Dive Brief:

• A Federal Energy Regulatory Commission “show cause” order that proposes to eliminate a transmission owner’s right to pay for and earn a profit on network upgrades for interconnecting power projects is based on unconstitutional premises and should be withdrawn, according to Duke Energy, Exelon, Xcel Energy and three other utility companies.

• The proposal in the show cause order FERC issued in June would lack clear Congressional authorization on an issue of major national significance, in violation of the major questions doctrine, the utility companies said in a Monday filing at FERC.

• “The show cause order proposes to take the historic step of mandating that electric utilities across much of the United States construct, own, and operate an entire class of interstate grid facilities with no opportunity to earn a return on those facilities,” the utility companies said.

Dive Insight:

In its show cause order, FERC said grid operator rules for “initial funding” may increase interconnection costs without corresponding improvements to that service, may unjustifiably block interconnection and may allow transmission owners to discriminate in favor of themselves and their affiliates.

The agency gave the Midcontinent Independent System Operator, the PJM Interconnection, the Southwest Power Pool and ISO New England 90 days to show why their initial funding rules are just and reasonable — or to describe what changes would be needed to make them allowable.

Renewable energy developers such as RWE Renewables, NextEra Energy Resources and EDF Renewables argue that network upgrades cost more when they are funded by transmission owners instead of the interconnection customer.

However, the utility companies, including Ameren, American Transmission Co. and NiSource’s Northern Indiana Public Service Co., contend the idea embedded in the show cause order — eliminating transmission-owner self-funding for interconnection-related network upgrades — violates the U.S. Constitution, the Federal Power Act and the Administrative Procedure Act.

As a result, it should be withdrawn, they said in their rehearing request. Although FERC’s order is “in many respects interlocutory,” the utility companies said the commission’s underlying premises are “fundamentally unlawful, and thus the entire proceeding to follow may suffer from those same legal infirmities.”

Among other things, the show cause order seeks to compel private enterprise to build, own and operate transmission facilities without a reasonable opportunity to earn a return, in violation of the Constitution’s Fifth Amendment, the utility companies said.

FERC also arbitrarily and capriciously relied on false premises and unfounded and overstated theories of risk and undue discrimination with inadequate explanation or justification, they said.

FERC’s show cause order is flawed because it seeks to gather information from regional transmission organizations and independent system operators that have no standing to give opinions on the returns that their transmission-owning members earn, the utility companies said.

“The commission is proposing to eliminate the ‘return on’ invested capital for what it acknowledges is a major driver of new transmission projects,” the utility companies said. “Rather than promoting capital investment in much needed transmission expansion, the potential elimination of transmission owner self-funding would have exactly the opposite effect.”