Federal Transmission under Microscope

Mar 13, 2011 - Bill Opalka - energybiz.com

Transmission policy is the next battleground in the ongoing debate over the federal role in the electric utility industry. And the dispute isn’t just some philosophical discussion about directives from Washington, it’s something more basic. It’s about money.

Lots of it. Probably billions are involved in upgrading and expanding the nation’s transmission grid, especially to bring remote renewable energy resources to load centers. Who pays, how much and who benefits, either directly or indirectly are all the issues on the table.

Some U.S. senators want to stop evolving federal policy that has become clearer over the past couple years. “The Electric Transmission Customer Protection Act” was introduced in the U.S. Senate recently by Senator Bob Corker, Republican of Tennessee. The bill wants to limit the authority of the Federal Energy Regulatory Commission in multi-state transmission project cost allocation.

FERC policies and proposed rulemaking have been trending toward spreading the costs of transmission upgrades more widely. It has approved regional cost allocation agreements that generally favor remote renewable generation and is accepting public comment on cost allocation for interstate transmission projects.

“We need federal policies that promote viable domestic energy production and innovation in the fairest, most cost-effective manner possible,” Corker said. “Governors and utilities from across the country have spoken out against FERC’s attempt to shift transmission costs from states that benefit to those that don’t.”

Corker and his co-sponsors said new federal rules “would give FERC sweeping authority to broadly spread the associated costs to customers outside of the area immediately serviced by the new transmission lines.” FERC would be required to use a “measurable reliability or economic benefit” standard when distributing transmission costs across state lines.

The proposal was called the Corker Amendment when it made it through the Senate Energy and Natural Resources Committee two years ago before comprehensive energy legislation died. Now it’s back as stand-alone legislation.

At root is a definition of “who benefits” and over how widespread an area when determining the scope of cost allocation. The proposed law clearly makes the definition more narrow.

Too narrow, according to WIRES (Working group for Investment in Reliable and Economic electric Systems).The bill adds barriers to development by creating a rigid but ambiguous standard, it says, that is hard to define and would cause potential investors in transmission projects to back away.
“It would therefore allow many potential beneficiaries of improvements or expansions of the transmission grid to avoid contributing to project costs, increasing the costs to others or halting development of needed projects altogether,” the group said.

“WIRES agrees with the bill’s sponsors that the beneficiaries of investments in transmission should bear its costs and that those customers who do not benefit should not be liable for transmission costs. That’s fair. In fact, that’s exactly what FERC is doing,” added Jim Hoecker, counsel to the WIRES organization and former Chairman of FERC.

Some in the Senate say FERC needs to do so in a different way. Case in point: Lines that would run through the Mid Atlantic states to service the Northeast. While the beneficiaries of the electricity would be the citizens of the Northeast, some states would be positioned to sell their coal and therefore benefit in other ways.

Difficult questions indeed.

Bill Opalka is editor of RenewablesBiz Daily