WIRES News: January/February 2012
An Update on Transmission Law & Policy Developments From WIRES
A New Year Poses New – and Some Old – Challenges
Washington’s legislative gridlock suggests that major transmission policy initiatives are unlikely before the November elections. While WIRES will continue to provide information to federal decision makers about the job-creation potential and other benefits of a strengthened electric grid, its work in Washington will lay the foundation for the 113th Congress. Transmission proponents nevertheless recognize that the need for well-planned transmission and its long-term benefits are not always fully appreciated by state officials and regional entities.
In planning its strategy for 2012 in Dallas on December 6-7, WIRES members heard from the Consul-General of Canada, the system planning director in ERCOT, a former Texas PUC Commissioner, and a Kansas legislator and head of the Kansas Electric Transmission Authority about state, regional, and cross-border solutions to transmission development that have emerged to accommodate reliability and public policy requirements.
"The basic issues – planning, land use, cost allocation – won't soon go away entirely," said Jolly Hayden, WIRES second-term President. "But I think transmission proponents are delivering a positive message about how to address these issues constructively. We must confront the facile arguments that more transmission will unsettle market arrangements and heap unsupportable costs on consumers."
"WIRES believes a stronger grid is essential to the energy economy and that we must act based not just on the basis of today’s cost and benefits but on the returns to energy users 20, 30 and even 40 years down the road. In 2012, we hope to advance changes in the transmission business environment, in conjunction with implementation of FERC’s Order 1000 and the growing awareness among state leaders that we all need to work together to ensure the grid is properly planned with a diverse and sustainable energy future in mind."
To a greater degree than ever during 2012, WIRES will take those messages directly to lawmakers and regulators at all levels of government. A sound national grid policy does not favor transmission investment to the exclusion of generation or energy efficiency options. Nor would it undermine regional priorities or operational differences. In 2012, WIRES will seek – as it always has – a national energy policy that takes advantage of energy solutions that are the most economic and forward-looking solutions suited to the 21st Century needs of the North American energy market.
NERC’s 2011 Long-Term Reliability Assessment Spurs Debate on Potential Impact of Environmental Regulations
According to the North American Electric Reliability Corporation's (NERC)
2011 Long-Term Reliability Assessment:
"...delays to transmission construction due to permitting and siting have been observed and continue to inhibit the industry from constructing new and potentially vital transmission infrastructure. While these deferments do not currently pose a reliability concern, the importance of a secure transmission infrastructure is amplified when considering the significant addition of variable generation resources, pending environmental legislation in both the United States and Canada, and increased demand projections throughout North America in the assessment’s 10‐year horizon."
The report addressed EPA's proposed regulation of mercury and other toxic air emissions from power plants, most notably the Cross-state Air Pollution Rule which could accelerate generation plant retirements, posing reliability issues if not successfully managed and accelerating the need for transmission additions to accommodate new plants. A decrease in projected generation resources will lead to declining planning reserve margins in some areas but a majority of areas appear to have adequate resource plans to meet projected peak demands over the next 10 years.
"NERC’s annual assessment has long been a useful benchmark regarding the need for transmission and how urgent that need is in light of changing operations and public policies," said WIRES President Jolly Hayden.
WIRES Installs New Board and Officers
WIRES members have elected a new Board of Directors to oversee the organization’s operations: Will Kaul, Vice President, Transmission at Great River Energy and a former WIRES President; Paul D. McCoy, Principal at Atlantic Wind Connection and also a former WIRES President; and Autry Warren, Vice President, Regional Customer Operations at Oncor Electric Delivery LLC and former Treasurer of WIRES.
The WIRES Annual Meeting in December also elected a new slate of officers: President: J. Jolly Hayden, Vice President of Electric Business Development at the Electric Infrastructure Alliance of America; President-Elect: Don J. Clevenger, Senior Vice President, External Affairs at Oncor Electric Delivery; Vice President: Phillip C. Grigsby, Senior Vice President, Commercial Transmission at Duke Energy; Secretary: Gerald Deaver, Manager, Regional Transmission Policy at Xcel Energy (serving his second term); and Treasurer: Gary Hickey, Executive Director, Transmission Development at NextEra Energy.
Go here for more information on WIRES’ board and officers.
Landmark MIT Study Finds U.S. Transmission System Requires Policy Changes To Ensure Reliability, Accommodate New Technologies
A December 2011 study from the Massachusetts Institute of Technology (MIT) Energy Initiative asserts that a failure to recognize the opportunities presented by new technologies and the need to improve the transmission regulatory environment could seriously degrade reliability, result in increased costs, and undermine important public policy initiatives. The MIT study makes several key findings about distributed generation, cyber security, energy efficiency, and research and development expenditures, but its findings about the transmission system are noteworthy.
The study says the grid faces numerous challenges in the next two decades and that changes are needed in the regulatory environment to facilitate and exploit technological innovation. "As a result of the layering of historical policy decisions and the lack of a comprehensive, shared vision of system structure or function, the U.S. electric power system today operates under a fragmented and often inconsistent policy regime," states the MIT report.
WIRES concurs that balkanized operation and regulation of transmission represents a key challenge and a good starting point for reassessing public policies governing the future of transmission networks.
EIPC Completes Phase I of Nationwide Grid Assessment
The Eastern Interconnection Planning Collaborative stakeholder steering committee completed Phase I of its report selecting three "futures" for which to conduct transmission studies. The three chosen futures are "business as usual," a 30% national renewable portfolio standard, and a combined climate and energy policy.
