Stakeholders Urge FERC To Recognize The Broad Benefits Transmission Provides

A diverse group of stakeholders from across the country today called on the Federal Energy Regulatory Commission (FERC) to require regions to presume that extra high voltage (EHV) transmission facilities of 345kV and above provide broad regional benefits for cost allocation determinations.

The stakeholders, a group of renewable energy advocates, environmentalists, utilities and transmission developers, voiced their collective support for FERC’s proposed rule, which would necessitate that regional transmission planning processes account for energy policy objectives as well as establish cost allocation methodologies that require consideration of a broad range of transmission benefits – reliability, congestion relief and national energy goals.

"A robust, modern transmission infrastructure is essential both to develop our vast domestic clean energy resources and to effectively integrate demand-side options. We applaud the Commission for taking these important, measured steps to reform the outdated and fragmented system for planning and paying for electric transmission infrastructure. A strong, smart electric grid is critical to strengthening the U.S. economy, enhancing our national security, and addressing the threat of climate change," said Reid Detchon, Executive Director, Energy Future Coalition.

The proposed rule, which is expected to be finalized in the spring or summer of 2011, seeks comment on how best to determine cost obligations for transmission customers and what benefits are appropriate to consider. In response, Charles River Associates, Inc. (CRA) supplied a technical analysis on the regional impacts of EHV transmission facilities throughout much of the United States.

The analysis stated "the results of the study provide compelling evidence that as a class, transmission facilities 345 kV and higher have a significantly greater impact on regional power flows than lower voltage facilities across a range of different regions. Each of these regions has evolved in a different manner, with unique transmission topologies, yet the result is similar in all regions, a finding that supports a rebuttable presumption which can be applied to all regions. Indeed, given the strong uniformity of results, there is no reason to expect that the results would differ for the areas that were not included in the analysis."

The stakeholders encouraged the Commission to recognize that certain transmission facilities have characteristics and operate in such a manner that make them integral to the functioning of the larger grid or "backbone." The documented impact of these facilities can be replicated in regions across the country and FERC’s guiding principles should reflect that fact.

"The stakeholders are not advocating that transmission costs be allocated to the entire Inter-connection, nor are they asking FERC to require broad allocation for all extra high transmission facilities. Rather, we contend there should be a presumption that these network facilities offer broad benefits while providing an opportunity for an impacted party to prove, in those limited instances, when this is not the case," said Gregory Ioanidis, Vice President, ITC Holdings Corp.

The stakeholders support FERC’s approach for determining who pays for needed transmission facilities. This "cost causation" principle, they argue, strikes the appropriate balance. It protects customers from being forced to pay for facilities they neither need nor benefit from, while also ensuring that all the network upgrade costs are not directly assigned to a single generator simply by virtue of when that customer was connected to the grid.

"This FERC rulemaking is key to the development of a clean energy grid. Effective regional transmission planning and broad regional cost allocation are necessary reforms to build out a robust interstate power grid. FERC’s approach on cost allocation is sound, rooted in the principle that customers that receive no benefit are not allocated costs. At the same time, FERC recognizes some benefits are not easily measured. The FERC proposed rule strikes the right balance between national and local interests, accommodating regional differences and allowing for different regional solutions, while establishing some basic rules of the road," said Joseph Kelliher, Executive Vice President, Regulatory Affairs, NextEra Energy, Inc.

FERC’s proposal did not require exact measurement of the benefits provided to customers in order to assign cost obligations. The Commission and the courts have long recognized that cost allocation, often referred to as ratemaking, is not a precise science, yet attempts to impose precision on the calculation and assignment of benefits of new transmission have created substantial obstacles to its construction, particularly in the case of EHV projects, the benefits of which extend beyond a single planning region.

FERC’s rule responds to concerns that facilities needed to connect remote energy resources are being delayed or prevented by planning processes that do not consider public policy requirements such as state renewable requirements, otherwise known as Renewable Portfolio Standards (RPS). By clarifying that "policy objectives," such as state RPS mandates, are key criteria to consider in transmission planning, FERC is supporting a more robust process that will facilitate renewable energy development.

"FERC is on the precipice of doing something truly important; it is laying the foundation for America’s energy future. If successful, FERC will bring more certainty to the transmission development process thereby opening the doors to new investment that will unleash this nation’s vast renewable energy potential, including wind power — giving us a cleaner environment and facilitating much needed job creation," said Rob Gramlich, Sr. Vice President, Public Policy, American Wind Energy Association (AWEA). .

The stakeholders include American Electric Power Corp., American Wind Energy Association, Energy Future Coalition, Iberdrola Renewables, ITC Holdings Corp., LS Power Transmission LLC, Mesa Power Group, LLC, NextEra Energy, Inc., and Solar Energy Industries Association.