# National Electric Transmission Congestion Report > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3AE7-19731 ## Record - **Collection:** Federal Register - **Document type:** Notice - **Published:** October 5, 2007 - **Citation:** 72 FR 56992 ## Text DEPARTMENT OF ENERGY [Docket No. 2007-OE-01, Mid-Atlantic Area National Interest Electric Transmission Corridor; Docket No. 2007-OE-02, Southwest Area National Interest Electric Transmission Corridor] National Electric Transmission Congestion Report AGENCY: Department of Energy. ACTION: Order. SUMMARY: The following is a report by the Department of Energy (Department or DOE) on its August 2006 National Electric Transmission Congestion Study under section 216 of the Federal Power Act (FPA). This report and order designates two national interest electric transmission corridors: The Mid-Atlantic Area National Interest Electric Transmission Corridor (Docket No. 2007-OE-01); and the Southwest Area National Interest Electric Transmission Corridor (Docket No. 2007-OE-02). A list of the acronyms used in this report and order, and maps of the two national interest electric transmission corridors are provided at the end of this order. DATES: The designations are effective October 5, 2007 and will remain in effect until October 7, 2019 unless the Department rescinds or renews the designation after notice and opportunity for comment. FOR FURTHER INFORMATION CONTACT: For technical information, David Meyer, DOE Office of Electricity Delivery and Energy Reliability, (202) 586-1411, david.meyer@hq.doe.gov. For legal information, Warren Belmar, DOE Office of Legal Counsel, (202) 586-6758, warren.belmar@hq.doe.gov, or Lot Cooke, DOE Office of the General Counsel, (202) 586-0503, lot.cooke@hq.doe.gov. SUPPLEMENTARY INFORMATION: I. Background A. Statutory Framework Section 1221(a) of the Energy Policy Act of 2005 (Pub. L. 109-58) (EPAct) added a new section 216 to the Federal Power Act (16 U.S.C. 824p) (FPA). New FPA section 216(a) requires the Secretary of Energy (Secretary) 1 to conduct a nationwide study of electric transmission congestion 2 within one year from the date of enactment of EPAct and every three years thereafter. FPA section 216(a)(2) provides “interested parties” with an opportunity to offer “alternatives and recommendations.” 16 U.S.C. 824p(a)(2). Following consideration of such alternatives and recommendations, the Secretary is required to issue a report on the study “which may designate any geographic area experiencing electric energy transmission capacity constraints or congestion that adversely affects consumers as a national interest electric transmission corridor.” FPA section 216(a)(2), 16 U.S.C. 824p(a)(2). FPA section 216(a)(4) states that in determining whether to designate a national interest electric transmission corridor (National Corridor), the Secretary may consider whether: 1 This report uses the terms “Secretary,” “Department,” and “DOE” interchangeably. 2 Electric transmission congestion (congestion) is the condition that occurs when transmission capacity is not sufficient to enable safe delivery of all scheduled or desired wholesale electricity transfers simultaneously. Congestion results from a transmission capacity constraint (constraint). (A) the economic vitality and development of the corridor, or the end markets served by the corridor, may be constrained by lack of adequate or reasonably priced electricity; (B)(i) economic growth in the corridor, or the end markets served by the corridor, may be jeopardized by reliance on limited sources of energy; and (ii) a diversification of supply is warranted; (C) the energy independence of the United States would be served by the designation; (D) the designation would be in the interest of national energy policy; and (E) the designation would enhance national defense and homeland security. 16 U.S.C. 824p(a)(4). FPA section 216 imposes several consultation requirements upon the Department. FPA section 216(a)(1) states that the Department shall conduct the congestion study in consultation with affected States. 16 U.S.C. 824p(a)(1). FPA section 216(a)(3) requires the Department to conduct the congestion study and issue the report in consultation with any appropriate Regional Entity. 16 U.S.C. 824p(a)(3). 3 In addition, FPA section 216(h)(9) states: 3 Regional Entities are regional reliability organizations to which the North American Electric Reliability Corporation (NERC), as the designated Electric Reliability Organization under FPA section 215, has delegated authority to propose and enforce electric reliability standards. In exercising the responsibilities under this section, the Secretary shall consult regularly with— (A) the Federal Energy Regulatory Commission; (B) electric reliability organizations (including related regional entities); and (C) Transmission Organizations approved by the Commission. 16 U.S.C. 824p(h)(9). 4 4 As defined in FPA section 215(a)(6), 16 U.S.C. 824o(a)(6), “Transmission Organizations” include Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs). RTOs and ISOs are Federally regulated entities charged with operating a regional transmission system in a manner that is non-discriminatory and ensures safety and reliability. The existing RTOs and ISOs do not own any transmission or generation and are run by independent boards of directors. The effect of a National Corridor designation is to delineate geographic areas within which, under certain circumstances, the Federal Energy Regulatory Commission (FERC) may authorize “the construction or modification of electric transmission facilities.” FPA section 216(b), 16 U.S.C. 824p(b). The statute imposes several conditions on the exercise of FERC's permitting authority within a National Corridor. Under FPA section 216(b)(1), FERC jurisdiction is triggered only when either: the State does not have authority to site the project; the State lacks the authority to consider the interstate benefits of the project; the applicant does not qualify for a State permit because it does not serve end-use customers in the State; the State has withheld approval for more than one year; or the State has conditioned its approval in such a manner that the project will not significantly reduce congestion or is not economically feasible. 16 U.S.C. 824p(b)(1). FERC has issued regulations governing the process it will follow when reviewing any applications under FPA section 216(b), and those regulations incorporate the requirements of FPA section 216(b)(1). 5 Further, FPA section 216(g) states, “Nothing in this section precludes any person from constructing or modifying any transmission facility in accordance with State law.” 16 U.S.C. 824p(g). 5 Regulations for Filing Applications for Permits to Site Interstate Electric Transmission Facilities, Order No. 689, 71 FR 69,440, 69,468 (Dec. 1, 2006), 117 FERC ¶ 61,202 at pp. 128-29 (2006) (to be codified at 18 CFR pts. 50 and 380) (FERC Order No. 689), order on reh'g , 119 FERC ¶ 61,154 (2007) (§ 50.6(e) requires applicants to demonstrate that the conditions of FPA sec. 216(b)(1) are met). Under FPA section 216(b)(2)-(6), FERC may issue a permit only if all of the following conditions are met: the facilities will be used for the transmission of electric energy in interstate commerce; the project is consistent with the public interest; the project will significantly reduce congestion in interstate commerce and protect or benefit consumers; the project is consistent with national energy policy and will enhance energy independence; and the project maximizes, to the extent reasonable and economical, the transmission capabilities of existing towers or structures. 16 U.S.C. 824p(b)(2)-(6). 6 With regard to the condition that a project must “significantly reduce transmission congestion in interstate commerce and protects or benefits consumers,” FERC has stated that it interprets this to mean that a project must significantly reduce the transmission congestion identified by DOE. 7 6 See also id. (§ 50.6(f) requires applicants to demonstrate that the conditions of FPA sec. 216(b)(2)-(6) are met). 7 See id. , 71 FR 69,440, 69,446, 117 FERC ¶ 61,202 at P 41. In order to construct a transmission facility, a developer must obtain both a construction permit as well as a right-of-way across each piece of public or private property along the route. If FERC were to issue a permit under FPA section 216(b), it would constitute the construction permit; it would not, in and of itself, grant any rights-of-way. Thus, the holder of a FERC permit would still need to obtain rights-of-way. The first step in obtaining such rights-of-way would be for the developer to initiate negotiations with each affected property owner. If the permit holder could not acquire a necessary right-of-way through negotiation with a private property owner, then the FERC permit would entitle the permit holder to acquire the right-of-way by exercise of the right of eminent domain in either Federal or State court. FPA sec. 216(e)(1), 16 U.S.C. 824p(e)(1). The court would then determine the just compensation owed to the property owner by the permit holder, which would be the fair market value (including applicable severance damages) of the property taken on the date of the exercise of eminent domain authority. FPA sec. 216(f)(2), 16 U.S.C. 824p(f)(2). The right of eminent domain would not apply to property owned by the United States or a State. Id. Thus, if FERC were to issue a permit for a transmission facility across Federal or State property, the permit holder would still need to reach agreement with the Federal or State agency responsible for managing that property in order to obtain a right-of-way across that property. In addition, FPA section 216(j)(1) provides that except as specifically provided, nothing in FPA section 216 affects any requirement of any Federal environmental law. 16 U.S.C. 824p(j)(1). Thus, a FERC permit does not absolve the permittee of compliance with other Federal law, including obtaining authorizations from other agencies implementing applicable Federal environmental laws. The statute provides a specific mechanism by which States can insulate themselves from the FERC permitting provisions of FPA section 216(b). FPA section 216(i) provides special treatment where three or more contiguous States have entered into an interstate compact, subject to approval by Congress, establishing a regional transmission siting agency to carry out the electric transmission siting responsibilities of the member States. If such a compact were established, FERC would have no authority to issue a transmission permit within any of the member States unless those members were in disagreement and the Secretary, after notice and opportunity for a hearing, made a finding that the conditions of FPA section 216(b)(1)(C) were met. FPA section 216(i)(4); 16 U.S.C. 824p(i)(4). FPA section 216(a) does not shift to the Department the roles of electric system planners or siting authorities in evaluating solutions to congestion and constraint problems. Transmission expansion is but one possible solution to a congestion or constraint problem. Other potential solutions include increased demand response; improved energy efficiency; deployment of advanced technology; and siting of additional generation, including distributed generation, close to load centers. Nothing in FPA section 216 requires or suggests that the Department should engage in a comparison of the relative merits of these different solutions to easing congestion in a specific geographic area. For example, the congestion study required by FPA section 216(a)(1) is described as “a study of electric transmission congestion,” rather than a study of either the solutions to congestion or the need for transmission. FPA section 216(a)(2) authorizes the Department to designate areas experiencing constraints or congestion that adversely affect consumers, rather than areas where more transmission is needed. None of the considerations identified in FPA section 216(a)(4) necessitate a comparison of transmission and non-transmission solutions. The first two considerations, which look at whether economic vitality is constrained by either lack of adequate or reasonably priced electricity or reliance on limited sources of energy, focus on the effects of congestion and constraints rather than the effects of any potential solutions to such congestion or constraints. The remaining considerations address whether a National Corridor designation, rather than the construction of additional transmission, would promote energy independence, national energy policy, or national defense and homeland security. Thus, FPA section 216(a) assigns to the Department the role of identifying transmission congestion and constraint problems, and the geographic areas in which these problems exist. A National Corridor designation is not a determination that transmission must, or even should, be built. Whether a particular transmission project, some other transmission project, or a non-transmission project is an appropriate solution to a congestion or constraint problem identified by a National Corridor designation is a matter that market participants, applicable regional planning entities, State authorities, and potentially FERC will consider and decide before any project is built. A National Corridor designation itself does not preempt State authority or any State actions, including action to approve or order the implementation of non-transmission solutions to congestion and constraint problems. If FERC jurisdiction under FPA section 216(b) were triggered, the designation of a National Corridor by the Secretary would not control FERC's substantive decision on the merits as to whether to grant or deny the permit application. Moreover, FERC has committed to considering non-transmission alternatives, as appropriate, during its permit application review process. 8 8 See id.; see also 119 FERC ¶ 61,154 at P 61 (“During the pre-filing and application processes, Commission staff will work with the applicant and stakeholders to define issues in each proceeding, including the development of appropriate alternatives * * *. The public will have the opportunity to participate and file comments—which can include suggested alternatives of any kind—throughout this review.”). Not only would a National Corridor designation not prejudice State or Federal siting processes against non-transmission solutions, it also should not discourage market participants from pursuing such solutions. Implementation of one solution to a congestion or constraint problem can reduce, and in some cases eliminate, the need for, and thus the viability of, competing solutions. For example, if a transmission line enabling the delivery of low-cost power from generation sources outside of a load center were to be put into service, the economic incentive to build a new generator closer to load could be eliminated. Designation of a National Corridor, however, does not constitute, advocate, or guarantee approval of any particular transmission project. Also, FERC, as discussed above, may only issue a permit if the applicant has shown that its project “will significantly reduce transmission congestion in interstate commerce and protects or benefits consumers.” If competing projects were to fully resolve the congestion or constraint problem before the issuance of a FERC permit, it would be difficult for the sponsor of a transmission project to make such a showing. 