Transmission Rule Inches Forward

A transmission cost allocation blueprint endorsed by federal regulators is inching closer toward resolution. The implications for remote renewable energy generation and the ability to transmit it to load are hard to overstate.

It now appears that the notice of proposed rulemaking (NOPR) will be on the July agenda of the Federal Energy Regulatory Commission.

The concept is simple: Who pays, how much, under what circumstances and in what geographic footprint. The execution is anything but.

Simply put, FERC is proposing to include “public policy” into the list of criteria regulators can consider when allocating “just and reasonable” costs associated with new transmission.Theh rule also encourages a more regional approach. Who benefits has been the guiding standard for decades.

The controversy has spawned a contentious debate, with advocates of a narrower view of regulators’ discretion recently discussed here that would codify a more narrow definition of beneficiaries.

I recently spoke to Jim Hoecker, the former FERC chairman and current counsel of WIRES (Working group for Investment in Reliable and Economic electric Systems), who endorses the idea. His main contention is that the NOPR, by no means final as we speak, is a continuation of long-standing FERC efforts and is not as far afield from the original mandates of the federal Power Act from the 1930s as the proposal’s opponents would suggest.

A group of Senators opposed to the NOPR have submitted legislation that would essentially head off the new rules at the pass.

“Monday morning quarterbacking is good, but this is pre-game quarterbacking,” Hoecker said.

The rule could be on the July FERC agenda (the body does not meet in August). Hearings have been requested before the Senate Energy and Natural Resources Committee, but it is unlikely that panel will hold any until the final rule is released.

“They call it socialization and they persist in theorizing that FERC is about to spread the cost of major new transmission projects not just regionally but across entire interconnections and even the entire nation,” Hoecker said. “It’s just not going to work that way; FERC does have a responsibility to see that only beneficiaries of new projects should pay towards the capital costs of these projects.”

The beneficiary is a major sticking point. Are they limited by proximity? If so, how far?

 “The reason this is such a difficult decision is that the nature of the electric grid has changed so much at the wholesale market level,” Hoecker added.

If a very narrow interpretation of just and reasonable is eventually adopted, the effect on renewable development will be immediate and severe, in WIRES’ view.
 
“The generator has the choice to eat all the costs, or not to build. Clearly this is going to impact renewable energy and energy diversity generally. I can’t imagine the formula isn’t anti-transmission and anti-renewable, just in terms of its logical consequences,” Hoecker said.

Opponents to the FERC policy dispute their intent is to derail renewables.

One thing the proposed legislation would do is unravel two recent cost allocation decisions endorsed by FERC involving the Southwest Power Pool and Midwest Independent System Operator.

Hoecker’s bottom line? “The NOPR and cost allocation is frankly no big deal. This is the federal power act at its best,” he said.

There are people and organizations that beg to differ. This issue is not going away quickly or quietly.