which transmission
facilities should be either in the regional transmission plan or
actually constructed.\145\ As also noted in Order No. 890, the ultimate
responsibility for transmission planning remains with public utility
transmission providers. With that said, the Commission intends that the
regional transmission planning processes provide for the timely and
meaningful input and participation of stakeholders in the development
of regional transmission plans.\146\
---------------------------------------------------------------------------

    \144\ Order No. 890, FERC Stats. & Regs. ] 31,241 at P 494.
    \145\ Order No. 890, FERC Stats. & Regs. ] 31,241 at P 438.
    \146\ Id. P 454.
---------------------------------------------------------------------------

    154. We disagree with those commenters that assert that non-
transmission alternatives only should be considered in the local
transmission planning process. We recognize that generation, demand
response, and energy efficiency options often are considered in local
resource planning and that transmission often is planned as a last
resort. Therefore, when local transmission plans are brought together
in a regional transmission planning process to determine if a regional
solution can better meet the needs of the region than the sum of local
transmission plans, many opportunities for the use of alternative
resources will already have been considered. Just as there may be
opportunities for regional transmission solutions to better meet the
needs of the region, the same could be true for regional non-
transmission alternatives. However, the regional transmission planning
process is not the vehicle by which integrated resource planning is
conducted; that may be a separate obligation imposed on many public
utility transmission providers and under the purview of the states.
    155. While we require the comparable consideration of transmission
and non-transmission alternatives in the regional transmission planning
process, we will not establish minimum requirements governing which
non-transmission alternatives should be considered or the appropriate
metrics to measure non-transmission alternatives against transmission
alternatives. Those considerations are best managed among the
stakeholders and the public utility transmission providers
participating in the regional transmission planning process.\147\
However, we note that in Order Nos. 890 and 890-A, as well as in orders
addressing related compliance filings, we have provided guidance
regarding the requirements of the Order No. 890 comparability
transmission planning principle.\148\ Specifically, public utility
transmission providers are required to identify how they will evaluate
and select from competing solutions and resources such that all types
of resources are considered on a comparable basis.\149\
---------------------------------------------------------------------------

    \147\ We also deny, as beyond the scope of this proceeding,
NRG's requests that we direct PJM to determine why its markets are
not sending appropriate price signals and that we direct ISOs and
RTOs to establish a ``feedback loop.''
    \148\ See, e.g., Order No. 890-A, FERC Stats. & Regs. ] 31,261
at P 216. See also, e.g., California Indep. Sys. Operator Corp., 123
FERC ] 61,283 (2008); East Kentucky Power Coop., 125 FERC ] 61,077
(2008).
    \149\ See, e.g., NorthWestern Corp., 128 FERC ] 61,040 at P 38
(2009) (requiring the transmission provider's OATT to permit
sponsors of transmission, generation, and demand resources to
propose alternative solutions to identified needs and identify how
the transmission provider will evaluate competing solutions when
determining what facilities will be included in its transmission
plan); El Paso Elec. Co., 128 FERC ] 61,063 at P 15 (2009) (same);
New York Indep. Sys. Operator, Inc., 129 FERC ] 61,044, at P 35
(2009) (same). In each of these cases, the Commission stated that
tariff language could, for example, state that solutions will be
evaluated against each other based on a comparison of their relative
economics and effectiveness of performance. Although the particular
standard a public utility transmission provider uses to perform this
evaluation can vary, the Commission explained that it should be
clear from the tariff language how one type of investment would be
considered against another and how the public utility transmission
provider would choose one resource over another or a competing
proposal. Northwestern Corp., 128 FERC ] 61,040 at P 38, n.31; El
Paso Elec. Co., 128 FERC ] 61,063 at P 15, n.25; New York Indep.
Sys. Operator, Inc., 129 FERC ] 61,044 at P 35, n.26.
---------------------------------------------------------------------------

    156. We disagree with concerns raised by certain commenters that
the Order No. 890 comparability transmission planning principle may
interfere with integrated resource planning.\150\ As discussed above,
this Final Rule in no way involves an exercise of authority over those
specific substantive matters traditionally reserved to the states,
including integrated resource planning, or authority over siting,
permitting, or construction of transmission solutions.\151\ In
addition, on compliance with Order No. 890, each public utility
transmission provider already has put into place regional transmission
planning processes that provide for the evaluation of proposed
solutions on a comparable basis.\152\ In this Final Rule, the
Commission is applying to regional transmission planning the
comparability transmission planning principle stated in Order Nos. 890
and 890-A.\153\
---------------------------------------------------------------------------

