Tackling Transmission Roadblocks
- Jul 19, 2018
A crucial yet often overlooked element in the nation’s energy revolution took center stage this month when a U.S. Senate committee aired concerns about the country’s transmission system.
During a July 12 hearing of the Senate’s Energy and Natural Resources Committee, two former chairmen of the Federal Energy Regulatory Commission called for renewed attention to the system that transports electricity. In wide-ranging presentations, the officials, who represented Democratic and Republican administrations, urged reconsideration of the complex regulatory issues that they contend are hampering improvements in regulatory issues.
Witnesses warned the committee that transmission capacity is a weak link in the chain that other promises vast supplies of affordably priced, sustainably produced power. “Today’s electric grid was developed to deliver yesterday’s electricity supply,” said Joseph Kelliher, who served as FERC chair from 2005 to 2009 under President George W. Bush. Despite years of catch-up investment that will reach an estimated $90 billion for the period 2017 to 2020, much more needs to be done, he argued.
Battling Delays, Deadlock
Sen. Lisa Murkowski (R-Alaska), the committee’s chairman, explained in her opening statement that the session was prompted by issues that had arisen in June during the committee’s oversight hearing in June with FERC commissioners. She cited delays or deadlock on decisions by FERC that bring about regulatory uncertainty, among other concerns.
“What’s more, the denial of necessary state approvals for projects on political grounds, or the failure of other federal agencies to meet FERC-established schedules, are problems that must be addressed,” Murkowski said. “For our country to reap the benefits of the natural gas revolution and renewable power technologies, and to keep our power supply reliable and secure, we must have dependable, financially sustainable, and expanding interstate delivery networks.”
Problems with the nation’s transmission network stem from a variety of causes, but the former FERC chairmen put policy shortcomings at the top of the list. “A complex regulatory regime has made project authorization a protracted and inefficient process and has failed to produce effective regional and interregional project planning,” said Jim Hoecker, who served as FERC chairman from 1997 to 2001 during the Clinton administration.
Now the executive director & counsel at WIRES, a trade association representing various stakeholders in the transmission system, Hoecker also cited the demand for further investment in obsolete facilities and reducing the costs of congestion, as well as what he called “widespread misunderstanding of how transmission benefits consumers of electricity.”
Often at issue is the planning process for major transmission projects that cross state boundaries and multiple jurisdictions. FERC’s Order 1000, approved in 2011 with a goal of reforming planning and cost allocation for public utility transmission providers, raised the issue; however, the order lacked specifics about a path forward. “The more important and extensive a proposed transmission project is, the more likely that affected states will fall into prolonged disagreement about who benefits and how the public interest should be served,” he said. “It’s an old story with few solutions and a considerable amount of uncertainty.”
Managing the interaction among those agencies is a huge challenge that affects, among other things, the coordination of environmental reviews among stakeholders. That inefficiency does much to drag out permitting, which for many larger transmission projects can take a decade, Hoecker said.
Former FERC chair Kelliher, who is now executive vice president for regulatory affairs at NextEra Energy Inc., attributed much of the holdup in improving the system to regulatory hurdles. Planning, he noted, tends to focus primarily on need, rather than on cost. “However, the competitive processes in most regions have been limited by state policies and RTO practices that restrict the scope of projects subject to competition.”
As a result, most projects are subject to only limited cost review, raising question of whether reliability needs are being met as cost-effectively as possible. Further hampering competition, and pushing up costs, are the barriers to new players. Some states give regulated utilities a preference or exclusive development rights for transmission projects over new entrants, he noted.
Murkowski’s main takeaway from the witnesses’ comments: “The United States needs balanced, merits-based energy regulation that is predictable and prompt.”