Strict adherence to cost-of-service ratemaking led to what might be considered a Luddite decision in the Maryland PSC’s initial rejection of BGE’s smart-grid filing. More than 60 years ago, the U....
The NOPR Was Late
But transmission planning, as we know it, may never be the same.
As proposed in last year, the NOPR had promised a number of new requirements for regional grid planning:
• Mandatory participation in regional transmission planning processes, governed by principles laid down in 2007 for grid planning by individual utilities.
• Consideration in regional grid planning of federal, state or other public policy mandates, as to be determined by the planners themselves,
• Reforms to encourage greater participation in regional planning processes by private, independent “merchant” and “non-incumbent” transmission developers—other than load-serving utilities or other jurisdictional “incumbent” transmission owners or service providers subject to an obligation to serve.
• Elimination of any federally granted right of first refusal (ROFR) that might give preference to incumbents in deciding who is to build new transmission projects. FERC would replace ROFRs with a “sponsorship” model that instead would guarantee the right to build to those developers who propose projects.
• Greater coordination between neighboring regional grid planning groups, through the signing of coordination agreements.
• Incorporation of cost allocation rules within regional planning processes. These rules would govern intraregional cost allocations for region-specific grid projects.
• Incorporation of cost allocation rules within bilateral and multilateral coordination agreements to be signed between and among regional planning groups. Such inter-regional cost allocations apply to extensive new grid projects spanning more than one region. (See, Trans. Planning & Cost Allocation for Trans. Owning & Operating Pub. Utils., Notice of Proposed Rulemaking, FERC Dkt. RM10-23, June 17, 2010.)
Given that readers will have seen FERC’s final rule long before discovering this column, let’s take a stab at what FERC was thinking, and where it might want to take the industry.
For example, some may see FERC’s NOPR as evidence of a green agenda, or another move in a series of moves designed to strengthen RTOs at the expense of state regulators. Yet there is much more at work.
Above all, the ground has shifted. Transmission service, the bread and butter of FERC’s traditional authority, is no longer where the money is. The action (and the money) is now in the business of building transmission lines, as shown by reports from the Edison Electric Institute (EEI) that shareholder-owned utilities invested more than $37 billion (real 2009 dollars) in transmission from 2004 through 2008, and were projected thereafter to invest another $54 billion in transmission over the next five years, from 2009 through 2013. Yet a well-known study from 2009 had suggested it could take $80 billion and 15,000 miles of new lines in the Eastern Interconnection simply to support 20 percent wind integration by 2024—and even a 5-percent wind penetration would require10,000 miles ($50 billion) of added EHV lines (extra high-voltage).
The electric industry today stands where the natural gas industry stood in the early and middle part of the 20th century: characterized by huge energy resources located in remote and unpopulated producing regions, with a need to transport that energy to heavily populated consuming regions.
For the natural gas industry, Congress passed the Natural Gas Act, which gave authority to the Federal Power Commission to certify and regulate natural