    \150\ E.g., Ad Hoc Coalition of Southeastern Utilities.
    \151\ See supra section III.A.2.
    \152\ See, e.g., Entergy OATT, Attachment K at Sec.  3.12;
Florida Power and Light OATT, Appendix 1 to Attachment K, Sec. Sec.
H and I; ISO New England OATT, Attachment K at Sec.  4.2; Puget
Sound Energy OATT, Attachment K at Sec.  2; SPP OATT, Attachment O
at Sec.  III.8.
    \153\ See, e.g., supra notes 148-49.
---------------------------------------------------------------------------

    157. We agree with commenters that public utility transmission
providers should have flexibility in determining the most appropriate
manner to enhance existing regional transmission planning processes to
comply with this Final Rule. As a result, and consistent with our
approach in Order No. 890, we will not prescribe the exact manner in
which public utility transmission providers must fulfill the
requirements of complying with the regional transmission planning
principles. We allow public utility transmission providers developing
the regional transmission planning processes to craft, in consultation
with stakeholders, requirements that work for their transmission
planning region. Consistent with this approach, we will not impose
additional rules that would detail consistent planning cycles, impose
stakeholder procedures, establish timelines for evaluating regional
transmission projects in the regional transmission planning process
(including establishing a minimum long-term planning horizons), add any
additional requirements to the Order No. 890 dispute resolution
transmission planning principle, or establish other planning criteria
beyond those in this Final Rule, as requested by some commenters. These
are matters best suited to resolution by the public utility
transmission providers and stakeholders in the transmission planning
region. We also reject Anbaric and PowerBridge's

suggestion that procedures be developed to treat transmission project
information as confidential, outside of the Commission's Critical
Energy Infrastructure Information (CEII) requirements and regulations,
as this runs counter to the requirement that regional transmission
planning processes be open and transparent.
    158. Additionally, we note that a public utility transmission
provider's regional transmission planning process may utilize a ``top
down'' approach, a ``bottom up'' approach, or some other approach so
long as the public utility transmission provider complies with the
requirements of this Final Rule. Public utility transmission providers
have flexibility in developing the necessary enhancements to existing
regional transmission planning processes to comply with this Final
Rule, based upon the needs and characteristics of their transmission
planning region.
    159. We also decline to impose obligations to build or mandatory
processes to obtain commitments to construct transmission facilities in
the regional transmission plan, as requested by some commenters. The
package of transmission planning and cost allocation reforms adopted in
this Final Rule is designed to increase the likelihood that
transmission facilities in regional transmission plans will move from
the planning stage to construction. In addition, public utility
transmission providers already are required to make available
information regarding the status of transmission upgrades identified in
transmission plans, including posting appropriate status information on
its Web site, consistent with the Commission's CEII requirements and
regulations.\154\ To the extent an entity has undertaken a commitment
to build a transmission facility in a regional transmission plan, that
information should be included in such postings.\155\ We determine that
this obligation, together with the reforms we adopt in this Final Rule,
are adequate without placing further obligations on public utility
transmission providers.
---------------------------------------------------------------------------

    \154\ See Order No. 890, FERC Stats. & Regs. ] 31,241 at P 472.
    \155\ Nothing in this Final Rule limits public utility
transmission providers from developing mechanisms to impose an
obligation to build transmission facilities in a regional
transmission plan, consistent with the requirements below regarding
the treatment of nonincumbent transmission developers. Similarly,
nothing in this Final Rule preempts or otherwise limits any such
obligation that may exist under state or local laws or regulations.
---------------------------------------------------------------------------