9 Further, developers who diligently pursue meritorious non-transmission solutions may be able to obtain approval for those solutions long before a FERC permit is issued. In many cases it has taken less time to plan, get approval for, and implement non-transmission projects than transmission projects. 10 In fact, FPA section 216, far from disadvantaging certain approaches to addressing congestion or constraint problems, is an attempt by Congress to put transmission projects on more of a level playing field with other congestion solutions. 9 If non-transmission projects had not fully resolved the congestion problem, it would seem appropriate to consider the need for new transmission to supplement those non-transmission projects, and non-transmission project sponsors would have no legitimate expectation to the contrary. 10 See, e.g. , S.P. Vajjhala and Paul S. Fischbeck, Quantifying Siting Difficulty, A Case Study of U.S. Transmission Line Siting , Resources For the Future Discussion Paper 06-03, at 3 (Feb. 2006) (“Transmission line siting is one of the most extreme examples of siting difficulty today * * *. Siting problems are not unique to the electricity industry; however, siting difficulties associated with transmission lines are especially complex.”). Nor are the time frames established under FPA section 216 likely to provide any unfair head-start for transmission projects. A transmission developer must first devise a detailed plan for the project. Given the highly interconnected nature of the transmission grid, a developer considering any significant transmission project would need to work with the relevant RTO, ISO, or other regional or sub-regional transmission planning entities to explore the feasibility, likely costs, and likely system effects of alternative project designs. After having done substantial preparatory analyses and settled on a project design, the developer in most cases would file a permit application with a State agency and could not seek FERC review until the State had had one year to evaluate and act upon the application. FPA section 216(h) establishes a mechanism to ensure that requests for Federal authorizations to construct transmission facilities, whether within or outside a National Corridor, are acted upon within one year. 16 U.S.C. 824p(h). However, a transmission developer must first complete a pre-filing process before filing an application at FERC that would trigger the one-year deadline under FPA section 216(h). 11 FERC has indicated that the pre-filing process for extensive projects may take a year to complete. 12 Thus, designation of a National Corridor should not reduce the incentive or time available to sponsors of non-transmission solutions to pursue such solutions. 11 FERC Order No. 689, 71 FR 69,440, 69,466-67, 117 FERC ¶ 61,202 at pp. 122-27 (§ 50.5 establishes mandatory pre-filing procedures). 12 Id. , 71 FR 69,440, 69,453, 117 FERC ¶ 61,202 at P 112. A National Corridor designation is not the cause of proposals to construct transmission. A National Corridor designation is not a proposal to build a transmission facility and it does not direct anyone to make a proposal. A National Corridor designation does not create or discover the need to consider solutions to congestion or constraint problems. Developers of electricity projects, be they transmission or non-transmission, react to the state of the grid. It is the presence of congestion and constraints, already well known to most market participants, that causes developers to undertake projects. Just as a National Corridor designation is not a decision about the best solution to a congestion or constraint problem, it also is not a siting decision. FPA section 216(a) does not shift to the Department the role of designing routes for transmission facilities, and a National Corridor designation does not dictate or endorse the route of any transmission project. If a transmission project is proposed in a National Corridor, it will be the State or local siting authorities, and potentially FERC if certain conditions are met, that will determine the specific route of that project. The designation of a National Corridor by the Secretary does not control FERC's substantive decision on the merits as to where any facilities covered by a permit should be located, or what conditions should be placed on that permit. If FERC jurisdiction were triggered by a proposed transmission project, FERC would conduct an evaluation of the reasonably foreseeable effects of transmission construction, including an analysis of alternative routes and mitigation options. Based on that analysis, FERC has the authority to approve the application, deny the application, or approve the application with modifications. 13 13 See, e.g., id. 71 FR 69,440, 69,446, 117 FERC ¶ 61,202 at PP 41-42 (“The Commission will conduct an independent environmental analysis of the project and determine if there is no significant impact as required by [the National Environmental Policy Act]. It will look at alternatives * * *. It will review the alternatives for their respective impacts on the environment and will determine mitigation measures to lessen the adverse impacts * * *. The Commission will also consider the adverse effects the proposed facilities will have on land owners and local communities.”); and 71 FR 69,440, 69,470, 117 FERC ¶ 61,202 at p. 142-43 (§§ 380.5(b)(14) and 380.6(a)(5) require either an environmental assessment or an environmental impact statement for projects seeking permits under sec. 216(b)). In sum, by adding section 216 to the FPA, Congress directed that the National Corridor designation process establish a Federal safety net to provide, in a defined set of circumstances, an opportunity for analysis of the need for transmission from a national, rather than a State or local, perspective. B. Congestion Study In accordance with the mandate of FPA section 216(a)(1), the Department issued its initial congestion study (the Congestion Study) for comment on August 8, 2006. The Congestion Study gathered historical congestion data obtained from existing studies prepared by the regional reliability councils, RTOs and ISOs, and regional planning groups. The Congestion Study also modeled future congestion: The years 2008 and 2011 for the Eastern Interconnection; and the years 2008 and 2015 for the Western Interconnection. The modeling focused on five metrics: Binding hours (the number of hours per year that a path is loaded to its safe limit and, thus, unable to accommodate all desired power transactions), U90 (the number of hours per year that a path is loaded above 90 percent of its limit), all-hours shadow price (the marginal cost of generation redispatch required to accommodate a given constraint averaged across all hours in the year), binding hours shadow price (average shadow price over only those hours during which the constraint is binding), and congestion rent (shadow price multiplied by flow, summed over all hours the constraint is binding). Based on the historical data and the modeling results, the Congestion Study identified and classified the most significant congestion areas in the country. Two “Critical Congestion Areas” ( i.e. areas where the current and/or projected effects of congestion are especially broad and severe) were identified: The Atlantic coastal area from metropolitan New York through northern Virginia (the Mid-Atlantic Critical Congestion Area); and southern California (the Southern California Critical Congestion Area). Four “Congestion Areas of Concern” ( i.e. areas where a large-scale congestion problem exists or may be emerging but more information and analysis appear to be needed to determine the magnitude of the problem) were identified: New England; the Phoenix-Tucson area; the San Francisco Bay area; and the Seattle-Portland area. Also, a number of “Conditional Congestion Areas” ( i.e. areas where future congestion would result if large amounts of new generation were to be developed without simultaneous development of associated transmission capacity) were identified, such as: Montana-Wyoming; Dakotas-Minnesota; Kansas-Oklahoma; Illinois, Indiana and upper Appalachia; and the Southeast. C. May 7 Notice On May 7, 2007, the Department published a notice in the Federal Register that summarized and responded to the comments relevant to National Corridor designation received in response to the Congestion Study. 72 FR 25,838 (May 7, 2007) (May 7 notice). The May 7 notice also issued and solicited comment on draft National Corridor designations for the two Critical Congestion Areas identified in the Congestion Study: The draft Mid-Atlantic Area National Corridor; and the draft Southwest Area National Corridor. In the May 7 notice, the Department noted that the term “constraints or congestion that adversely affects consumers” as used in FPA section 216(a)(2) is ambiguous and stated that while it was not attempting to define the complete scope of the term, the term does include congestion that is persistent. Thus, the Department stated that FPA section 216(a) gives the Secretary the discretion to designate a National Corridor upon a showing of the existence of persistent congestion, as persistent congestion has adverse effects on consumers. The Department also stated that the Secretary would decide whether to exercise the discretion to make National Corridor designations based on the totality of the information developed, taking into account relevant considerations, including the considerations identified in FPA section 216(a)(4), as appropriate. Further, the Department concluded that it would use a source-and-sink approach 14 to delineate the boundaries of the draft Mid-Atlantic Area National Corridor and the draft Southwest Area National Corridor. 14 “Source” refers to an area of existing or potential future generation, and “sink” refers to the area of consumer demand or “load.” With regard to the Mid-Atlantic Critical Congestion Area, the Department noted that the Congestion Study had identified this area based on evidence of historical, persistent congestion caused by numerous well-known constraints that are projected to continue and worsen unless addressed through remedial measures. The Department provided data documenting how frequently these constraints have been binding, and noted that the modeling for the Congestion Study projected that some of these constraints will continue to be problems in 2008, along with other additional constraints. The Department also documented the existence of persistent congestion through regional differences in generation capacity factors within the footprints of the PJM Interconnection, LLC, (PJM) 15 and the New York Independent System Operator (NYISO). 16 Based on this information, the Department found under FPA section 216(a)(2) that consumers in the Mid-Atlantic Critical Congestion Area are being adversely affected by congestion. 15 PJM is the RTO serving parts or all of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia, and the District of Columbia. 16 NYISO is the ISO serving New York State. Having concluded that the Department may designate a National Corridor for the Mid-Atlantic Critical Congestion Area, the Department then examined whether it is appropriate to exercise that discretion. Using historical data on locational marginal prices (LMPs) and capacity prices, the Department documented that congestion results in electricity consumers in the eastern portion of PJM's footprint consistently paying higher electricity prices than consumers in the western portion, and in consumers in southeast New York consistently paying higher electricity prices than consumers in the rest of the State. The Department documented that if action is not taken to address congestion, consumers in the Baltimore-Washington-Northern Virginia area, the northern New Jersey area, and southeast New York face threats to the reliability of their electricity supply. The Department also documented that congestion exacerbates the degree to which consumers in the eastern portion of PJM and in southeast New York rely on generation fueled by natural gas and oil. Finally, the Department described the importance of the Mid-Atlantic Critical Congestion Area to the security and economic health of the Nation as a whole. Thus, the Department stated its belief that economic development, reliability, supply diversity and energy independence, and national defense and homeland security considerations warrant exercise of the Secretary's discretion to designate a National Corridor for the Mid-Atlantic Critical Congestion Area. With regard to the Southern California Critical Congestion Area, the Department noted that the Congestion Study had identified this area based on evidence of historical, persistent congestion caused by numerous well-known constraints that are projected to continue and worsen unless addressed through remedial measures. The Department provided data documenting how frequently these constraints have been binding, and noted that the modeling for the Congestion Study projected that some of these constraints will continue to be problems in 2008. The Department also documented the existence of persistent congestion using flow data, data on congestion and redispatch costs, and data on transmission service denials. Based on this information, the Department found under FPA section 216(a)(2) that consumers in the Southern California Critical Congestion Area are being adversely affected by congestion. Having concluded that the discretion exists to designate a National Corridor for the Southern California Critical Congestion Area, the Department then examined whether it is appropriate to exercise that discretion. The Department documented that if action is not taken to address congestion, consumers in the Southern California Critical Congestion Area face threats to the reliability of their electricity supply. The Department also documented that congestion exacerbates the reliance of consumers in Southern California Critical Congestion Area on generation fueled by natural gas. Finally, the Department described the importance of the Southern California Critical Congestion Area to the security and economic health of the Nation as a whole. Thus, the Department stated its belief that reliability, supply diversity, and national defense and homeland security considerations warrant exercise of the Secretary's discretion to designate a National Corridor for the Southern California Critical Congestion Area. To delineate the boundaries of both the draft Mid-Atlantic Area National Corridor and the draft Southwest Area National Corridor, the Department identified source areas that would enable a range of generation options and then identified the counties linking the identified source areas with the respective sink areas, i.e. , the Mid-Atlantic Critical Congestion Area and the Southern California Critical Congestion Area. The Department stated that it intended to set a 12-year term for both the draft Mid-Atlantic Area National Corridor and the draft Southwest Area National Corridor. The Department further stated that FPA section 216(a)(1) did not require it to conduct an analysis of non-transmission solutions to congestion before designating either the draft Mid-Atlantic Area National Corridor or the draft Southwest Area National Corridor, and that the National Environmental Policy Act of 1969 (NEPA) did not apply to either designation. On June 7, 2007, the Department published a notice of correction indicating that the May 7 notice had inadvertently omitted six counties from the narrative list of counties comprising the draft Mid-Atlantic Area National Corridor; the six counties had been correctly included, however, in the map of the draft Mid-Atlantic Area National Corridor. 