Exelon Chairman, President, and CEO John W. Rowe, on the proposed merger that would create the largest utility in the United States....
Our nation's transmission infrastructure is increasingly unable to meet new demands for power created by rapidly changing electricity markets. Although reliability protocols ensure against catastrophic failure, there is ample evidence today that the grid is too congested. The long, high-voltage lines and the big towers that carry electricity from power plants to distribution facilities, to our homes and our businesses, need upgrading and expansion.
The North American Electric Reliability Council says, "The nation is at .. a crisis stage with respect to reliability of transmission grids." The U.S. transmission system requires nearly $56 billion in new investment over the next 10 years to maintain the reliability of the grid, but only $35 billion will likely be invested, a recent study shows.
California has been the poster child for many electricity problems-and transmission is no exception. A new draft study from the Federal Energy Regulatory Commission (FERC) says congestion costs on the main north-south transmission line (Path 15) in California added up to $73 million in one month alone last year. FERC staff believes that total transmission constraint costs nationwide add up to several hundred million dollars.
The transmission system has not expanded to keep pace with the changing electricity business. We are in a period when the old way of doing business is quickly fading and the new approach is not yet in place. Regional Transmission Organizations (RTOs) are still in various stages of development-some are up and running, while others are still in the planning phase. Edison Electric Institute (EEI) strongly supports the creation of RTOs because they will help accelerate the expansion of competitive markets.
Perhaps the most significant obstacle to expanding the transmission system is getting approvals to site lines. It's become almost impossible to win siting permits for new transmission lines because of regulatory red tape and negative public sentiment. There are complicated state review processes. Many local government agencies are involved, as are the courts and various competing interest groups. This all adds up to lengthy, costly delays.
To address this kind of transmission gridlock, the Bush Administration and others are urging Congress to give new siting authority to the FERC for the expansion and construction of transmission facilities. This backstop authority could be exercised only in collaboration with the states, and only with the appropriate input from property owners and other stakeholders.
EEI supports backstop siting authority for the FERC if states and local governments find it impossible to get transmission lines sited after a given period-say, a year or 18 months. Of course, it's not known when FERC might get siting authority, if at all. Much depends on energy legislation now pending in Congress.
The FERC would simply be the court of last resort to resolve disputes over siting. Because transmission is more regional than local, FERC needs more latitude than it currently has to help make those decisions. The creation of RTOs will help provide a regional focus for the siting discussions, although RTOs won't be able to solve siting problems without federal help.
Solving the transmission problem is not simply a matter