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'T' Party Revolt

Transmission expansion costs are spread unevenly, driving a wedge between utilities and regions.

Fortnightly Magazine - October 2009

filed Aug. 2009.)

MISO also explains that its new tariff will serve only as an interim measure—adopted on an emergency basis to avert member defections and preserve the RTO as an institution. It will be replaced, MISO promises, by a permanent Phase II solution, to be filed at FERC by July 2010, that presumably will be more favorable to the wind industry.

Again, however, the wind industry and many other stakeholders see MISO’s proposed cure as worse than the disease. They point out that if FERC should approve this “interim” proposal, that MISO members will have gotten what they wanted, and so will have no bargaining incentive to cede ground when MISO’s RECB task force reconsiders the problem next year.

Instead, why not just craft a private settlement with Otter Tail and MDU? Or, perhaps socialize the Otter Tail and MDU costs across the entire MISO footprint via an “uplift” charge tacked on to LMPs in the regional energy market. Why discourage wind project development across the entire Midwest, when the problem is much narrower, involving only Otter Tail and MDU as special cases?

Opponents argue as well that MISO’s proposal runs counter to the spirit of FERC’s recent order approving a much more wind-friendly allocation method for net-up costs in the Southwest Power Pool, which faces the same explosion in wind power development as does MISO. (See, Southwest Power Pool, Inc., Docket ER09-1039, June 18, 2009, 127 FERC ¶61,283.)

Yet all these well-intentioned efforts to identify, calculate and weigh costs and benefits and then apportion the bill accordingly miss the big picture, according to a federal appeals court judge sitting in Chicago. That judge, Richard Cudahy, urges that regulators view grid expansion as a broad-based national enterprise, in which all utilities have a stake and a duty, and so should remain unfettered by traditional regulatory bean-counting aimed at equalizing costs and benefits.

In August, on a challenge to FERC policy brought by the Illinois state utility commission, Cudahy issued a scathing dissent to the majority ruling of the U.S. 7th Circuit Court of Appeals, which struck down and remanded a 2007 FERC order that had OK’d a PJM tariff that had provided for equal, “postage-stamp” cost-sharing among utility TOs across the entire PJM regional grid footprint (based on utility-specific load-ratio shares) for new, large-scale transmission upgrades rated at 500kV or higher, and designed to provide extensive regional benefits by moving electricity large distances across the entire regional transmission organization (RTO). The case had involved Project Mountaineer, designed to facilitate cheap power imports from the Midwest to the Mid-Atlantic, but two of three judges ruled that FERC had provided insufficient evidence to show that Commonwealth Edison, operating in Illinois, would receive benefits commensurate to its cost contribution. (Illinois Comm. Comm’n v. FERC, Nos. 08-1306, et al. Aug. 6, 2009, 7th Cir.)

In his dissenting opinion, Judge Cudahy wrote: “However theoretically attractive may be the principle of ‘beneficiary pays,’ an unbending devotion to this rule in every instance can only ignite controversy, sustain arguments, and discourage construction while the nation suffers from inadequate