72 FR 31571 (June 7, 2007) (June 7 errata). The comment period on the May 7 notice closed on July 6, 2007. The Department also held a series of public meetings on the May 7 notice. 17 All timely filed comments, as well as written comments submitted at the public meetings and transcripts of those public meetings were posted on the Department's Web site in order to facilitate public review. In addition, the Department consulted with each of the States within the two draft National Corridors, 18 as well as with the Regional Entities that have authority within the draft National Corridors. 19 17 Arlington, VA, May 15, 2007; San Diego, CA, May 17, 2007; New York City, NY, May 23, 2007; Rochester, NY, June 12, 2007; Pittsburgh, PA, June 13, 2007; Las Vegas, NV, June 20, 2007; and Phoenix, AZ, June 21, 2007. 18 The Department sent a letter to the Governor of each of the States within the draft National Corridors and the Mayor of the District of Columbia on April 26, 2007, requesting an opportunity to consult with them on the draft designations. The Department then held consultation meetings described below with the representatives of the Governors and the Mayor. Delaware: The Department met with Delaware on May 3, 2007, in the Governor's Washington, DC office. By phone, a staff person from the Delaware Public Service Commission and the Department of Natural Resources and Environmental Control participated in the meeting. District of Columbia: The Department met with the District of Columbia on June 27, 2007. This meeting included staff from the DC Department of Environment and the Office of the City Administrator. Maryland: On May 11, 2007, the Department met with staff from the Governor's Washington, DC Office. New Jersey: The Department met with New Jersey on May 9, 2007, in the Governor's Washington, DC office. An aide from the Governor's staff in New Jersey participated by phone. New York: The Department conducted a conference call with staff from the Governor's Office in Albany, NY on May 9, 2007. In addition, DOE met with staff from the Governor's Washington, DC office on May 11, 2007. Ohio: The Department met with Ohio on May 3, 2007, in the Governor's Washington, DC office. By phone, this meeting included the Governor's staff in Ohio and staff from the Public Utilities Commission of Ohio. Pennsylvania: The Department met with staff from the Governor's Office at DOE Headquarters on May 10, 2007. This meeting included staff from the Pennsylvania Department of Environmental Protection. Virginia: The Department conducted a conference call with staff from the Governor's office on May 30, 2007. West Virginia: The Department conducted a conference call with staff from the Governor's office on May 24, 2007. Arizona: The Department met with staff from the Governor's Washington, DC office on May 9, 2007. California: The Department conducted a conference call with staff from the Governor's office on April 26, 2007. In addition, the Department met with staff in the Governor's Washington, DC office on May 3, 2007. Nevada: The Department met with staff in the Governor's Washington, DC office on May 3, 2007. 19 On May 21, 2007, the Department sent letters to the affected Regional Entities inviting consultation on the draft designations. Northeast Power Coordinating Council, Inc. (NPCC) responded and the Department conducted a conference call on July 6, 2007. ReliabilityFirst Corporation responded and the Department conducted a conference call on July 3, 2007. SERC Reliability Corporation and Western Electricity Coordinating Council (WECC) did not respond, although WECC filed timely written comments in this proceeding. D. Focus of This Report 1. Overview of Report Section II of this report summarizes and responds to the comments received on the draft Mid-Atlantic Area National Corridor. Section III of this report summarizes and responds to the comments received on the draft Southwest Area National Corridor. Section IV summarizes and responds to the comments received on the applicability of NEPA, the National Historic Preservation Act (NHPA), and the Endangered Species Act (ESA) to National Corridor designations. Section V of this report orders the designation of the Mid-Atlantic Area National Corridor and the Southwest Area National Corridor. This report focuses on the two geographic areas of the Nation experiencing the most acute and urgent electric transmission congestion problems; the report takes no action with regard to the other geographic areas discussed in the Congestion Study. The Department recognizes that it has received many comments and suggestions concerning the issues of: (1) National Corridor designation for areas other than the two Critical Congestion Areas, (2) technical aspects of the Congestion Study that relate to areas outside the two Critical Congestion Areas, and (3) the conduct of future congestion studies. The Department appreciates these comments and will consider these issues at a later date. 2. Other Issues Numerous commenters addressed issues that the Department considers to be beyond the scope of this report. These issues are described below. a. Opposition to FPA Section 216 Summary of Comments Many commenters opposed the very concept of a National Corridor and urged the Department to refrain from designating any National Corridors. Some of these commenters argued that the eminent domain and Federal preemption provisions of FPA section 216 violate the Fifth and Tenth Amendments to the U.S. Constitution 20 and are undemocratic. 21 These commenters argued that a for-profit company should never be granted eminent domain, 22 and expressed skepticism that the Federal government could appropriately balance competing interests when reviewing applications to construct transmission. 23 Some commenters objected to the provision in FPA section 216(b)(1)(C)(i) granting FERC jurisdiction within a National Corridor where a State commission has withheld approval of a transmission application for more than a year. These commenters argued that this one-year deadline will not provide adequate time to assess meaningfully the environmental impacts of a proposed transmission line project. 24 20 See, e.g. , comments of Tommy and Kathy Hildebrand, Cindy Carter, and Gary Manoni. 21 See, e.g. , comments of Faith Bjalobok and statement of Christopher Zimmerman at May 15, 2007, Arlington, VA public meeting. 22 See, e.g. , comments of Joseph Zappulla and New York Public Interest Research Group (NYPIRG). See also comments of the Pennsylvania Senate. 23 See, e.g. , comments of Howard Armfield (“The State Corporation Commission of Virginia is in a better position than at the Federal level to know the historical importance of areas under consideration for a utility line.”), Donald Law (“The federal government should not interfere with this process.”), Julie Keller (“A state has better knowledge of the impact of transmission lines etc. and bases it's decisions on the best interest of its local citizens rather than private companies or federal agencies.”), Jackie Grant (“I feel the public, local municipalities, and the states should be able to address their energy needs locally. Local and state efforts to resolve energy demands should not be undermined by the federal government.”), and Chenango County Farm Bureau. 24 See, e.g. , comments of the New Jersey Department of Environmental Protection (NJDEP) and the Pennsylvania Department of Environmental Protection (PaDEP). Other commenters urged the Department to refrain from designating any National Corridors in light of various alleged generic adverse effects of transmission, including: The effects of electromagnetic fields on human health and the health of livestock and wildlife; 25 the effect of herbicides used to maintain transmission rights of way; 26 disruption of farming; 27 reduction of property values; 28 effect on viewsheds; 29 fragmentation of wildlife habitat; 30 and encroachment on open space. 31 25 See, e.g. , comments of Lew McDaniel, David Katch, Alison Hanham, and William Hopkins. 26 See, e.g. , comments of Travis Turnley and Lee Scherer. 27 See, e.g. , comments of Pennsylvania Farm Bureau. 28 See, e.g. , comments of Sean Dobich, Jane Eickhoff, and Henry Woolman III. 29 See, e.g. , comments of Louise Peterson and Thomas Hoffman, Jr. 30 See, e.g. , comments of Murray Lantner and Ross Cooper. 31 See, e.g. , comments of Michael McPoland and Aurore Giguet. Many commenters argued that instead of implementing FPA section 216(a), the Department should focus on developing and promoting a national energy plan based on conservation, energy efficiency, and distributed generation. 32 These commenters argued that National Corridor designations would encourage utilities to pursue outdated, environmentally destructive transmission solutions and discourage the development of more innovative, sustainable solutions. Michael Arrington, for example, stated, “[National Corridors] will only give utilities another reason not to innovate or conserve.” 33 32 See, e.g. , comments of Upen Patel, John Sprieser, Raman Jassal, Robert Hanham, Nora Palmatier, and Karen Kampfer, and statement of Paul Miller at June 12, 2007, Rochester, NY public meeting. 33 See also comments of Russell McKelway (“I believe that cessation of land condemnation for power lines would force the kind of conservation of energy that our country desperately needs to reduce dependence on foreign sources of energy and to reduce global warming.”), Nora Marsh (“Yes, we have energy issues but the solution is not with old technology.”), and Sheila Paige (“Conservation and anti-congestion planning are vitally important—not to be swept under the rug by temporary and ill-researched band-aids. These ‘corridors’—actually vast regions—represent nothing but permission for power companies to continue doing what they do badly.”). Numerous individuals suggested specific steps the Department should take in lieu of designating National Corridors, including banning the use of incandescent lights 34 and mandating higher efficiency standards in building codes. 35 34 See, e.g. , comments of Joel Silverthorn and Karee Miller. 35 See, e.g. , comments of Ben Pisarcik and A. Pellechia. DOE Response These comments are essentially suggestions that Congress should not have enacted FPA section 216, and requests that the Department ignore FPA section 216(a) based on concerns about the very statutory framework. The Department has an obligation to act consistent with the terms of FPA section 216(a) as written and enacted into law. Objections to the terms of this provision simply do not provide a basis for declining to implement the statute. The Department has no basis to conclude that the provision is unconstitutional. The Fifth Amendment to the U.S. Constitution bars the taking of private property for a public purpose without just compensation, but as discussed in Section I.A above, FPA section 216(f)(2) explicitly provides for payment of just compensation in the event that a FERC permit holder were to exercise the right of eminent domain. While the Tenth Amendment reserves to States those powers not delegated to the Federal government by the Constitution, the Interstate Commerce Clause of Article I explicitly authorizes the Federal government “to regulate commerce with foreign nations, and among the several states, and with Indian tribes.” 36 As discussed in Section I.A above, FERC's permit authority is limited to facilities that will be used for the transmission of electric energy in interstate commerce. FPA section 216(b)(2), 16 U.S.C. 824p(b)(2). 37 36 U.S. CONST. art. I, § 8, cl. 3. 37 See also Pub. Util. Comm'n of R.I. v. Attleboro Steam & Elec. Co., 273 U.S. 83, 86 (1927) ( Attleboro ) (transmission of electricity from one State to another is interstate commerce); and Fed. Power Comm'n v. Florida Power & Light, 404 U.S. 453, 462 (1972) ( FPL ) (transmission of electricity within one State held to be interstate commerce because the electricity commingled with electricity that was being transmitted out of State). Further, there is nothing novel about either the concept of granting eminent domain authority to for-profit utilities providing services deemed to be in the public interest, or the concept of Federal preemption with regard to the siting of interstate energy facilities. In most States, for-profit utilities that obtain permits to construct transmission facilities are granted the right of eminent domain. 38 Also, FERC and its predecessor, the Federal Power Commission, have been issuing permits for the construction of non-Federal hydropower facilities and associated primary transmission lines since 1920 and for the construction of interstate natural gas pipelines since 1938, all of which permits granted the right of eminent domain. See FPA sec. 4(e) and 21, 16 U.S.C. 797(e) and 814; and Natural Gas Act, sec. 7(a) and (h), 15 U.S.C. 717f(a) and (h). In fact, given the inherently interstate nature of transmission, Congress could have completely preempted State siting of interstate transmission facilities, as it did almost 70 years ago with regard to siting of interstate natural gas pipelines. 