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The Regulators Forum - States to Feds: Don't tread on Me

How far do states rights go in transmission planning?
Fortnightly Magazine - November 15 2003

have rate decreases, five will have rate increases, and five will break even. Even if there were no questions about the study or its assumptions and omissions, it does not provide a basis to abandon the current system and adopt FERC's SMD.

The DOE study also assumes that the incremental cost of implementing SMD will be about $760 million nationwide. However, this figure assumes no costs for the added infrastructure needed for competition but not needed for reliability. No funds are included to alter the current transmission infrastructure to a superhighway common carrier.

Failing to account for the cost to alter fundamentally the character and structure of the nation's transmission infrastructure carries profound implications. We looked at the impact on the study if one assumes that $30 billion or $60 billion is required over a 10-year period to have the system envisioned by the SMD. No matter how one analyzes it, these costs alone overwhelm any marginal benefits the DOE study might suggest. Indeed, if only $15 billion is needed for the transformation, the analysis shows the SMD makes no economic sense, as the SMD clearly costs more than the benefits reflected in the study on a short- and long-term basis.

It is surprising and disappointing that the FERC has not performed a cost-benefit analysis on its proposed SMD. It is incomprehensible that the FERC would proceed with SMD now and require states to abandon their current systems in light of the DOE study, the August blackout, and the costs-in money and risks-of changing the current transmission systems.

F: What is the issue of most concern in Virginia?

HWM: I am most concerned about the ability of Virginians to receive reliable utility service at just and reasonable rates in the future. This concern applies equally to local telecommunications service, electricity, and gas service. The so-called "restructuring" of these utilities has not produced the benefits that were touted by deregulation's advocates.

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