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Policy Shift: 2009 Law & Lawyers Report

Legal and regulatory changes are transforming the industry.

Fortnightly Magazine - November 2009

time, the process has raised almost as many questions as it’s answered (see “ Bench Report—Chinook/Zephyr ; NRG Power Marketing v. Maine PUC ; ComEd v. FERC ,” etc. ). As a result, conflicts seem certain to continue, especially involving projects designed to move power from remote renewable resource sites to urban load centers.

In what’s viewed as an effort to clarify various perspectives and speed up the policy process, in early October 2009, FERC solicited comments from stakeholders about pricing and cost- allocation issues (Docket No. AD09-8-000 ). The commission is expected to incorporate those comments into its transmission-planning reform process.

“I think FERC has finally recognized that the transmission-planning process never did work correctly, and unless you have some broader-based cost-allocation mechanism, you’re not going to get transmission built,” Eisenstat says.

However, recognizing this need is much easier than resolving it, given the broad divergence of interests among various stakeholders—and the lack of clear policy direction from the legislative branch.

“The FERC has some political reluctance to take the lead on this,” McGrane says. “I think they’d like some cover from Congress to give them the authority to do multi-regional or even interconnect-wide cost allocation.”

But whether Congressional action would help or hurt is questionable, given the complex and contentious nature of transmission issues. For example, energy legislation approved by the Senate Energy & Natural Resources Committee this summer included an amendment by Sen. Bob Corker (R-Tenn.), which would hold FERC to a high standard for quantifying the economic and reliability benefits of transmission investments before the commission could allocate costs to ratepayers in multiple states. “It’s tough to measure these benefits, given the interconnected, interrelated and long-lived nature of the assets,” says Cynthia S. Bogorad, a partner with Spiegel & McDiarmid. “If it becomes law, the Corker amendment could put a crimp on the regional cost allocations necessary to get the transmission built that consumers need.”

And that, of course, is the source of all conflict; not everyone agrees exactly what transmission investments are really necessary, and nobody wants to pay for investments viewed as unnecessary or even detrimental to local interests. While it’s true that some 60 percent of the states have enacted RPS requirements and Congress is moving toward a federal standard, state lawmakers are reluctant to burden their ratepayers with capital expenses that primarily might benefit out-of-state generators.

“If we make commitments to transmission, it will dictate how we develop energy resources,” says Randy Speck, a partner with Kaye Scholer. “If we build a transmission line to North Dakota, you can be sure we’ll site lots of wind turbines in North Dakota, but that might not ultimately be the best solution to the problem. There may be other, more localized alternatives that won’t require such a huge investment in transmission.”

Of course, the broader the costs are spread— i.e., across multiple states—the more affordable they become for individual consumers. Nevertheless, PUCs and public-power interests in many states are mounting a fierce resistance to what they view as overreaching by federal regulators