39 38 See, e.g. , ARIZ. REV. STAT. ANN. § 12-1111 (2007); VA. CODE ANN. § 1-219.1 (2007); N.Y. TRANSP. CORP. LAW § 11 (2006); W. VA. CODE ANN. § 54-1-2 (2006); 66 PA. CONS. STAT. ANN. § 1104 (1978); CAL. PUB. UTIL. CODE § 612 (1975). Moreover, while FPA section 216(e)(1) provides holders of FERC permits with the option of going to either Federal or State court to exercise eminent domain, the statute also specifies that “[t]he practice and procedure” in any Federal eminent domain proceeding “shall conform as nearly as practicable to the practice and procedure in a similar action or proceeding in the courts of the State in which the property is located.” FPA sec. 216(e)(3), 16 U.S.C. 824p(e)(3). 39 See, e.g., Attleboro, 273 U.S. at 86. As for those comments suggesting that a National Corridor designation is never appropriate because of the risks posed by transmission facilities, we note that all forms of energy infrastructure pose risks and benefits. The nature and magnitude of the risks and benefits posed by a particular infrastructure project (be it transmission or non-transmission), the feasibility and cost of mitigating those risks, and the comparison of the relative risks and benefits of competing projects are all issues with which electric system planners and siting authorities must grapple. However, as discussed in Section I.A above, FPA section 216(a) does not shift to the Department the roles of electric system planners or siting authorities in evaluating solutions to congestion and constraint problems. Moreover, the Department has no basis to conclude that the effects of transmission are so adverse that National Corridor designations are never warranted or are warranted only as a last resort. In fact, FPA section 216 evinces Congress' concern that transmission was not always being approved where and when needed. With regard to comments that the Department should abandon designation of National Corridors and pursue other energy policies, the Department notes that it is already actively engaged in efforts to promote conservation, energy efficiency, and distributed generation. For example, the Department funds a broad range of research and development in technologies that can be used as alternatives and supplements to transmission lines, including: Advanced methods of central generation such as nuclear energy, central solar, clean coal and sequestration of its carbon emissions, wind, geothermal, hydroelectric, and gas-fired combustion turbines; distributed generation such as solar photovoltaics; energy efficiency; demand response; better transmission conductors, such as those using high temperature superconductivity, that greatly reduce transmission losses; electricity storage; and “smart grid” technologies and related methods. In addition, the Department provides best-practice-based expert technical assistance to States that wish to enact electricity-related laws, policies, or programs to encourage, allow, or otherwise enable their electric utilities to make greater use of alternatives to transmission lines. Upon the request of State utility regulators, the Department also has facilitated efforts to build regional consensus on means to improve energy efficiency, demand response, and distributed generation in retail and wholesale electricity markets, such as through the Mid-Atlantic Distributed Resources Initiative, the Midwest Distributed Resources Initiative, the Pacific Northwest Distributed Resources Project, the New England Demand Response Initiative, and the 2006 National Action Plan for Energy Efficiency. Regardless, FPA section 216(a) requires the Department to conduct a congestion study every three years, and upon completion of such a study, to issue a report or reports in which it determines whether or not to designate one or more National Corridors. FPA section 216(a) does not grant the Department any other authorities or options. Therefore, requests that the Department initiate other regulatory activities are beyond the scope of these proceedings. Further, the Department disagrees that designation of a National Corridor limits or discourages non-transmission solutions (including conservation, energy efficiency, and distributed generation) to congestion or constraint problems. As discussed in Section I.A above, the Department sees no reason to conclude that a National Corridor designation would either prejudice State or Federal decision processes against non-transmission solutions or discourage market participants from pursuing such solutions. The only “benefit” that a National Corridor designation confers upon sponsors of proposed transmission projects is the provision of a potential Federal forum for review. The existence of this procedural option could well result in outcomes that differ from those that would result in its absence. Thus, the end result could be the additional or earlier construction of transmission. However, the fact that one process may produce a different result than another is not proof that the process is skewed in favor of a particular substantive result. For example, allowing applicants to appeal agency decisions in court can produce different outcomes than a system without a judicial right of appeal, but the existence of such a right does not constitute a bias. The Department has no reason to believe that designation of National Corridors will result in transmission projects supplanting superior non-transmission solutions. As many commenters have noted, FPA section 216(a) does not mandate the designation of any National Corridors; the statute states that the Department “may” designate a National Corridor. As explained further in Sections II and III below, the Department has concluded that in the case of the Mid-Atlantic Critical Congestion Area, the reliability of the supply of electricity to the political capital and to a key financial center of this Nation is at some risk; in the case of the Southern California Critical Congestion Area, a large and populous portion of one State faces threats to reliability while an adjacent State says that its generation resources should be reserved for the benefit of its residents. While the statute does grant the Department discretion, the Department believes that withholding the opportunity for a Federal safety net in the circumstances presented would be inconsistent with the intent of FPA section 216(a). b. Comments on the Merits of Specific Transmission Projects Summary of Comments Most of the written comments as well as most of the oral statements made at the Department's public meetings came from individuals who indicated that they live or own property near the routes of particular proposed transmission projects that would be within the draft National Corridors. Many of these individuals commented on the adverse effects that approval of these particular transmission projects would have on them. 40 Some of these individuals acknowledged that designation of a National Corridor is not the same as approving a specific transmission project. Nonetheless, they argued that designation of the draft National Corridors would increase the chances that these particular transmission projects would be approved, and, thus, consideration of the merits of those particular lines in this proceeding is warranted. For example, Cynthia Ridout commented: 40 See, e.g. , comments of Kathleen Yasas (“I live along the route that has been proposed by New York Regional Interconnect, Inc. (NYRI) for a 400,000-volt direct current power line. This foreign-owned project would bisect numerous communities, undermine our already fragile economy, wreak havoc on our environment and raise electric rates while delivering no benefits.”), Charles Elmes (“If this [NYRI] line were to go through my property, it would take a line through my farm about 6,000 feet long right through the middle of my polo fields, essentially putting me out of business and rendering the rest of my farm practically useless.”), Fred and Debra Burnside (“I protest Allegheny Energy's Trans-Allegheny Interstate Line. The line would run through my property and we only own 1 acre. I fear it would reduce the value of my property. * * *”), Janie Ricciuti (“We live within 600 ft of the proposed APTrail. My husband served his country in Vietnam, he has CTCL from Agent Orange Exposure. These towers are a death sentence for him.”), Vanessa Mueller (“I would like to go on record as saying I am opposed to Dominion's proposal to place power lines through this area.”), Linda Rose (“We are opposed to Dominion VA Power's attempted desecration of our local countryside. * * *”), Teresa Barker (“I would like to express my opposition to the Sunrise Powerlink * * *. The visual impacts will create a scar on our landscape that will endure for generations.”), and Alison Law-Mathisen (“The City of Los Angeles, under the guise of the ‘Green Path Project,’ is targeting many communities with blight * * *”); see also statement of Jay Biba at June 12, 2007, Rochester, NY public meeting, and statement of Terry Simmons at June 13, 2007, Pittsburgh, PA public meeting. My home is directly in the path of a proposed 500 kV transmission line in Southwest PA. I speak today to defend that home. The PA PUC is currently examining the proposal for the line, and may yet deny permission for it to be built. This careful investigation is the protection offered me as a citizen of PA. The looming danger for me, though, is the threat of NIETC designation. My fear is that private for-profit companies view the NIETC as a carte blanche to quickly gain approval for and build transmission lines to reap enormous profits. 41 41 See also comments of Eugene and Kristin Gulland, (“By granting the designation, DOE would make a de facto endorsement of the [Dominion's/Allegheny's] preferred pathway * * *”) and Kate Severinsen (“Corridor designation allows NYRI to complete the state Public Service Commission's review process knowing the federal government can and will say 'yes' even if the State of New York says ‘no’ to it.”). Numerous elected officials, environmental organizations, and other groups raised similar objections to specific proposed transmission projects. 42 42 See, e.g. , comments of U.S. Rep. Hall, Chenango County Farm Bureau, City of Paris, New York, and Communities United for Sensible Power. A number of other commenters described the alleged benefits of specific proposed transmission projects that would be within the draft National Corridors. 43 43 See, e.g. , comments of San Diego Gas and Electric (SDG&E), New York Regional Interconnect Inc. (NYRI), Allegheny Energy, Inc. (Allegheny), American Electric Power (AEP), and the California Chamber of Commerce. DOE response As the Department stated in the May 7 Notice and as explained further in Section I.A above, designation of a National Corridor is not a siting decision, nor does such designation constitute approval or disapproval, or endorsement or rejection of any transmission project. The Department neither supports nor opposes any of the particular transmission projects that have been proposed within the draft National Corridors; indeed, the Department has not evaluated the merits of the design or route of any specific proposed transmission project, including whether any specific transmission project would meet the FPA section 216(b)(2)-(6) criteria for issuance of a FERC permit. The boundaries of the National Corridors being designated today are not based on any proposed transmission projects. The existence of a National Corridor designation does not mean that any transmission project within that National Corridor will ultimately be approved, let alone approved exactly as proposed by the project sponsor. As discussed in Section I.A above, if FERC jurisdiction were triggered, FERC could issue a permit only if all of the following conditions are met: The facilities will be used for the transmission of electric energy in interstate commerce; the project is consistent with the public interest; the project will significantly reduce congestion in interstate commerce and protect or benefit consumers; the project is consistent with national energy policy and will enhance energy independence; and the project maximizes, to the extent reasonable and economical, the transmission capabilities of existing towers or structures. FPA sec. 216(b)(2)-(6); 16 U.S.C. 824p(b)(2)-(6). FERC has issued regulations governing the process it will follow under FPA section 216(b). These regulations provide that if FERC jurisdiction under FPA section 216(b) were triggered, FERC would conduct an evaluation of the reasonably foreseeable effects of transmission construction, including an analysis of alternative routes and mitigation options. Based on that analysis, FERC has the authority to approve the application, deny the application, or approve the application with modifications. 44 44 FERC's experience in siting interstate natural gas pipelines demonstrates the latitude that FERC possesses to modify applications for energy infrastructure construction. FERC has processed many applications to construct natural gas pipelines and, where such applications have been approved, the final route has almost always been different from that proposed by the project sponsor. See, e.g., Millenium Pipeline Co., L.P., 97 FERC ¶ 61,292 (2001) (ordering developer to negotiate with elected officials and interested parties and citizens to work toward an agreement on an alternate route through Mount Vernon, NY); and Greenbrier Pipeline Co., LLC , 103 FERC ¶ 61,024 (2003) (authorizing construction subject to 47 different environmental conditions, including a major route alternative and four route variations). Determination of whether and where to site transmission facilities raises important and difficult issues, the resolution of which is of especially critical importance to the people who live and work near those facilities. However, the pros and cons of any particular proposed transmission project are not germane to the Department's determination under FPA section 216(a) of whether consumers are being adversely affected by constraints or congestion such that National Corridor designation is appropriate. c. Designation in the Absence of Current Congestion Summary of Comments A few commenters, including the Organization of MISO States (OMS), the National Association of Regulatory Utility Commissioners (NARUC), the Ohio Power Siting Board (OH Siting Board), the Michigan Public Service Commission (MiPSC), and Communities Against Regional Interconnect (CARI), expressed concern about the Department's statement in the May 7 notice that the Secretary has discretion to designate a National Corridor in the case of a constraint that is hindering the development of generation that would be beneficial to consumers without demonstrating present congestion. These commenters argued that the Department's position appears inconsistent with the plain language and legislative intent of FPA section 216(a)(2). NARUC asked that the Department clarify how constraints or congestion that adversely affects consumers can be “experienced,” as required by the statute, if there is not yet generation that constrains or congests the system. OMS requests that