Dozens of utilities, advocacy groups warn Senate energy bill would thwart new transmission

Options Toolbox

Related Companies American Electric Power Co. (AEP) American Transmission Co Dominion Resources Inc. (D) Exelon Corp. (EXC) Iberdrola Renewables Inc Iberdrola SA ITC Holdings Corp. (ITC) MidAmerican Energy Holdings Co Xcel Energy Inc. (XEL)

Related Articles 6/17/2009 Senate energy committee completes markup of energy bill, including provisions for new financing agency

Related Issues in Focus Who will site new transmission lines?

A broad group of electric generation and transmission companies, municipal utilities, electric cooperatives and environmental groups wrote to Senate leaders Nov. 3, warning that pending legislation contains a "poison pill" that could thwart expansion of the nation's transmission grid.

In a letter to Senate Majority Leader Harry Reid, D-Nev., and Minority Leader Mitch McConnell, R-Ky., 62 utilities, independent power developers and advocacy groups objected to a measure in the American Clean Energy Leadership Act of 2009, S 1462, which they say would severely restrict how FERC determines who pays for new high-priority transmission facilities. In addition, the groups said the measure would make cost recovery so uncertain that it would disrupt billions of dollars of planned transmission investment.

The bill was introduced in July by Sen. Jeff Bingaman, D-N.M., chairman of the Senate Energy and Natural Resources Committee, based on testimony from 19 hearings between January and May and six earlier bills, some of which had bipartisan sponsorship, as well as a markup. Aside from addressing cost allocation methodologies for new transmission, the bill would require FERC to coordinate the development of interconnectionwide transmission plans every three years, direct states to act within one year of receiving a proposal to site transmission lines of 345 kV or higher, and set a nationwide renewable energy and energy efficiency standard of 15% by 2021.

As now written, the bill will prohibit FERC from adopting "a cost allocation methodology that is fair and workable," the Nov. 3 letter said. "Further, the current language may well upset existing FERC-approved cost allocation policies and jeopardize billions of dollars of planned transmission investment in certain regions. As Congress is contemplating making more demands on the grid to meet new energy and environmental objectives, new transmission investment will be needed and this language runs counter to that objective."

Although the bill would direct FERC to conduct a rulemaking to determine the appropriate methods for allocating costs of new "national priority transmission facilities," the letter contended that an amendment adopted during committee consideration of S 1462 "would unduly limit the flexibility of FERC to craft a workable policy. This amendment would prevent FERC from allocating transmission costs to any region or sub region unless the commission can demonstrate that the costs are 'reasonably proportionate' to the 'measureable economic and reliability benefits.'"

The groups argued that this language "threatens to hamstring FERC by limiting its current flexibility under the 'just and reasonable' standard in the allocation of transmission costs. This will impede the timely construction of needed new transmission projects to meet reliability standards, connect new generators, access renewable resources and otherwise benefit consumers."

Signatories to the letter include American Electric Power Co. Inc., American Transmission Co. LLC, the American Wind Energy Association, Dominion Resources Inc., Exelon Corp., Iberdrola SA subsidiary Iberdrola Renewables Inc., the Indiana Municipal Power Agency, the Illinois Municipal Energy Agency, ITC Holdings Corp., MidAmerican Energy Holdings Co., the Sierra Club, the Solar Energy Industries Association and Xcel Energy Inc.

The 62 utilities, power suppliers and advocacy groups "strongly believe that the costs of transmission upgrades should be shared by all those who benefit. We note that the bill, absent the amendment language, did not give FERC unfettered discretion — it would have required the commission to allocate costs only to a 'region or sub region,' called for direct assignment of costs if appropriate, required deference to cost allocation agreements among affected states, and required that costs and benefits not be 'disproportionate.' Our concern is that the requirement for FERC to 'measure' benefits (as used in the amendment) will, at best, result in time-consuming, protracted cost-benefit analyses that will trigger endless litigation and prevent consistent, predictable cost allocation — a requirement for entities to make needed transmission investments."

At worst, the letter argued: "[T]he added language could result in a requirement that is impossible for the commission to meet, thereby forcing federal regulators to default to direct assignment of costs, which will have the effect of making it impossible to build needed new high voltage transmission facilities that provide broad regional benefits. It is also unclear how existing cost allocation arrangements that spread costs across a region or sub region will be impacted by such a requirement."