    160. The Commission also acknowledges the importance of identifying
the appropriate size and scope of the regions over which regional
transmission planning will be performed. We clarify that for purposes
of this Final Rule, a transmission planning region is one in which
public utility transmission providers, in consultation with
stakeholders and affected states, have agreed to participate in for
purposes of regional transmission planning and development of a single
regional transmission plan. As the Commission explained in Order No.
890, the scope of a transmission planning region should be governed by
the integrated nature of the regional power grid and the particular
reliability and resource issues affecting individual regions.\156\ We
note that every public utility transmission provider has already
included itself in a region for purposes of complying with Order No.
890's regional participation transmission planning principle. We will
not prescribe in this Final Rule the geographic scope of any
transmission planning region. We believe that these existing regional
processes should provide some guidance to public utility transmission
providers in formulating transmission planning regions for purposes of
complying with this Final Rule. However, to the extent necessary, we
clarify that an individual public utility transmission provider cannot,
by itself, satisfy the regional transmission planning requirements of
either Order No. 890 or this Final Rule.
---------------------------------------------------------------------------

    \156\ See, e.g., Order No. 890, FERC Stats. & Regs. ] 31,241 at
P 527.
---------------------------------------------------------------------------

    161. The Commission also clarifies that the obligation to
participate in a regional transmission planning process that produces a
regional transmission plan that meets the seven transmission planning
principles, is not intended to appropriate, supplant, or impede any
local transmission planning processes that public utility transmission
providers undertake. The objective of this Final Rule is to amend the
requirements of Order No. 890 so that regional transmission planning
processes not only continue to meet the transmission planning
principles established in Order No. 890 but, additionally, produce a
regional transmission plan.
    162. With regard to comments that seek clarification as to the
applicability of the requirements of this Final Rule to transmission
projects currently being proposed in existing regional transmission
planning processes, we clarify in section II.D above that the
requirements of this Final Rule are intended to apply to new
transmission facilities. Our intent is to enhance transmission planning
processes prospectively to provide greater openness and transparency in
the development of regional transmission plans. As also discussed in
section II.D above, we recognize that this Final Rule may be issued in
the middle of a transmission planning cycle, and we therefore direct
public utility transmission providers to explain in their respective
compliance filings how they intend to implement the requirements of
this Final Rule. In response to comments requesting that the Commission
mandate that public utility transmission providers include a funding
mechanism to facilitate the participation of in the regional
transmission planning process of interested entities that are not
market participants, this Final Rule affirms the general approach the
Commission took in Order No. 890 regarding the recovery of costs
associated with participation in the transmission planning process.
There, the Commission acknowledged concerns regarding ``how state
regulators and other agencies will recover the costs associated with
their participation in the planning process.'' \157\ The Commission
therefore directed public utility transmission providers to ``propose a
mechanism for cost recovery in their planning compliance filings'' and
stated that those proposals ``should include relevant cost recovery for
state regulators, to the extent requested.'' \158\ We decline to expand
that directive here to include funding for other stakeholder interests,
as requested by certain commenters. However, we also note that, to the
extent that public utility transmission providers choose to include a
funding mechanism to facilitate the participation of state consumer
advocates or other stakeholders in the regional transmission planning
process, nothing in this Final Rule precludes them from doing so.
---------------------------------------------------------------------------

    \157\ Order No. 890, FERC Stats. & Regs. ] 31,241 at n.339 and P
586.
    \158\ Id. n.339.
---------------------------------------------------------------------------

    163. With regard to the participation of merchant transmission
developers in the regional transmission planning process, we conclude
that, because a merchant transmission developer assumes all financial
risk for developing its transmission project and constructing the
proposed transmission facilities, it is unnecessary to require such a
developer to participate in a regional transmission planning process
for purposes of identifying the beneficiaries of its transmission
project that would otherwise be the basis for securing eligibility to
use a regional cost

allocation method or methods.\159\ However, we acknowledge the concern
of some commenters that a transmission project proposed or developed by
a merchant transmission developer has broader impacts than simply cost
recovery. Because all electric systems within an integrated network are
electrically connected, the addition or cancellation of a transmission
project in one system can affect the nature of power flows within one
system or on other systems.
---------------------------------------------------------------------------

    \159\ Proposed Rule, FERC Stats. & Regs. ] 32,660 at P 99.
---------------------------------------------------------------------------