the DOE reconsider its position or refrain from making these and similar findings in its final order on the two draft National Corridors. OH Siting Board states that DOE should reserve the issue regarding its authority to designate National Corridors for Conditional Congestion Areas for a future time. DOE Response The May 7 notice addressed the question of designating a National Corridor in the absence of current congestion in response to conflicting comments we received on the Congestion Study. Some commenters on the Congestion Study asked the Department to clarify that it was not foreclosing the possibility of designating National Corridors for Conditional Congestion Areas before the expected generation was developed; others argued that no such designations were permissible because the statute requires a showing that an area is currently experiencing congestion adversely affecting consumers. In the May 7 notice, we observed that there is no generally accepted understanding of what constitutes a “geographic area experiencing electric energy transmission constraints or congestion that adversely affects consumers,” and the phrase, as used in the statute, is ambiguous. We noted that one way in which constraints can adversely affect consumers is by causing congestion that in turn adversely affects consumers. However, we also noted that if Congress had intended to limit the Secretary's designation authority over constraints to cases where constraints are currently causing congestion, then there would have been no need for the statutory language to refer to congestion or constraints. Further, we agreed with those commenters who argued that the total absence of a line connecting two nodes can be just as, if not more, limiting to consumers than the presence of a line that is operating at capacity and, therefore, that “constraint” includes the absence of transmission facilities between two or more nodes. Thus, we stated that the statute does not appear to foreclose the possibility of National Corridor designation in the absence of current congestion, so long as a constraint, including the absence of a transmission line, is demonstrably hindering the development of desirable generation. We noted that this interpretation would not only give meaning to all terms in the statutory phrase “constraints or congestion that adversely affects consumers,” it would also be consistent with the statutory reference to “experiencing” a constraint. Under this interpretation, any National Corridor designation would necessitate a showing that a current lack of capacity exists and that such lack of capacity is having a current, tangible effect—generation that would be of benefit to the general public including consumers, is actually being hindered by the lack of capacity to bring it to market. Finally, we noted that we were leaving open the question of the type of information that would be required to demonstrate that a constraint actually is hindering the development or delivery of a generation source and that development or delivery of such generation source would be beneficial to consumers. The Department is not relying on this interpretation of its statutory authority for either of the two designations being made in this report. Despite the characterizations of some commenters, in the case of both the Mid-Atlantic Area National Corridor and the Southwest Area National Corridor, the Department's assertion of authority is based on the conclusion that congestion adversely affecting consumers is currently being experienced. Neither of these two designations relies on any interpretation of the scope of the Department's authority in the absence of current congestion. If and when the Department considers making a National Corridor designation in the absence of current congestion, it intends to provide such designation in draft form for public comment and to consult with all affected States prior to making any final decision. At that time, interested parties will have a full opportunity to raise any concerns they have about the adequacy of the Department's demonstration of authority. Further clarification is beyond the scope of these proceedings. d. FERC's Process Summary of Comments Some commenters raise objections to FERC's process for reviewing permit applications under FPA section 216(b). These commenters dispute FERC's interpretation of FPA section 216(b)(1)(C)(i) allowing it to exercise jurisdiction where a State has denied, as opposed to simply delayed action on, an application. 45 NJDEP expresses concern about how FERC will interpret the one-year timeframe for State action under FPA section 216(b)(1)(C)(i). PaDEP expresses concern that FERC's review will be narrowly restricted to the merits of a proposed line rather than examining whether generation or demand resources can better satisfy the underlying needs. PaDEP also expressed concern that approval by one State of a portion of a multi-state project may prejudice FERC's review. 45 See, e.g. , comments of the Delaware Department of Natural Resources and Environmental Control (DeDNR) and the Public Utilities Commission of Nevada and the Nevada State Office of Energy (Nevada Agencies). On the other hand, National Grid USA (National Grid) states that FERC's siting rules include a substantial measure of deference to existing regional, State, and local planning and siting processes. DOE Response Congress specifically granted to FERC, rather than to DOE, the responsibility of reviewing any permit applications under FPA section 216(b). As required by FPA section 216(c)(2), FERC has issued regulations governing the process it will follow when reviewing any such applications. These regulations are being challenged in court. 46 Any allegations of inadequacy or inconsistency with statutory intent must be addressed there and are beyond the scope of these proceedings. 46 See Piedmont Environmental Council, et al. v. FERC, 4th Cir., Nos. 07-1651, et al. II. Mid-Atlantic Area National Corridor (Docket No. 2007-OE-01) A. Procedural Matters 1. Parties to This Proceeding The May 7 notice provided instructions on how to provide comments and how to become a party to the proceeding in this docket. Consistent with those instructions, the Department is granting party status in this docket to all persons who either: (1) Filed comments electronically at http://nietc.anl.gov on or before July 6, 2007; (2) mailed written comments marked “Attn: Docket No. 2007-OE-01” to the Office of Electricity Delivery and Energy Reliability, OE-20, U.S. Department of Energy, 1000 Independence Avenue, SW., Washington, DC 20585, that were received on or before July 6, 2007; or (3) hand-delivered written comments marked “Attn: Docket No. 2007-OE-01” at one of the public meetings. 2. Fairness of the Designation Process Summary of Comments Many commenters, including numerous individuals, argued that the Department had failed to provide adequate opportunity for the public to review and comment on the draft National Corridors. For example, John Balasko argued that the Department should have done more to inform and involve the general public because, “If this corridor is adopted, no longer will landowners within the corridor be free to make sound land management decisions because the hammer of the Federal Energy Regulatory Commission and perhaps federal eminent domain is looming in the background.” CARI contends that designation of the draft Mid-Atlantic Area National Corridor would be a “rule” subject to the notice and comment rulemaking requirements of the Administrative Procedure Act, 5 U.S.C. 553 (APA). Many commenters argued that more public meetings should have been held and that they should have been held along the routes of various proposed transmission projects within the draft National Corridors. 47 Numerous commenters requested an extension of the comment period. In particular, commenters argued that the June 7 errata published by the Department warranted an extension of the comment period. Numerous individuals and organizations asserted that the Department had failed to reveal the data underlying the draft designations. 48 47 See, e.g. , comments of Karen Smolar, Rand Carter, Dale Roberts, U.S. Sen. Clinton, and NY Rep. Destito. 48 See, e.g. , comments of Greene County, Rick Layton, and Barbara Kessinger. Many commenters, including a number of individuals, alleged that the draft National Corridor designations were the result of improper influence by transmission companies. 49 Some commenters complained that instead of conducting an independent study of congestion, the Department improperly relied on data and analyses from utilities or others with a vested interest in transmission expansion. 50 49 See, e.g. , comments of Diane Eisenberg (“The proposals smack of cronyism, a lack of transparency, and improper attempts by secretive private interests to influence national energy policy not for the public benefit but for their own profit.”). 50 See, e.g. , comments of Toll Brothers, Inc. (Toll Bros.) and Jeffrey Brown. DOE Response The Department concludes that its process has been fair, open, and transparent, and that it has provided ample opportunity for public comment. DOE does not agree that the designation of National Corridors is subject to the APA's informal rulemaking provisions. FPA section 216(a) does not expressly require rulemaking, and, in DOE's view, the designation of National Corridors constitutes informal adjudication under the APA. Absent a statutory or other legal requirement providing otherwise, the choice whether to use rulemaking or adjudication in a particular matter is the administrative agency's to make. The APA defines “adjudication” as “an agency process for the formulation of an order.” 5 U.S.C. 551(7). An order is “the whole or a part of a final disposition, whether affirmative, negative, injunctive, or declaratory in form, of an agency in a matter other than rule making but including licensing.” 5 U.S.C. 551(6). A report designating a National Corridor is the final disposition in declaratory form of how DOE chooses to address the results of the study it must conduct under FPA section 216(a), and, therefore, is an informal adjudication for APA purposes. Regardless of the label one applies to the designation of National Corridors, DOE has employed procedures that satisfy all applicable procedural requirements. DOE complied with FPA section 216(a)(2) by soliciting comments on the Congestion Study through a notice of availability and request for comments published on August 8, 2006 (71 FR 45047). DOE allowed 60 days for submission of public comments on the Congestion Study. After considering the comments received pursuant to that solicitation, DOE published the May 7 notice and provided a 60-day public comment opportunity on draft National Corridor designations. The May 7 notice stated that public comments would be considered prior to DOE issuing a report as required by FPA section 216(a)(2). DOE provided this comment opportunity even though FPA section 216(a) does not require DOE to solicit comments on either the report or on any proposed or draft National Corridor designations. FPA section 216(a) only requires that DOE solicit comments on the study, upon which the report and any designation of National Corridors are based. In addition, the Department held a series of public meetings on the draft National Corridors. Although the Department was not required to hold any public meetings, it announced in the May 7 notice that it would hold three public meetings. In response to numerous requests for additional meetings, the Department held four more meetings. With regard to complaints about the Department's failure to schedule meetings along the routes of various proposed transmission projects, the Department notes that, as discussed in Section I.A above, designation of a National Corridor is not a siting decision, nor does such designation constitute approval or endorsement of any transmission project. While some commenters argue that the June 7 errata warranted extension of the comment period, the Department notes that the counties inadvertently omitted from the narrative list were included in the previously available map of the draft Mid-Atlantic Area National Corridor. Further, given that the designations were issued in draft and the Department was soliciting comment on those drafts, including comment on its delineation of the boundaries of the draft National Corridors, persons concerned about counties in the general vicinity of the draft National Corridors were on notice on May 7, 2007, of the need to provide comments by July 6, 2007. The Department believes it has provided adequate disclosure of information. The May 7 notice identified the specific data the Department relied on to: Establish the existence of congestion adversely affecting consumers, determine whether the Secretary should exercise his discretion to designate a National Corridor, and delineate the specific boundaries of the draft National Corridors. Those data included memoranda that the Department has made available on its Web site. In addition, as noted in the May 7 notice, the non-proprietary data relied on in the Congestion Study has been available on the Department's Web site since September 27, 2006. The Department did not rely solely on data and information from any single source or category of sources. While conducting the Congestion Study, the Department contacted a wide range of stakeholders for publicly available and current data, and then, through the notice of inquiry and technical conference, opened the call for data to all entities. The Department then performed its own review of the information provided. All interested persons had an opportunity to comment on the May 7 notice, and the Department has considered all timely filed comments. 3. Adequacy of State Consultation Summary of Comments Some commenters asserted that the Department has failed to adequately consult with affected States. For example, Virginia Governor Kaine states that the Congestion Study was performed without consultation with Virginia, contrary to FPA section 216(a)(1). Pennsylvania Senator Casey asserts that States were not adequately consulted. The Pennsylvania Land Trust Association argued that various expressions of opposition to the draft Mid-Atlantic Area National Corridor from elected officials from Pennsylvania prove that the Department has failed to consult. 