This is an interim report in the middle of a 2.5-year study funded by the U.S. Department of Energy to look at the Eastern Interconnection transmission system and potential or alternative transmission needs for a long-range future.
The three futures to be analyzed in Phase II are:
- Business as usual – a continuation of existing conditions including load growth, existing renewable portfolio standards and currently proposed environmental regulations.
- National RPS – regional implementation to meet 30% of the nation’s electricity requirements from renewable resources by 2030; achieved by using a regional implementation strategy.
- Combined federal climate and energy policy – calling for reduction of economy-wide carbon emissions by 50% from 2005 levels in 2030 and 80% in 2050 combined with meeting 30% of the nation’s electricity requirements from renewable resources by 2030 and significant deployment of energy efficiency measures, demand response, distributed generation, smart grid and other low-carbon technologies; achieved by using a nationwide/Eastern Interconnection-wide implementation strategy.
Over and above these limited scenarios, WIRES will be assessing the usefulness of the EIPC data for several purposes, including what it may mean for other regional planning efforts and for implementation of FERC’s Order 1000.
Rehearing of FERC Order 1000
More than 60 states, utilities, energy industry trade groups and regional organizations have asked FERC to reconsider and/or clarify FERC Order 1000, issued in July 2011. WIRES filed for rehearing, not to ask that FERC retreat but instead to request greater specificity in the rule’s requirements for inter-regional planning and cost allocation. With compliance deadlines set as late as early 2013, the final rule is just the beginning of the debate over what federal cost allocation and planning policy will finally become.
HR 3280: A Reasoned Pro-Transmission Bill
HR 3280 – the "Powering America for Tomorrow Act" – was introduced in October by Rep. James Sensenbrenner (R-WI) to rationalize and expedite the regulation of electric transmission without undoing state authority to site facilities or to reverse any existing regional planning efforts.
Rep. Sensenbrenner’s intention appears to be to foster development and deployment of new technologies through investments in infrastructure. Because the bill tracks HR 5515 from the 111th Congress, it is only coincidence that HR 3280 tends to complement the efforts of the FERC in Order No. 1000 to ensure that regional planning occurs everywhere in the country and between regions. HR 3280 goes a step further by requiring FERC to certificate projects recommended by regional planners, thereby creating a single finding of "need" for individual transmission lines above a certain voltage level.
WIRES contends that today’s regulatory framework for electric transmission is highly unpredictable and authority over need determinations, planning, siting, and cost allocation too dispersed and unevenly applied. HR 3280 would be a constructive step toward regularizing these processes. No hearings have been held on the legislation to date.
FERC Reports Provide Useful Information on Transmission and FERC’s Issuances
FERC’s Office of Energy Projects Energy Infrastructure Update for November 2011 highlights, among other news, 214 new projects under the Midwest Independent Transmission System Operator’s Transmission Expansion Plan.
Also, FERC’s Fiscal 2011 Performance and Accountability Report shows the agency approved rate incentives for 15 projects, totaling 2,637 miles of new transmission and $12.7 billion worth of investment. The report, released in mid-November, tracks FERC’s progress on various objectives, including maintaining the reliability of the electric grid and increasing efficient infrastructure.
FERC Will Conduct "Retrospective Analysis" of Existing Rules
In November 2011, FERC announced its plan for compliance with President Obama’s Executive Order 13579, issued in July 2011, requiring agencies to conduct a "retroactive analysis" of existing significant regulations to make them less burdensome, more relevant, and more streamlined. As an independent regulatory agency, FERC's compliance with the Executive Order is voluntary.
FERC highlighted what it believed were applicable relevant regulatory actions, including:
- Order 888, prohibiting public utilities from using their monopoly power over transmission to restrain or prevent competition.
- Order 889, establishing rules governing an Open Access Same-time Information System (OASIS) and prescribing standards of conduct.
- Order 890, which revisited the Commission’s open access policies and amended its pro forma Open Access Transmission Tariff to further improve competition in wholesale markets.
- Order 673, which adopted reliability standards.
- Order No. 706 was issued to make mandatory certain cyber security reliability standards to protect the reliability of the electric system.
WIRES Spokesperson Urges Governors' Staffs and Nebraska Wind Developers to Focus On The Benefits of Transmission
In his Keynote address to the Nebraska Wind Power Conference in Kearney, Nebraska, on November 16, 2011, WIRES Counsel Jim Hoecker urged Nebraskans to support the kind of large-scale power transmission projects that can tie wind energy to new markets, or risk missing out on a major economic opportunity.
During the fall of 2011, Jim led breakout sessions at the National Governors Association Center for Best Practice in Providence and Phoenix on "Job Opportunities Through Transmission Expansion."
Legal/Regulatory Notes
Various Michigan parties have filed an appeal of FERC’s approval of the Midwest ISO’s allocation of the costs of Multi-value Projects (MVPs), in the 7th Circuit Court of Appeals. The case will be important to the future of federal cost allocation policy and FERC's Order No. 1000, which enunciates principles that apply to regional and inter-regional planning and cost allocation efforts.
The Department of Energy has proposed rules for coordinating federal agency review of transmission siting on federal lands. Comments are due January 27, 2012. The rules were published in the Federal Register on December 13, 2011.
Calendar
National Association of Regulatory Utility Commissioners’ 2012 National Electricity Forum in Washington, DC, February 8-9.
For the latest on other important events related to the high-voltage transmission grid, see the WIRES Calendar (on the Home page).
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