    164. We therefore conclude that it is necessary for a merchant
transmission developer to provide adequate information and data to
allow public utility transmission providers in the transmission
planning region to assess the potential reliability and operational
impacts of the merchant transmission developer's proposed transmission
facilities on other systems in the region. We will allow public utility
transmission providers in each transmission planning region, in
consultation with stakeholders, in the first instance to propose what
information would be required. Public utility transmission providers
should include these requirements in their filings to comply with this
Final Rule.
    165. Although merchant transmission developers must provide
information in the regional transmission planning process as discussed
herein, to be clear, we emphasize that the transmission facilities
proposed by a merchant transmission developer are not subject to the
evaluation and selection processes that apply to transmission
facilities for which regional cost allocation is sought, as a merchant
transmission developer is not seeking to be selected in the regional
transmission plan for purposes of cost allocation. However, nothing in
this Final Rule prevents a merchant transmission developer from
voluntarily participating in the regional transmission planning process
(beyond providing the information and data required above) even if it
is not seeking regional cost allocation for its proposed transmission
project. As we stated in the Proposed Rule, we encourage them to do so.
In addition, nothing in this Final Rule limits or otherwise affects the
responsibilities a merchant transmission developer may have to fund
network upgrades caused by the interconnection of its project with the
transmission grid.\160\
---------------------------------------------------------------------------

    \160\ We note that, to the extent a merchant transmission
developer becomes subject to the requirements of FPA section 215 and
the regulations thereunder, it also will be required to comply with
all applicable obligations, including registration with NERC. Under
section 215, all users, owners, or operators of the bulk power
system must register with NERC for performance of applicable
reliability functions. The registration with NERC will help ensure
that merchant transmission developers provide all appropriate
information to be used in transmission system planning and
assessment studies. See 16 U.S.C. 824o(g) (``Reliability Reports--
The ERO shall conduct periodic assessments of the reliability and
adequacy of the bulk-power system in North America.''); see also
Rules Concerning Certification of the Electric Reliability
Organization; and Procedures for the Establishment, Approval and
Enforcement of Electric Reliability Standards, Order No. 672, 71 FR
8662 (Feb. 17, 2006), FERC Stats. & Regs. ] 31,204, at P 803, order
on reh'g, Order No. 672-A, 71 FR 19814 (Apr. 18, 2006), FERC Stats.
& Regs. ] 31,212 (2006). Concerns regarding when NERC registration
would be triggered should be addressed in a NERC registration
process.
---------------------------------------------------------------------------

4. Consideration of Transmission Needs Driven by Public Policy
Requirements \161\
---------------------------------------------------------------------------

    \161\ See supra P 2 (defining Public Policy Requirements).
---------------------------------------------------------------------------

a. Commission Proposal
    166. The Proposed Rule would require that transmission needs driven
by Public Policy Requirements be taken into account in the local and
regional transmission planning process to ensure that each public
utility transmission provider's transmission planning process supports
rates, terms, and conditions of transmission service in interstate
commerce that are just and reasonable and not unduly discriminatory or
preferential. The Proposed Rule would require each public utility
transmission provider to amend its OATT such that its local and
regional transmission planning processes explicitly provide for
consideration of Public Policy Requirements.\162\ The Commission noted
that this proposed requirement would be a supplement to, and would not
replace, any existing requirements with respect to consideration of
reliability needs and application of the Order No. 890 economic
planning studies transmission planning principle in the transmission
planning process.\163\ If a public utility transmission provider
believes that its existing transmission planning processes satisfy
these requirements, then the Proposed Rule would require that the
public utility transmission provider must make that demonstration in
its compliance filing.\164\
---------------------------------------------------------------------------

    \162\ Proposed Rule, FERC Stats. & Regs. ] 32,660 at P 64.
    \163\ Id.
    \164\ Id. P 66.
---------------------------------------------------------------------------

    167. The Proposed Rule would require each public utility
transmission provider to coordinate with its stakeholders to identify
Public Policy Requirements that are appropriate to include in its local
and regional transmission planning processes.\165\ The Proposed Rule
stated that, after consulting with stakeholders, a public utility
transmission provider may include in the transmission planning process
additional public policy objectives not specifically required by state
or federal laws or regulations.
---------------------------------------------------------------------------

    \165\ Id. P 65.
---------------------------------------------------------------------------

    168. The Proposed Rule sought comment on how planning criteria
based on Public Policy Requirements should be formulated, including
whether it would be more appropriate to use flexible criteria rather
than ``bright line'' metrics when determining which transmission
projects are to be included in a regional transmission plan, whether
the use of flexible criteria would provide undue discretion as to
whether a transmission project is included in a regional transmission
plan, and whether the use of ``bright line'' metrics may
inappropriately result in alternating inclusion and exclusion of a
single transmission project over successive planning cycles and thus
create inappropriate disruptions in long-term transmission
planning.\166\
---------------------------------------------------------------------------