51 CARI states that DOE has failed to consult adequately with New York. 51 See also comments of Energy Conservation Council of Pennsylvania (ECCP) and statement of Robert Lazaro at May 15, 2007, Arlington, VA public meeting. DOE Response The Department is cognizant of its responsibility to consult with affected States and believes that it has fulfilled this responsibility. As described in the May 7 notice, there are practical difficulties in conducting the level of consultation that some may prefer in the context of a study with the magnitude of the Congestion Study within the statutorily mandated deadlines. However, the Department believes that its consultation with States, as documented in the May 7 notice, satisfied the requirements of FPA section 216(a)(1). Moreover, in recognition of the importance of National Corridor designation to States, upon issuance of the May 7 notice, the Department engaged in additional consultation with each of the States within the draft National Corridors and the District of Columbia, as documented in Section I.C above. The Department recognizes the value and importance of State consultation. The Department has sought to ensure that it understands the concerns of the States within the Mid-Atlantic Area National Corridor and the Southwest Area National Corridor; that it has accommodated those concerns where possible consistent with its obligations under FPA section 216(a); and that it has fully explained its position where it concludes it cannot accommodate those concerns. B. Overall Comments on the Draft Mid-Atlantic Area National Corridor The Department received comments from numerous State officials and agencies generally opposed to the Department's designation of a Mid-Atlantic Area National Corridor. Governor Kaine opposes designation of a National Corridor that includes the Commonwealth of Virginia. 52 The PaDEP, filing comments on behalf of Governor Rendell, opposes designation of the draft Mid-Atlantic Area National Corridor as premature; the Pennsylvania Public Utilities Commission (PaPUC) also filed comments opposing designation. 53 Maryland Governor O'Malley states that the Department should set aside the draft Mid-Atlantic Area National Corridor and focus on other ways to address the region's energy problems. DeDNR, filing comments on behalf of Governor Miner, opposed designation of the draft Mid-Atlantic Area National Corridor. In addition, the Department received comments opposing designation from: The New York Public Service Commission (NYPSC) and the New York Department of Environmental Conservation (NYDEC); the New Jersey Board of Public Utilities, NJDEP, and the New Jersey Department of the Public Advocate (NJ Public Advocate); and OH Siting Board. 52 See also comments of Virginia Department of Historic Resources. 53 See also comments of the Pennsylvania House of Representatives and the Pennsylvania Senate. Numerous counties and cities within the draft Mid-Atlantic Area National Corridor filed comments opposing designation. The Department also received comments opposing designation from hundreds of individuals residing within the draft Mid-Atlantic Area National Corridor but outside of the Mid-Atlantic Critical Congestion Area. Numerous non-profit organizations also filed comments opposing designation. 54 54 See, e.g. , comments of Piedmont Environmental Council, CARI, NYPIRG, and Sierra Club (National). The New York City Economic Development Corporation, filing comments on behalf of the City of New York (City of New York), supports designation of a National Corridor for New York City. PJM supports designation of the portion of the draft Mid-Atlantic Area National Corridor within the PJM footprint. NYISO supports designation of the draft Mid-Atlantic Area National Corridor based on the Department's clarifications in the May 7 notice that the designation does not represent either an endorsement of any individual project, a determination that new transmission construction is necessarily required, or a repudiation of regional planning mechanisms. Numerous utilities also filed comments supporting designation of a Mid-Atlantic Area National Corridor. 55 55 See, e.g. , comments of AEP, National Grid, Allegheny, NYRI, and Old Dominion Electric Cooperative (ODEC); see also comments of Edison Electric Institute (EEI). NERC filed comments stating that the ultimate designation of National Corridors will further bolster the reliability of the grid. NPCC expressed concern about designation of an overly narrow National Corridor. DOE Response These comments in general opposition to the designation of a Mid-Atlantic Area National Corridor are essentially opposition to the regimen established by FPA section 216(a). As stated in Section I.D.2(a) above, the Department has an obligation to act consistent with the terms of FPA section 216(a) as written and enacted into law. Objections to the terms of this provision simply do not provide a basis for declining to implement the statute. C. Adequacy of Showing of Congestion That Adversely Affects Consumers Summary of Comments Numerous commenters argued that the Department had failed to make the showing of congestion adversely affecting consumers required in order to designate a Mid-Atlantic Area National Corridor. Some of these commenters took issue with the Department's position that it has the discretion to designate the Mid-Atlantic Area National Corridor upon a showing of the existence of persistent congestion, without further demonstration of adverse effects on consumers. For example, NYPSC states that DOE's interpretation is contrary to the express language of the statute, which recognizes that transmission congestion and constraints do not, per se , adversely affect consumers. NYPSC states that DOE's approach renders the statutory phrase “that adversely affects consumers” entirely superfluous, contrary to a fundamental canon of statutory construction. PaPUC states that DOE has misread the statute to give itself unlimited power to designate National Corridors almost anywhere in the United States, since every transmission pathway may become congested at some point in time. PaPUC states that it is not enough for the DOE to identify the existence of chronic congestion. OMS states that although it may be relatively easy to demonstrate that persistent congestion is adversely affecting consumers, OMS believes that DOE still needs to explicitly demonstrate such adverse effects before it can designate any National Corridor. 56 56 See also comments of MiPSC, ECCP, Consolidated Edison Company of New York, Inc. (Con Ed), CARI, Toll Bros., and City of Paris, NY. NYPSC argues that in regions such as New York State where competitive markets have been established, higher prices for transmission do not always adversely affect consumers. NYPSC further states where the costs of relieving congestion exceed the costs of the congestion itself, consumers are not adversely affected by such congestion because such congestion reflects the most economically efficient operation of the grid. 57 Erica Wiley states that areas of congestion or higher pricing are a result of natural market forces, thus, one would expect New York City's cost of energy to be higher than that in the Ohio River Valley, much like real estate prices. Higher prices, this commenter argued, do not adversely affect consumers, but rather have led to innovation and conservation. 57 See also comments of Con Ed. Some commenters argued that the Department's analysis relies on inflated estimates of future congestion. A few commenters argued that the Department had failed to consider that greenhouse gas regulation will increase the price of coal-fired generation, and thereby reduce congestion between areas of coal generation and load centers. 58 Con Ed argues that the Department should model new generation capacity in the eastern portion of the PJM footprint resulting from the new Reliability Pricing Model capacity market or other generation now expected to be in service after 2011. Con Ed states that using average losses instead of marginal losses also can serve to artificially inflate projections of congestion. Con Ed further states that the three cost curves for Upstate East, Upstate West, and Downstate New York used in the Congestion Study modeling should have been combined into one curve and the resulting energy prices compared to energy prices with constraints. PaPUC states that rather than relying solely upon a static direct current flow analysis, DOE should have performed dynamic analysis of alternating current flows, as is used in actual transmission grid planning models. CARI argues that the Department has not adequately considered data from NYISO's most recent Reliability Needs Assessment that suggests that future constraints and congestion will not be as severe as the Congestion Study modeling predicts. Some commenters argue that the Department failed to adequately consider the effects of ongoing demand reduction efforts on congestion, including New York Governor Spitzer's recent plan to decrease energy demand in the State by 15 percent below forecasted load by 2015. 59 58 See, e.g. , comments of Sierra Club (National) and Con Ed. 59 See, e.g. , comments of CARI, NYPRIG, and American Council for an Energy-Efficient Economy. Other commenters supported the Department's showing of congestion adversely affecting consumers in the Mid-Atlantic Critical Congestion Area. For example, PJM states that persistent and growing transmission congestion such as that experienced in the Mid-Atlantic Critical Congestion Area is a precursor to threats to reliability of service in the near- and mid-term future. 60 NYISO states that as a general rule, the Department correctly identified those areas of New York State lying along its major transmission pathways that historically have experienced significant congestion. 61 60 See also comments of WIRES. 61 See also comments of National Grid. DOE Response The Department concludes that it has sufficiently demonstrated and found the existence of congestion that adversely affects consumers in the Mid-Atlantic Critical Congestion Area. FPA section 216(a)(2) does not define the term “congestion that adversely affects consumers,” nor is there any dictionary definition or common usage of that phrase within the realm of electric system operations to clarify its meaning. The considerations listed in FPA section 216(a)(4), which authorize the Department to consider factors such as diversification of supply and energy independence when determining whether to designate a National Corridor, indicate that Congress intended the Department to consider adverse effects on consumers beyond increases in the delivered price of power. However, the statute provides no further clarification of the type or magnitude of adverse effect intended. The statute also does not dictate any particular method of determining the existence of congestion adversely affecting consumers, except that such determination is to be based on the study conducted pursuant to FPA section 216(a)(1). In sum, the statute is ambiguous, and leaves to agency discretion, as to when congestion can be said to adversely affect consumers. Nothing in the statute requires that the Department conduct a separate explicit empirical analysis of the specific adverse effects of an instance of congestion before designating a National Corridor. FPA section 216(a)(1) describes the congestion study on which any designation of a National Corridor must be based only as a “study of electric transmission congestion.” Similarly the term “congestion that adversely affects consumers” in FPA section 216(a)(2) does not dictate a two-step analysis—first to determine the level of congestion and second to determine the specific resulting adverse effects—before a National Corridor designation may be made. In the Congestion Study, the Department defined “congestion” as the condition that occurs when transmission capacity is not sufficient to enable safe delivery of all scheduled or desired wholesale electricity transfers simultaneously. This definition was based on common usage within electric system operations 62 and spurred little dissent among commenters on the Congestion Study. Under this definition, determining and documenting the specific adverse effects caused by specific instances of congestion could necessitate identification of all the scheduled or desired power transactions that were denied transmission service, all the alternative power transactions that occurred as a result of the congestion, all the parties to both sets of transactions, all the terms of both sets of transactions, and all the sources of power for both sets of transactions. Obtaining and analyzing such information for each area under evaluation for potential National Corridor designation, assuming all such information were accessible, would be a daunting task, particularly in the context of a triennial study that must already identify and analyze the existence of congestion itself throughout 47 States and the District of Columbia. Thus, given the practical complications of conducting in each case a specific analysis of the specific adverse effects caused by the specific instances of congestion, the Department considered whether it was possible to identify a class of congestion that necessarily adversely affects consumers. 