Transcript HELP, PLLC ThinkEquity Summer Call Series “CAN WE DEAL WITH THE CHALLENGES TO GETTING TRANSMISSION BUILT?” Remarks of James J.

HELP, PLLC
ThinkEquity Summer Call Series
“CAN WE DEAL WITH THE
CHALLENGES TO GETTING
TRANSMISSION BUILT?”
Remarks of James J. Hoecker
Husch Blackwell Sanders LLP
Hoecker Energy Law & Policy PLLC
July 13, 2009
REGULATORY REFORM: WHAT YOU
WANT DEPENDS ON WHO YOU ARE
America’s Electric Power Industry
IOUs
7%
IOUs
73%
Co-Ops
30%
POUs
15%
POUs
63%
Percent Ownership
(3,100 Utilities)
Co-Ops
12%
Percent of Total
Customers Served
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. . . . AND WHERE YOU ARE
RTO/ISO Operating Responsibility
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TODAY’S “NATIONAL” GRID
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Key network infrastructure vital to the nation’s economy
A nationwide164,000-mile, highly-integrated network of
transmission lines and control facilities, interconnecting
over 750,000 MW of generating capacity to millions of
customers in all regions, and 3000 utilities
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THE CHALLENGES
FACING TRANSMISSION
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Aging and deteriorating infrastructure
More dispersed sources of generation
Wholesale competition among
generators
Complex bulk power markets
Arrival of the digital economy
Electricity consumption doubled after
1980; increased consumer electronics
Convoluted regulatory path
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THE
TH
111
CONGRESS
Transmission Legislation Is Pending
In Both the House and Senate
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H.R. 2454 Waxman/Markey
(climate bill)
H.R. 2211 Rep. Inslee
S. 539 Sen. Reid
S. 774 Sen. Dorgan
S. ___ Sen. Bingaman (Energy &
Natural Resources Committee)
DRIVING THE DEBATE
Commitment to renewables/clean energy
 Worries about energy security, energy
independence & “third world” grid
 Expanding power markets/demand
BUT
 States/regions take proprietary interest
in all utility functions
 No one ever wants to pay
 Smart grids and greater efficiency might
argue against more transmission
 Mistrust of the Feds
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PLANNING
TRANSMISSION
Now: Planning is system by system, state by state, or by
region, historically to ensure reliability for native load
customers and meet the needs of incremental generation.
Individual utilities plan; RTOs plan; ad hoc regional groups
and reliability organizations plan; and even groups of
governors plan. No single entity has full responsibility for
executing on a plan.
CHALLENGES: 1. WHO DECIDES WHAT
TRANSMISSION IS NEEDED AND WHERE.
2. WHAT IS THE SCOPE OF PLANNING? SUBREGIONAL, REGIONAL, INTERCONNECTIONWIDE, OR EVEN NATIONAL?
3. DO WE ALREADY HAVE INSTITUTIONS AND
PROCEDURES THAT CAN DO THE JOB?
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SITING TRANSMISSION
Now: Routing transmission lines, including a determination of
“need,” is a traditional state role. In 2005, Congress allowed
FERC to “backstop” state siting authority for certain projects in
designated corridors – a failed solution.
CHALLENGE: NEW POLICIES THAT HEAVILY FAVOR
ACCESS TO REMOTE CLEAN ENERGY RESOURCES
(AND THE INTERSTATE NATURE OF THE MODERN
BULK POWER MARKET) MAY ARGUE FOR A MORE
PROGRAMMATIC APPROACH. EXCLUSIVE
FEDERAL SITING? REGIONAL COMPACTS?
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WHO PICKS UP THE TAB
Now: Cost allocation raises the issue of who benefits from an
upgrade or expansion of the system. Approaches range from
direct assignment to “cost causers” to socializing costs
across entire regions. There are no national standards for
cost allocation and so each utility or RTO decides who will
pay in each instance. The result is uncertainty.
CHALLENGE: MASSIVE NEW TRANSMISSION
ADDITIONS TO BRING RENEWABLES TO MARKET
WILL BE COSTLY. SOME REGIONS WOULD FENCE
THEMSELVES OUT. BUT RATEPAYER IMPACTS CAN
BE KEPT LOW BY BROAD SOCIALIZATION -- WHEN
IS THIS EQUITABLE AND WHEN NOT?
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WIRES’ LETTER TO
CAROL BROWNER
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Grid modernization must address several
challenges
Planning must be regional, mandatory,
independent, and comprehensive
States should retain authority to site but not
to decide the “need” for major facilities
We need clear cost allocation standards
Avoid balkanizing the grid by reforming
regulation for limited resources or purposes
WIRES is a national coalition of transmission providers and customers, grid managers, and
technology companies – both publicly- and investor-owned -- dedicated to investment in a
strong, well-planned and environmentally beneficial high voltage transmission system.
For a copy of the Browner letter, contact www.wiresgroup.com
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Contact Information
James J. Hoecker, Ph.D., J.D.
Husch Blackwell Sanders LLP
Hoecker Energy Law & Policy PLLC
[email protected]
www.Huschblackwell.com
www.HELPPLLC.com
W: 202-378-2300