    \166\ Id. P 70.
---------------------------------------------------------------------------

b. Comments
    169. In general, most commenters support the Commission's proposal
that each public utility transmission provider must amend its OATT such
that local and regional transmission planning processes explicitly
provide for the consideration of public policy requirements established
by state or federal laws or regulations that may drive transmission
needs.\167\ Support came from all sectors of the industry,

including public utilities, municipal and cooperative utilities,
renewable generators, transmission developers, state commissions, and
consumer and public interest representatives. While most commenters
support the proposal to include public policy requirements in
transmission planning processes, a number seek clarification or request
that the Commission provide additional guidance.
---------------------------------------------------------------------------

    \167\ E.g., Allegheny Energy Companies; American Transmission;
Anbaric and PowerBridge; Arizona Corporation Commission; Arizona
Public Service Company; Atlantic Grid; AWEA; California Commissions;
California ISO; Clean Energy Group; Connecticut & Rhode Island
Commissions; Consolidated Edison and Orange & Rockland; DC Energy;
Delaware PSC; Dominion; Duke; Duquesne Light Company; EarthJustice;
Exelon; First Wind; Iberdrola Renewables; Integrys; ISO New England;
ISO/RTO Council; Maine PUC; Massachusetts Departments; Massachusetts
Municipal and New Hampshire Electric; MISO; MISO Transmission
Owners; National Audubon Society; National Grid; New England States'
Committee on Electricity; New Jersey Board; New Jersey Division of
Rate Counsel; New York PSC; NextEra; Northeast Utilities; Northern
Tier Transmission Group; Ohio Consumers' Counsel and West Virginia
Consumer Advocate Division; Old Dominion; Pacific Gas & Electric;
Pattern Transmission; Pennsylvania PUC; PHI Companies; PJM; PUC of
Nevada; San Diego Gas & Electric; Southern California Edison;
Sunflower and Mid-Kansas; Transmission Dependent Utility Systems;
Transmission Access Policy Study Group; Transmission Agency of
Northern California; Western Grid Group; and Wind Coalition.
---------------------------------------------------------------------------