62 See, e.g. , California Independent System Operator, Conformed Simplified and Reorganized Tariff, App. A, Master Definitions Supplement (April 6, 2007) (“Congestion—A condition that occurs when there is insufficient Available Transfer Capacity to implement all Preferred Schedules simultaneously or, in real time, to serve all Generation and Demand.”); and Southwest Power Pool, Glossary and Acronyms, http://www.spp.org/glossary.asp?letter=C (“Congestion is a condition that occurs when insufficient transfer capacity is available to implement all of the preferred schedules for electricity transmission simultaneously.”). Given the definition of “congestion,” any congestion prevents some users of the transmission grid from completing their preferred power transactions. These users include wholesale industrial consumers of power as well as load-serving entities buying power on behalf of retail consumers, all of whom are prevented by congestion from obtaining delivery of desired quantities of electricity from desired sources. Thus, any congestion on a line necessarily interferes with the choices of those who wish to use that line on their own or their customers' behalf. Whenever there is congestion on a transmission path, there simply is not enough transmission capacity to accommodate all the desired power transactions, and some sort of rationing of available capacity is needed. In areas with organized electricity markets, this rationing generally occurs through a pre-established economic mechanism, such as an LMP-based system designed to allocate the limited capacity to the users who value it the most. In areas of the country without organized markets, the rationing may involve the transmission provider denying requests for transmission service, adjusting schedules, or in some cases making pro rata curtailments in real time. Regardless of how the rationing is resolved, however, one thing remains true: Congestion results in some users of the transmission system being denied the benefit of their preferred transactions. Interference with customers' preferred power transactions poses numerous potential adverse effects on consumers. One reason for choosing a particular power seller is commodity price. Electricity buyers frequently seek power from sellers who offer the lowest power price. When congestion prevents those transactions from being consummated, more expensive power must be purchased, which adversely affects consumers. However, congestion can result in the loss of benefits to consumers other than just low commodity prices. A seller may offer contract terms other than lower commodity price that benefit consumers, including better credit terms, greater long-term pricing certainty, or greater flexibility in terminating contracts. A seller may offer consumer benefits in terms of fuel source. For example, a seller may offer power from a fuel source that would increase diversity or energy independence, both of which protect consumers from unforeseen events and market volatility related to fuel availability. Or a seller may offer consumers the ability to buy renewable power, which offers environmental benefits to consumers. A seller may offer consumer benefits simply by being unaffiliated with a load-serving entity's primary electricity supplier, which protects consumers from being completely dependent on a single supplier. While analysis of why the transactions thwarted by a particular instance of congestion were in fact preferred by customers would reveal which of these specific consumer benefits had been forgone, no such analysis is needed to conclude that congestion thwarts customer choice resulting in the loss of one or more of these benefits. Finally, congestion results in parts of the transmission system being so heavily loaded that grid operators have fewer options for dealing with adverse circumstances or unanticipated events. Therefore, as congestion increases consumers are exposed to increased risk of blackouts, forced interruptions of service, or other grid-related disruptions. Some commenters suggest that congestion only adversely affects consumers if the costs of relieving the congestion are less than the costs of the congestion itself. As discussed above, we conclude that Congress intended the Department to consider adverse effects on consumers beyond increases in the delivered price of power, some of which effects may not be easily monetized. Further, designation of a National Corridor does not dictate how or even whether to address a particular instance of congestion. Therefore, the Department believes that restricting the term “congestion that adversely affects consumers” to congestion that can be cost-effectively relieved is an overly narrow reading of the statute. Some commenters suggest that congestion can actually benefit consumers by spurring energy efficiency or the adoption of innovative technologies. The Department believes, however, that their comments speak not to any true benefits of congestion itself, but rather to the benefits of congestion management systems that put a price on congestion, thus making it easier for market participants to evaluate how best to address that congestion. While the Department concludes that, in theory, any congestion adversely affects at least some consumers, it is not adopting that interpretation of the term “congestion that adversely affects consumers.” Instead, the Department recognizes that isolated instances of congestion can arise on any transmission path, and such events are more in the nature of occasional inconveniences than a significant adverse effect on consumers. However, as congestion becomes more frequent on a particular path, the occasional inconveniences start to accumulate until, at the point where congestion becomes persistent, customers find that they must recurrently resort to less desirable power sources. In fact, as customers lose the ability to access preferred suppliers on a firm basis, they may need to make permanent arrangements with less desirable suppliers, all to the detriment of consumers. Further, the Department recognizes that congestion remedies are not free. As discussed above, the identification of congestion adversely affecting consumers is not a determination of whether or how a particular instance of congestion should be addressed. It is, however, the first step in the process of determining whether to provide a potential Federal forum that would examine whether addressing congestion through transmission expansion is in the public interest. Just as isolated or infrequent instances of congestion do not usually cause significant adverse effects to consumers, they also do not usually warrant consideration of structural changes, such as transmission expansion, increased demand response, or siting of additional generation. The “solution” to such transient instances of congestion is short-term, temporary adjustments, such as redispatch. Thus, when electric system planners consider whether structural changes are needed in the system, they typically start by looking for recurrent patterns of congestion and calculating the number of hours per year that a given transmission line or path is congested. The Department emphasizes that while a finding of congestion that adversely affects consumers provides the Department with the discretion to designate a National Corridor, it does not mean that the Department will choose to exercise that discretion in all instances. Before making any designation of a National Corridor, the Department will consider whether such designation is in the national interest, based on the totality of the information developed, taking into account relevant considerations, including the considerations identified in FPA section 216(a)(4), as appropriate. The Department concludes, based on its technical expertise and policy judgment, that it is reasonable to interpret the phrase “congestion that adversely affects consumers” to include congestion that is persistent. Thus, the Department believes that FPA section 216(a) gives the Secretary sufficient authority and discretion to designate the Mid-Atlantic Area National Corridor upon a showing of the existence of persistent congestion. The Department further concludes that persistent congestion exists into and within the Mid-Atlantic Critical Congestion Area. Some commenters question assumptions made in the modeling performed in the Congestion Study, and others suggest that the modeling be performed again to incorporate additional analysis or more recent data. All of these comments concern the accuracy of projections of future levels of congestion; however, the analysis in the Congestion Study and the May 7 notice was not limited to estimating future levels of congestion. The Mid-Atlantic Area National Corridor is based on well-documented existing constraints causing patterns of congestion that have persisted over a number of years. For example, Tables VIII-4 and VIII-5 in the May 7 notice identified 25 different transmission elements in the PJM and NYISO footprints that have been constrained more than five percent of the time from 2004 through 2006. 63 Some of these elements were constrained much more than five percent of the time: Bedington-Black Oak was constrained 52 percent and 45 percent of the time in the Day-Ahead market in 2005 and 2006 respectively; the Kammer 765/500 transformer was constrained 39 percent and 23 percent of the time in the Day-Ahead market in 2005 and 2006 respectively; Rainey to Vernon 345 kV was constrained 36 percent and 32 percent of the time in the Day-Ahead market in 2005 and 2006 respectively; and Dun-Shore Road was constrained 71 percent and 89 percent of the time in the Day-Ahead market in 2005 and 2006 respectively. While some commenters question how much and how quickly congestion in the Mid-Atlantic Critical Congestion Area will increase or decrease, and how much and how quickly various efforts will reduce the congestion, no one seriously questions that this congestion exists now and that it will continue for some period of time. 64 63 Given the large daily and seasonal swings in the level of demand and the associated changes in the patterns of generation dispatch, congestion on a line is significant even if the line is not congested most of the hours in the year. For example, although Path 15 in California was congested in only 11.9 percent of the total hours in the Day-Ahead market and 4.7 percent in the Hour-Ahead market in 2004 ( see CAISO, 2004 Annual Report on Market Issues and Performance, table 5.2 (April 2005)), upgrades implemented in December 2004 are estimated to save consumers hundreds of millions of dollars ( see CAISO, Potential Economic Benefits to California Load from Expanding Path 15-Year 2005 Prospect (Sept. 24, 2001)). Congestion does not occur until a line is already loaded to its safety limit; this means that in general congestion tends to occur when demand is relatively strong, which happens only during a portion of the day or year. 64 Further, as discussed in Section I.A above, FERC may only issue a permit if the applicant has shown that its project will significantly reduce congestion, and FERC has interpreted this to mean that an applicant must make a showing that its project will significantly reduce the congestion identified by DOE. Thus, if congestion into or within the Mid-Atlantic Critical Congestion Area were to be resolved before the issuance of a FERC permit, it would be difficult for the sponsor of a transmission project to make such a showing. Moreover, while the Department concludes that the statute authorizes the designation of the Mid-Atlantic Area National Corridor upon the Department's finding of the existence of persistent congestion, the Department nevertheless has provided additional documentation. In the context of explaining the considerations that led to the draft designation of the Mid-Atlantic Area National Corridor, the Department documented that congestion is causing consumers in the Mid-Atlantic Critical Congestion Area to face consistently higher electricity prices; that congestion poses threats to the reliability of electricity supply to consumers in the Mid-Atlantic Critical Congestion Area; and that congestion limits supply diversity and energy independence for Mid-Atlantic Critical Congestion Area consumers. 65 For example, the May 7 notice explained that PJM has determined that unless constraints into the Baltimore-Washington-Northern Virginia area are mitigated, existing 500 kV transmission facilities serving that area will become overloaded by 2011 in violation of NERC and PJM reliability and planning criteria, and unless constraints into northern New Jersey are mitigated, that area faces violations of NERC and PJM reliability and planning criteria by 2014. The May 7 notice further explained that NYISO has determined that constraints limiting delivery of electricity to southeast New York pose a threat to reliability by 2011. 65 See May 7 notice, Section VIII.C.1-3. NJ Public Advocate argues that the congestion rents calculated in the Congestion Study exaggerate the adverse economic impacts on consumers because they ignore the availability of transmission cost hedging instruments. However, as explained in the May 7 notice, the Department believes that while congestion rents are a useful indicator of the persistence and pervasiveness of congestion, the Department is not suggesting that such rents represent the actual monetary cost that consumers pay specifically as a result of congestion. The May 7 notice's discussion of increased costs to consumers focused on differences in actual power and capacity prices paid as a result of the documented congestion, rather than projections of congestion rents. Far from simply assuming the presence of congestion that adversely affects consumers, as some commenters allege, the Department has made a reasoned determination that the statutory conditions triggering discretion to designate a National Corridor for the Mid-Atlantic Critical Congestion Area have been met. D. Boundaries of the Mid-Atlantic Area National Corridor Summary of Comments Numerous commenters argued that the draft Mid-Atlantic Area National Corridor is impermissibly broad. For example, ECCP states that designation of an area spanning much of the Mid-Atlantic region exceeds the Secretary's authority and the Department's expansive definition of “corridor” does not comport with Congress” definition of “corridor” or Congress’ intent in enacting FPA section 216. Upper Delaware Preservation Coalition states that DOE exceeded its statutory authority by disregarding the common usage of the word “corridor” under EPAct and drawing the boundaries of the draft Mid-Atlantic Area National Corridor arbitrarily. 66 Southern Environmental Law Center (SELC) states that the definition employed by DOE in establishing corridors under EPAct section 368 should also apply to National Corridors designated under FPA section 216(a). Appalachian Trail Conservancy states that the draft Mid-Atlantic Area National Corridor is so broad as to be virtually meaningless. 66 See also comments of U.S. Sen. Casey, Pennsylvania Farm Bureau, Piedmont Environmental Council, and numerous individuals. ODEC states that a National Corridor designation that would provide Federal backstop siting authority for any project in eastern portion of the PJM footprint likely would be counter-productive to getting transmission built in that region. PaPUC states that the draft Mid-Atlantic Area National Corridor is both overly broad and overly narrow. The draft Mid-Atlantic Area National Corridor is overly broad, according to PaPUC, because it includes many areas that for a variety of economic, environmental, or technical engineering reasons would be excluded from any major transmission infrastructure project study; it is overly narrow because the simplistic “box” methodology ignores the actual topology of the existing transmission grid and excludes regions outside the “box” that might be equally suitable or superior for siting National Interest transmission infrastructure. PaPUC also objects to the use of political boundaries that have no clear relevance to electric infrastructure as a physical system. PaPUC suggests defining one or more smaller National Corridors in the Mid-Atlantic region, each with an entry point at the source, an exit point at the load, and a congestion interface in the middle. Numerous commenters argued that the statute requires any Mid-Atlantic Area National Corridor to be limited to the confines of the urban areas experiencing the congestion. 67 CARI states that if any area is to be designated in New York State, it should be those limited portions of the existing New York transmission system actually functioning as a transmission constraint or causing persistent congestion that adversely affects consumers. CARI also argues that a broad reading of the term “geographic area experiencing electric energy transmission capacity constraints or congestion that adversely affects consumers” violates the principle of statutory construction known as the “presumption against preemption.” 