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.
On July 21, the day after after this column went to press, the Federal Energy Regulatory Commission (FERC) was set to release its most important ruling in years—the widely anticipated yet much-delayed final rule on electric transmission planning and cost allocation.
And if it looks anything like what was initially proposed, the final rule should prove worth the wait.
Edward Krapels, founder of the independent transmission company known as Anbaric Holding LLC, and prime mover behind such historic grid projects as Neptune, Hudson, and Green Line , predicted as much when he commented on FERC’s proposal last September.As Krapels put it, “We believe the commission’s final rule that this NOPR foreshadows is likely to join the other seminal acts of Congress and of the commission that have compelled the American power markets to modernize and become more innovative.”
The rule comes more than 13 months after FERC issued the NOPR (notice of proposed rulemaking), in June 2010, and nearly two years after the commission staff first convened regional meetings in Philadelphia, Atlanta and Phoenix in September 2009 to gather ideas and advice. FERC’s apparent foot-dragging marks a sure sign of feathers being ruffled—not only across much of the power industry, but also in the halls of Congress.
Earlier this year, in February, Senators Bob Corker (R-Tenn.), Ron Wyden (D-Ore.), and Richard Burr (R-N.C.) together had fired a warning shot off FERC’s port bow:
Corker and his colleagues questioned many of the NOPR’s ideas, including the proposal that transmission planners should take account of public policy mandates, such as state renewable portfolio standards (RPS), or that planners might choose to socialize (spread) the costs of new grid projects across wide swaths of utility service territories and their ratepayers, under the supposed radical theory that “beneficiaries pay.”
Even before that, after the Wall Street Journal had run an adverse editorial in December 2010, the FERC chairman was forced to mend fences. He assured Journal readers that the commission wouldn’t discard the long-held “cost causation” principle affirmed in the landmark 2009 case of Illinois Commerce Commission v. FERC , in which the U.S. Court of Appeals for the Seventh Circuit had had asked FERC for a better explanation of why PJM could allocate costs to ratepayers across its entire grid footprint, from the Atlantic to Chicago, to pay for high-voltage transmission lines designed primarily to serve needs in Pennsylvania, New Jersey, Virginia, and Maryland. (That explanation, by the way, is still forthcoming.)
Nevertheless, Wellinghoff stuck to his guns, assuring the senators in March that reforms were still needed:
“I believe,” he wrote, “it is necessary to consider the significant changes that have occurred in the electric industry over the past decade … [such as] significantly increased regional and interregional trade in wholesale power.”
“This expansion in trading activity,” Wellinghoff added, “has altered the way the transmission system is used, with an increasing number of transactions occurring across longer