    170. With regard to what constitutes a public policy requirement,
some commenters seek to limit the definition to state and federal laws
and regulations \168\ while others seek a more flexible approach. For
example, Omaha Public Power District supports the Commission's proposal
only if such public policy requirements are established by state or
federal laws or regulations applicable to all entities in the relevant
planning region. East Texas Cooperatives believes that Omaha Public
Power District's proposal strikes a reasonable balance. Similarly,
National Rural Electric Coops state that the Commission should not
empower stakeholders to use the transmission planning process to impose
and enforce new resource planning requirements that lack the sanction
of state or federal law in the planning region. First Energy Service
Company argues that only enforceable requirements that are embodied in
state or federal law should be eligible for inclusion in transmission
planning processes. Duke states that the Final Rule should make
unambiguous that the public policy aspect of regional and interregional
planning refers only to those transmission projects driven by the need
to comply with state and/or federal laws, rules, and/or regulations and
that it supports limiting the requirement to public policies that drive
the need for transmission.
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    \168\ E.g., Omaha Public Power District; Exelon; First Energy
Services; PJM; New York ISO; and Transmission Agency of Northern
California.
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    171. Likewise, PJM states that the Commission should make clear
that the responsibility of the transmission planner to plan for public
policy criteria is triggered by the clear and formal identification of
those public policy criteria identified by Congress or state
policymakers through publicly issued laws or regulations and recognize
that the transmission planner would need to refer to the states to
reconcile conflicting policies that cannot both be reasonably
accommodated under a cost-effective and efficient regional transmission
plan. In their reply comments, APPA, PSEG Companies, ISO/RTO Council,
and Illinois Commerce Commission also caution about transmission
planners picking and choosing the public policies that would be
considered in transmission planning processes.
    172. In their reply comments, ISO/RTO Council suggest that the
Final Rule make clear that public policy objectives are limited to
those developed by federal or state executive, legislative, and
regulatory bodies with authority to adopt such objectives, that ISOs
and RTOs may defer to regional state committees on identifying and
reconciling individual state public policy goals, that states should
utilize the authority under section 216(i) of the FPA to enter into
regional compacts to ensure that recommendations pass constitutional
muster and otherwise have a suitable legal foundation, and that
stakeholders should advocate means of implementing state public policy
mandates to the states rather than to ISOs/RTOs.
    173. Several comments focus on the role of states in the
identification of public policy requirements and what constitutes such
a requirement. Many request that the Final Rule expressly acknowledge
the role of the state regulatory agencies and governors.\169\ For
example, PUC of Nevada supports the Commission's concept to require
that public policies be incorporated into transmission planning and
states that the Final Rule should specify the role state regulatory
commissions and governors play in ensuring that the transmission plan
accurately reflects state policies and, where there are inconsistencies
in the utility's interpretation of the state's public policy versus
that of the state regulatory commissions and governors, the Commission
should give deference to the regulatory commissions' and governors'
interpretation. PUC of Nevada also notes that the Final Rule does not
include an oversight mechanism.
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    \169\ E.g., Connecticut & Rhode Island Commissions;
Massachusetts Departments; PUC of Nevada; and New England States
Committee on Electricity.
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    174. New England States Committee on Electricity conditions its
support for the Commission's proposal on states identifying the
policies established in law and regulations to be considered in
transmission analysis. New York PSC comments that the Commission should
modify the process to allow states to identify which state-level
policies should be included in the transmission planning process. It
also asks the Commission to clarify that these policies may include
public policies derived pursuant to such statutory or regulatory
authority, such as those created pursuant to regulatory orders or state
energy plans and to allow states to identify state-level policies for
inclusion in those plans, not stakeholders. In reply comments,
California PUC also states that the Commission should not establish
prescriptive criteria regarding what policy goals are to be included.
City of Los Angeles Department of Water and Power states that the
Commission's proposal should be expanded to include local laws and
regulations, noting that many requirements of entities such as itself
are grounded in such local mandates.
    175. NARUC notes that states will not turn over their policy
authority to planning entities for inclusion in a Commission tariff and
states that, while it is valuable to have transmission planning
processes incorporate public policy considerations, a Commission tariff
cannot mandate particular policy approaches. NARUC explains that
transmission planners should not be required to determine unwritten
public policy requirements, and that the Final Rule should explicitly
recognize the governmental role, particularly at the state level, in
providing policy input into the transmission planning processes, rather
than directing the planners to consult with all stakeholders. NARUC
states that the Final Rule should make explicit that any provisions do
not impede or interfere with state commission authority to accept or
approve integrated resource plans, make decisions about generation,
demand-side resources, resource portfolios, or to modify policy based
on cost thresholds. East Texas Cooperatives, First Wind, and Florida
PSC express their support for NARUC's position.
    176. Connecticut & Rhode Island Commissions state that the
Commission should not prescribe any particular public policy
requirement that must be considered or excluded from the transmission
planning process. Moreover, they argue that the states, not
transmission utilities and planners, must retain their jurisdiction as
the ultimate arbiter on the issue of whether a transmission project is
the most beneficial, lowest cost, or most prudent decision for
achieving a state public policy goal. North Carolina Agencies assert
that the regional transmission planning processes should not decide how
to meet state and federal policy requirements, and that the FPA gives
the Commission no authority to determine what resources should be used
by load-serving entities, regardless of whether or not those resources
are

needed to meet public policy requirements.
    177. Others seek more flexibility in defining what constitutes a
public policy requirement.\170\ For example, Pacific Gas & Electric
asks that the Final Rule clarify that local and regional transmission
planning processes for public utility transmission providers consider
state or federal public policy objectives rather than identifying or
referring to specific laws and regulations. NextEra seeks clarification
that any type of legal or regulatory requirements affecting
transmission development should be included in the transmission
planning process, noting that the EPA has established a schedule for
issuing of a host of Clean Air Act rules governing other emissions from
electric generating units. Iberdrola Renewables states that any state
and federal renewable portfolio requirements and any state and federal
greenhouse gas emission reduction or climate change policies, including
requirements or standards that take effect in future years, should be
considered in the transmission expansion plan. Atlantic Wind Connection
states that the Commission should broaden the phrase ``public policy