67 See, e.g. , comments of Karl Cehonski, Susan Morgan, and City of Paris, New York. Some commenters suggested redrawing the Mid-Atlantic Area National Corridor boundaries so as to follow existing transmission lines or highways. 68 68 See, e.g. , comments of Karen Gonzales and Laura Krauza. Other commenters supported the Department's approach. For example, PJM and NYISO support the Department's source-and-sink approach. Pepco Holdings, Inc. (PHI) states that the draft Mid-Atlantic Area National Corridor is appropriately broad so as to encompass all necessary RTO-approved system enhancements associated with major new transmission solutions and to complement existing and foreseeable transmission plans. National Grid states that the Department's approach to establishing boundaries for the draft Mid-Atlantic Area National Corridor is precisely the approach that accords deference to existing regional, State, and local planning and siting authorities by preserving the flexibility those authorities need to consider multiple alternative solutions. EEI states that DOE has properly delineated the draft Mid-Atlantic Area National Corridor as a general, inclusive geographic area, and adds that if utility, State, or regional agency staff indicate that the margins of the draft Mid-Atlantic Area National Corridor need to be modified to encompass potential solutions, DOE should make such modifications so that a full array of solutions can be considered. NPCC expressed concern that the Department's source-and-sink approach may lead to the designation of overly narrow National Corridors. NPCC cautions against making transmission improvements in narrow corridors without giving sufficient attention to the possible need for coordinated improvements in distant but related parts of the Eastern Interconnection. NPCC points out, for example, that increasing the west-to-east electricity flows in PJM without regard to broader effects could exacerbate loop flows around Lake Erie. Accordingly, NPCC recommends that DOE maintain an Interconnection-wide perspective in making National Corridor designations and emphasize to all stakeholders that adding more transmission capacity within a National Corridor could exacerbate reliability problems outside the Corridor unless appropriate and coordinated countermeasures are implemented. DOE Response The Department concludes that its approach to defining the boundaries of the draft Mid-Atlantic Area National Corridor is consistent with the statute. FPA section 216 does not explicitly define the term “national interest electric transmission corridor.” FPA section 216(a)(2) does, however, authorize the Department to designate “any geographic area experiencing electric energy transmission capacity constraints or congestion that adversely affects consumers” as a National Corridor. 16 U.S.C. 824p(a)(2). “Any geographic area” connotes no particular shape, proportion, or size. Thus, the language of FPA section 216(a) does not appear to limit the shape, proportion, or size for a National Corridor. A few commenters point to the approach being used by DOE and the Federal land managing agencies to delineate energy right-of-way corridors for oil, gas, and hydrogen pipelines and electricity transmission and distribution facilities under EPAct section 368 as evidence that the draft Mid-Atlantic Area National Corridor is too broad to be consistent with the statute. We believe, to the contrary, that the differences in the language and intent of FPA section 216(a) and EPAct section 368 underscore the appropriateness of the Department's overall approach to establishing the boundaries of the draft Mid-Atlantic Area National Corridor. In contrast to FPA section 216(a)(2)'s reference to “any geographic area,” EPAct section 368(e) explicitly requires that “[a] corridor designated under this section shall, at a minimum, specify the centerline, width, and compatible uses of the corridor.” Congress could have included similar language in FPA section 216(a) had it intended the Department to use the same approach to delineating National Corridors, but it did not. The plain language of EPAct section 368(e) limits its applicability to corridors “designated under this section.” Further, despite the assertions of some commenters, the Department sees no reason to conclude that the language of EPAct section 368(e) implicitly governs FPA section 216(a)(2). Nothing in EPAct section 368 suggests that the language of EPAct section 368(e) was intended to establish a general definition of “corridor” for all EPAct purposes. In fact, the heading of EPAct section 368(e) characterizes that subsection not as a definition, but rather as “Specifications of Corridor.” Further, while FPA section 216 was added to the FPA by EPAct section 1221(a), it was part of a stand-alone title called the “Electricity Modernization Act of 2005.” 69 69 See EPAct sec. 1201. Moreover, National Corridors designated under FPA section 216(a) serve a fundamentally different purpose than energy right-of-way corridors for oil, gas, and hydrogen pipelines and electricity transmission and distribution facilities, designated under EPAct section 368; therefore, use of different approaches to delineating the respective corridors is not only appropriate, it is necessary. The corridors called for by EPAct section 368 are specifically characterized as “right-of-way corridors.” Congress required that the Federal land-managing agencies designate these right-of-way corridors through amendments to their land use resource management plans or equivalent land use plans. Thus, designation of right-of-way corridors under EPAct section 368 is in the nature of land use planning. In contrast, when the Department designates National Corridors under FPA section 216(a) it is not engaging in land use planning. FPA section 216(a) established a profoundly different task for the Department, a task that is novel in the realm of electric system planning and development. As discussed in Section I.A above, the Department's role under FPA section 216(a) is limited to the identification of congestion and constraint problems and the geographic areas in which these problems exist, and does not extend to the functions performed by siting authorities in evaluating routes for transmission facilities. None of the considerations listed in FPA section 216(a)(4) speak to land use issues. Thus, unlike an EPAct section 368 energy right-of-way corridor, an FPA section 216(a) National Corridor is not intended to identify a potential transmission siting route. As the Supreme Court recently held, “A given term in the same statute may take on distinct characters from association with distinct statutory objects calling for different implementation strategies.” 70 70 Environmental Def. v. Duke Energy Corp., 127 S. Ct. 1423, 1432 (2007). Numerous commenters argue that the draft Mid-Atlantic Area National Corridor is inconsistent with common meanings of the term “corridor.” Given the statutory reference to “any geographic area” as well as the novel nature of FPA section 216(a), it is not clear that common meanings or past uses of the term “corridor” have much relevance for the delineation of National Corridor boundaries. Nonetheless, the Department does not believe that the draft Mid-Atlantic Area National Corridor is inconsistent with such commonly accepted meanings. There was broad consensus among the commenters on the Congestion Study that if a project-based approach were not used to set National Corridor boundaries, then a source-and-sink approach should be. The Department used a source-and-sink approach to develop the boundaries of the draft Mid-Atlantic Area National Corridor. Such an approach comports with the common usage of “corridor” as an area linking two other areas. This approach is also consistent with the physical properties of the electric grid, because a transmission line into a congested or constrained load area will not benefit that load unless the line connects with a source of power that could help to serve the load. In addition to dictionary definitions of “corridor,” commenters offer examples of usage of the term to argue that the draft Mid-Atlantic Area National Corridor is overly broad. Again, the Department questions the relevance of such examples, even the examples of electricity industry usage, given the novel nature of a National Corridor under FPA section 216(a). However, the Department notes that there are examples of the term “corridor” being used in other contexts to refer to geographic areas not dissimilar in size and shape to the draft Mid-Atlantic Area National Corridor. 71 71 For example, in the trade context, “corridors” are often very broad. The North American Free Trade Agreement led to the establishment of various trade corridors in North America. Not unlike National Corridors, these trade corridors are areas where there is a need to develop transportation and communications infrastructure to facilitate trade. These trade corridors include the “Pacific Corridor,” which “includes the entire geographic band formed by the Rocky Mountain range and the Pacific Coast.” See North American Forum on Integration Web site at http://www.fina-nafi.org/eng/integ/corridors.asp?langue=eng&menu=integ . The Department does not think it is reasonable, as some commenters have suggested, to interpret the term “geographic area experiencing electric energy transmission capacity constraints or congestion that adversely affects consumers” as restricting a National Corridor designation to the specific confines of the load being adversely affected by congestion or the constrained transmission lines causing such congestion. FPA section 216(a)(4)(A) and (B) both refer to the Department considering economic factors in “the corridor, or the end markets served by the corridor.” Since the end markets served by a National Corridor are the load centers where consumers are being adversely affected by congestion, this language indicates that Congress envisioned designation of National Corridors that extend beyond the location of the adversely affected consumers. FPA section 216(b)(6) requires that before FERC issues a permit for a project in a National Corridor, it must make a finding that the project “will maximize, to the extent reasonable and economical, the transmission capabilities of existing towers or structures.” Thus, FERC is authorized to issue a permit for projects that do not use existing towers, provided that it concludes that use of existing towers is not reasonable or economical. Since FERC can only issue permits within the bounds of a National Corridor, this language indicates that Congress envisioned designation of National Corridors that extend beyond existing constrained transmission lines. The term “geographic area experiencing electric energy transmission capacity constraints or congestion that adversely affects consumers” envisions an area that encompasses the load being adversely affected by congestion and the constrained transmission lines causing such congestion, but the statute is ambiguous with regard to the precise scope of the area. The Department believes its source-and-sink approach to delineating the boundaries of the draft Mid-Atlantic Area National Corridor represents a reasonable interpretation of this ambiguous statutory term. As discussed in Section I.A above, FPA section 216(a) does not shift to the Department the roles of electric system planners or siting authorities in evaluating or selecting solutions to congestion and constraint problems. Thus, in implementing its source-and-sink approach, the Department has attempted to identify source areas that would enable a range of generation options. Theoretically, a sink area could be served by generation sources from across the entire interconnection. Also, given the long lead time involved in planning, obtaining regulatory approvals for, and constructing transmission projects, areas without a current surplus of generation could well develop additional power sources by the time a transmission project is completed. Therefore, not only could areas with existing surplus generation function as source areas, but also areas with projected surplus generation, or areas with available fuel supply for additional generation. The Department was faced, therefore, with a considerable range of potential source areas from which to choose when delineating the draft Mid-Atlantic Area National Corridor. In exercising its judgment as to which source areas to use for purposes of delineating the boundaries of the draft Mid-Atlantic Area National Corridor, the Department was guided by several factors. The Department has tried to balance the objective of accommodating a range of options against the practical limitations on delivery of power over increasingly longer distances. 72 The Department has also taken into consideration State concerns about the size of any Mid-Atlantic Area National Corridor, as well as the fact that Congress opted for a limited approach to Federal preemption of transmission siting. The Department has been further guided by the considerations identified in FPA section 216(a)(4). Finally, consistent with the language of FPA section 216(a)(2) referring to designation of a geographic area experiencing constraints or congestion that adversely affects consumers, the Department has restricted its selection of source areas to those separated from the identified sink area, i.e. the Mid-Atlantic Critical Congestion Area, by one or more of the constraints identified in Section VIII.B of the May 7 notice as causing congestion adversely affecting consumers. 72 The Department recognizes, as some commenters have pointed out, that the longer the transmission line, the greater the associated line losses, and that generation that is remote from a load center is less effective in providing some of the ancillary services required to maintain reliability than generation that is closer to the load center. The result of this analysis was the identification of two categories of source areas: (1) The closest locations with substantial amounts of existing, under-used economic generation capacity separated from the identified sink area by one or more of the constraints identified as causing congestion adversely affecting consumers; and (2) the closest locations with the potential for substantial development of wind generation capacity separated from the identified sink area by one or more of the constraints identified as causing congestion adversely affecting consumers. Identification of the first category is consistent with FPA section 216(a)(4)(A), which emphasi [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3AE7-19731. Public record. Not legal advice.