Transcript Transmission Policy and Regulation: What are the Issues

Transmission Trends:
Current Policy and Regulatory Issues and What They
Mean for Renewables
Remarks of James Hoecker
Husch Blackwell Sanders LLP
Hoecker Energy Law & Policy PLLC
Former Chairman, Federal Energy Regulatory Commission
EMERGING TRENDS IN RENEWABLE ENERGY
enXco
RANCHO MIRAGE, CALIFORNIA
FEBRUARY 2010
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Challenges to The
Transmission System
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Aging and deteriorating infrastructure
More dispersed resources of generation
Wholesale competition among generators
Complex bulk power markets
Arrival of the digital economy
Electricity consumption doubled 1980-2007
Shifts of public policy (e.g., RPS, efficiency,
demand response)
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Challenges to New
Transmission Construction
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“Not in my backyard” or “not in my term of office”
Conflicts between local, state and regional interests
Inconsistent state and local regulation
Uncoordinated environmental reviews
Federal land authorization, esp. in the West
Lack of timing coordination among siting entities
Varying GHG restrictions and RPS’s
Difficulty right-sizing for short and long-term needs
Uncoordinated siting of lines and generators
Timing of “need” determinations
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Will We Build More Transmission?
 NERC: Transmission additions will triple to 3100
miles/year 2009-2018. Project proposals abound: 90
planned projects each greater than $100 million
(totaling $120 Billion)
 Prospects for a clean energy economy—RPS, climate
legislation, smart grid; renewable energy projects mean
jobs and will drive major transmission expansions and
upgrades; 20-30% wind penetration in the East = > $100
Billion for transmission (NREL)
 Other drivers: reliability, cyber security, replacements,
new technologies, load growth
 PROBLEM: approval processes are out of sync with the
realities of multi-state, multi-system, multi-purpose
transmission
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Q. Who Decides If A Line Is Needed?
A. Everybody
 Siting – Location, Location...and Need
States consider “need” for facilities when siting them
 Cost allocation – Who Pays? Who Benefits?
States are influenced by the rate impacts on citizens
when considering need; FERC defers to states and
stakeholders
 Planning – Which Projects Are Needed?
Stakeholders & regional planners determine whether
projects satisfy reliability, economic, environmental, or
public policy needs
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State vs. Federal Siting– A Struggle
Section 216, Federal Power Act (Sec. 1221, EPAct 2005)
National Interest Electric Transmission Corridor
Limited FERC backstop authority within NIETCs
FERC’s Aggressive Interpretation of Its Authority
Regional State Compacts
New Siting Approaches?
Pre-emptive federal backstop
Natural gas pipeline model; federal siting for high priority lines
Interstate siting compacts
Adoption of federal, state and local “best practices” for
Valuing their viewshed
Land conservation
Multi-agency permitting
Protecting Property values
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Federal Siting Fares Badly In Court
Piedmont Environmental Council v. FERC
(4thCircuit Court of Appeals)
“The result of the Fourth Circuit decision is nullification of the comprehensive
scheme erected by Congress with respect to U.S. transmission policy. The goal of
Congress was to strengthen the interstate grid to support competitive markets,
assure reliability, and promote development of renewable energy capacity.
Congress recognized that development of larger interstate transmission projects is
necessary to accomplish those policy goals, and also appreciated that state and
local siting is poorly suited for development of such projects…. [T]he Fourth Circuit
has interpreted Congress’ intent as maintaining each state’s veto authority over
new interstate transmission facilities no matter how vital to the national interest.”
Amicus Brief By Four
Former FERC Chairmen
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Transmission Cost Allocation—
Unresolved
 Project Causers vs. Project Beneficiaries
 New renewable generator = direct causer and beneficiary
 Load under RPS = beneficiary, not a cost causer
 Future generation in the area = beneficiary, not a cost causer; BUT
 If transmission addresses a NERC standard, the owner is a causer and a
beneficiary, and local load and local generation are beneficiaries
 Transmission Access vs. Transmission Use
 Access-based allocation is based on installed capacity, peak demand, or
T service
 Usage-based allocation is based on energy injections and withdrawals
 Local vs. Interregional Benefits and Use
 Local transmission serves local generation and load, provides market
access for generators and load seeking diverse suppliers
 Interregional facilities enhance system flexibility, reliability, and economy of
production
 Other issues
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Who Pays? Equity vs. Efficiency
 Allocation Methodologies–
-- License Plate
-- Beneficiary Pays
-- Postage Stamp
-- Direct Assignment
-- Highway/Byway
-- Injection/Withdrawal
-- Merchant Recovery
 Difficult-to-Quantify
& Often Ignored Benefits--
-- Enhanced Market Competitiveness, Liquidity
-- Economic value of reliability
-- Insurance and risk mitigation
-- Capacity benefits
-- Environmental and renewable energy
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Transmission Planning—Key
 Historically, system by system to ensure reliability for native
load customers and meet the needs of incremental
generation.
 Increasingly, facilities are multi-state and multi-purpose,
facilitate economy energy transactions, and a liquid bulk
power market, and will serve a flexible low-carbon fuel mix.
 Individual utilities plan; RTOs plan; ad hoc regional groups
and reliability organizations plan; and even groups of
governors plan. No single entity is responsible for executing
on a plan.
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Trends & Prognosis
 Positive Investment Trends in All Regions: quadruple the 1990s
 Interconnection-wide planning efforts (ARRA-funded)
 More FERC leadership in cost allocation and planning, although
far from preemption
 Pending transmission legislation could address planning, siting,
and cost allocation to varying degrees–
 S.1462 American Clean Energy Leadership Act (E&NR
Comm.)
 “Climate Bill” H.R. 2454 American Clean Energy & Security
Act (Waxman-Markey)
 Speculation of a political nature
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James J. Hoecker, JD, Ph.D
Husch Blackwell Sanders LLP
Hoecker Energy Law & Policy PLLC
[email protected]
www.helppllc.com
202-378-2300
www.wiresgroup.com
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