The commission’s jurisdiction over transmission governance allows it to modify filing-rights allocations and adjust the PJM Interconnection’s nominating committee, writes Harvard Law’s Ari Peskoe.

The surge in data-center energy demand and related power price increases has put the spotlight on PJM Interconnection processes that can culminate in market-rule changes or can reinforce the status quo.

In this piece, I discuss the Federal Energy Regulatory Commission’s legal authority to approve or order changes to PJM’s governance and conclude that FERC’s jurisdiction over transmission governance allows it to modify filing-rights allocations and adjust PJM’s nominating committee. In addition, utilities have no authority to impose conditions on any filing rights transfer over the regional planning protocol.

FERC’s oversight of regional transmission organization governance is rooted in its duty to define, detect and eliminate unduly discriminatory conduct. The commission has connected governance of multi-utility transmission agreements to undue discrimination since at least the 1970s. In 1987, the D.C. Circuit summarized that FERC’s prior regulation of regional transmission governance was a “proper exercise of its power to prevent undue discrimination.”

PJM’s current governance was designed to address undue discrimination by utilities. In 1996, FERC recognized that its open-access transmission mandate that aimed at countering utilities’ incentives to stymie competition would be of limited value if utilities continued to operate transmission themselves. It therefore encouraged utilities to cede control over their transmission networks to system operators who had no financial stake in the markets.

To receive FERC’s approval to operate transmission, FERC required newly created RTOs to show that their governance would prevent “ control, and appearance of control, of decision-making by any class of participants ” or individual companies.

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