(Mis)Understanding 'Undue Discrimination' : FERC's Misguided Effort to Extend the Boundaries of the Federal Power Act

In Order No. 1000, issued on July 21, 2011, FERC concluded that a right of first refusal is anticompetitive and unduly discriminates against independent transmission developers. FERC had previously suggested in Primary Power, LLC that it believed the company proposing the transmission project should have the right to build it unless the regional entity can adequately justify selecting another entity for construction. That decision and the Order No. 1000 reforms will have a significant impact on the way transmission infrastructure is planned and constructed in the United States. FERC, however, lacks jurisdiction to specify which entity may con-struct transmission facilities approved in a regional planning process. The FPA's jurisdictional grant limits FERC's ability to adopt a federally sanctioned selection process requiring equal treatment for all potential transmission developers, regardless of whether or not the developers are similarly situated. Moreover, in Order No. 1000, FERC recognized that it lacks authority under the FPA to preempt states' transmission siting, permitting, and construction decisions. It is well settled law that FERC cannot do indirectly that which it cannot do directly. Even if the new federal regulations are not attempting to exercise preemptive authority and, at the pre-compliance stage, do not directly infringe on the states, the regulations create the potential for conflict between federal and state policy. The potential for conflict indirectly limits state authority by pushing states to conform their regulations to the federal policy and, as a result, implicitly preempts state authority