(November 2008)Economic uncertainties are raising doubts over utility returns. Will regulators feel the need to consider broader economic effects when engaging in ratemaking? While...
Titans of Transmission
ITC and AEP jockey for the lead in building the grid of tomorrow.
flowgates, choke points, and locational pricing differentials. They study the likely locations of future generation projects, as suggested by interconnection queues, resource-adequacy analyses, and bidding patterns that emerge from capacity markets, such as New England’s FCM (Forward Capacity Market) and PJM’s RPM (Reliability Pricing Model). They refer to data collected through their own day-ahead and real-time markets for energy and ancillary services to pinpoint the location and causes of grid congestion, and the likely price and cost savings to be achieved by various grid upgrades and projects.
AEP suggests that this micro-managing style of grid-project selection focuses too much on local issues and misses the forest for the trees, as Tomasky explained further in her Senate testimony:
“As it stands today, most of this planned investment is what the industry would call ‘reliability spend’—investment to make sure the current system works.
“While this investment is critical, it is also incremental. It won’t be sufficient to meet the needs of our country’s energy future.”
In fact, it appears that rival company ITC actually shares AEP’s vision of the high-voltage grid overlay that would create a unified, national backbone system over top of the existing grid, just as President Eisenhower’s Interstate highways did for the post-war road network. That point came out at the technical conference on barriers to construction of interstate transmission, held at FERC last October, where ITC Holdings CEO Joseph Welch weighed in:
“All the energy issues that face us are national issues. They’re not local, they’re not state issues.
“We know where the wind blows. We know where the loads are going to go. We know absolutely beyond the shadow of a doubt what the RPS standards are. Yet we want to design these [lines] one at a time and build a spaghetti network that’s both inefficient and ineffective, where we could just make the calculation.”
Tomasky also participated at the October conference. When FERC Commissioner Moeller asked her how others had reacted to her “relatively bold statement” to the Senate, Tomasky suggested that strong central planning would have more allies than one might think:
“You know, the reaction has actually surprised me. I have a lot of secret conversations now with people who want to say that they really do believe that, but they can’t really do it for a bunch reasons.”
In fact, Tomasky recommended to FERC that RTOs and ISOs should give up some of the strict technical rules they employ in transmission planning, such as the different cost-benefit tests and different cost-allocation methods used for projects supposedly needed for reliability, versus “economic” projects that are designed to reduce congestion to bring lower-cost power to high-cost areas, but which are not strictly needed to meet reliability standards:
“We’re getting to a point that those things in between reliability and congestion [are] primarily artificial.
“The key difference is time. The congestion project is basically a reliability problem waiting to happen.
“If you can encourage RTOs … to not differentiate … between economic projects and congestion projects, it would go a long way towards assuring that the projects you