CFTP cites record growth in transmission investment, raises concerns with FERC Order 1000

WASHINGTON, D.C. Coalition for Fair Transmission Policy Speaking at a major transmission conference this week, Coalition for Fair Transmission Policy Executive Director Bruce Edelston welcomed utility industry data showing investment in the nation’s electricity grid is proceeding at a record pace and reiterated concerns about the consumer costs of the Federal Energy Regulatory Commission’s transmission Order 1000.   

“Everyone agrees on the need to modernize and expand the nation’s electricity grid and to accommodate new generation from renewable sources, but it must be done efficiently” Edelston said at the Infocast Transmission Executive Forum 2012.  “While FERC and the Department of Energy are devising policies to encourage a national transmission build out, it is important to recognize that unprecedented investments in transmission are already underway,” Edelston emphasized. Utilities are spending billions to interconnect new generation such as wind and solar onto the grid, replace aging power lines, ensure reliability and alleviate congestion, he noted.   

According to the Edison Electric Institute, shareholder-owned electric utilities and stand-alone transmission companies for the first time in 2010 surpassed the $10 billion mark for a yearly investment in transmission infrastructure. Spending on transmission increased nine percent from 2009 to 2010, EEI reported. Utilities and others are expected to invest $54 billion on transmission between 2011 and 2014, a 43 percent increase over transmission investment during the previous four-year period, 2007-2010, EEI reported. 

“Maybe we are asking the wrong question. Perhaps what we should be asking is not whether new transmission is needed, but where it is needed—and why,” Edelston said. “Simply building more power lines without considering how transmission affects energy policy and markets can be extremely wasteful and inefficient,” he added. “We must treat transmission as a means—and not the only means—to reach America’s goals for clean and reliable electricity.” 

These goals are attainable but transmission planning must be coordinated with generation development in a way that best serves consumers, Edelston said. A bottom-up planning process achieves the lowest rates and the most reliable supply of electricity, he added.

Also, appropriate price signals will ensure needed generation is located in the right places so load-serving utilities and other retail suppliers will make the most efficient resource decisions, based on the generation and delivery costs of electricity. The only way to guarantee the right price signals is to require those benefiting from new transmission to pay for it, Edelston said. 

“Government policymakers must avoid encouraging decisions that favor expensive sources of renewable generation delivered over thousands of miles of new power lines when cheaper sources of renewable electricity are often located closer to consumers,” Edelston said.

Unfortunately, FERC Order 1000 on transmission planning and cost allocation seems to be a step in the wrong direction, Edelston stated. Under FERC’s rule, regions could implement top-down planning that that allows a regional entity, without approval from regulators in affected states, to determine how a utility meets its public policy requirements.  “Certainly such a top-down regime could interfere with state-level integrated resource planning processes,” Edelston said. Moreover, these plans must be filed with FERC, but questions remain whether the commission can challenge or reverse local decisions to construct new transmission facilities, he added.

“On cost allocation, FERC uses some of the right words in Order 1000, which says costs should be allocated based on benefits received and those not benefitting should not be allocated costs. However, there is a huge loophole,” Edelston cautioned. During the comment process, FERC declined to define what may be considered a benefit, he added. Regions could assume their cost-allocation plans deliver some benefits in the future to justify spreading costs widely among consumers, Edelston said.   

FERC is virtually ensuring that at least in some instances the costs of new transmission facilities will be borne by customers receiving little or no benefits. “As a result, decisions about what resources to use, where to locate generation, and how to expand transmission will be based on false price signals, and will result in inefficient power markets and higher costs to electricity consumers,” Edelston said.