USA Law and Practice Contributed by: David P. Flynn, Lindsey E. Haubenreich, Thomas F. Puchner, Dennis W. Elsenbeck and Zachary R. Hirschfeld, Phillips Lytle LLP
the state utility commission, to review environmental, cultural, historical, technical and economic impacts. Generally, FERC plays a limited role in distribution infrastructure development, only becoming involved to the extent that there is a jurisdictional question regarding the facility’s status as a distribution or trans- mission facility, or if the facility implicates a federal law under the purview of FERC’s jurisdiction. Public Participation Public participation and input may be permitted in accordance with applicable state and local laws. Simi- lar to the federal processes, state law may require a public hearing, and the overseeing state agency or state utility commission may solicit public comments. Most state utility commissions have an online public docketing portal where applications, notices, com- ments, petitions, rulings and orders are posted. Depending on the state and the type of distribution facility being proposed, a utility or developer may need to file advance notice of a proposed facility, which may be subject to public comment. Timing of distribu- tion system approvals may depend on state-specific public notice and comment requirements, utility rate case schedules, local government involvement, and state policy and regulation. 5.3 Terms and Conditions Imposed in Approvals to Construct and Operate Electric Distribution Facilities The terms and conditions of distribution facility approval vary based on state regulations and market structures. In vertically integrated states, a state utility commission typically requires the distribution facility applicant to demonstrate that a facility is necessary, prudent, in the public interest, and just and reasonable in light of current market conditions and state policy objectives. Approval may be conditional on compli- ance with certain safety, environmental, engineering and public interest standards. 5.4 Eminent Domain, Condemnation or Expropriation Rights to Construct and Operate Electricity Distribution Facilities The power of eminent domain, condemnation and expropriation is commonly granted to electrical ener-
gy distribution facility applicants upon review and approval of their construction and operation applica- tion. However, depending on the applicable state laws governing eminent domain, the rights of the distribu- tion facility applicant will vary. A distribution facility or utility exercising its right of eminent domain must provide just compensation for the property being condemned. 5.5 Monopoly Rights for Electricity Distribution Entities In most states, utilities have geographically defined service territories, provided for by state legislation or regulation, within which the utility has monopoly rights to provide a distribution service. Exceptions may exist in some states for competitive market participants, depending on state law and regulation. The degree to which monopoly service rights exist, the extent of deregulation, the method by which such rights are modified and the opportunity for competitive market participants to compete within those service territories varies significantly by state. 5.6 Electricity Distribution System Charges and Terms of Service The primary authority over electrical energy distribu- tion is each state’s utility commission, which typically has broad authority to ensure just and reasonable rates, terms and conditions of distribution service in accordance with state legislation, regulation and promulgated rules. FERC imposes a functional test for the case-by-case determination of whether a facility is providing inter- state transmission service or local distribution ser- vice, but generally defers to states’ interpretation and application of those factors in making its determina- tion. State utility commissions have jurisdiction over rates and terms of service for retail distribution-level utility service. Generally, the rate-making process is designed to balance the utility company’s opportunity to earn a fair return on its investments and the cus- tomer’s interest in receiving a safe, reliable service at just and reasonable rates.
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