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Power Grid Upgrade Costs to Handle Extreme Weather Divide States

Feb. 16, 2022, 7:13 PM

Clean energy goals and resilience to extreme weather should spur the next wave of power grid upgrades, federal energy officials and state utility commissioners broadly agreed Wednesday during a meeting in Washington.

But the Federal Energy Regulatory Commission’s mission to overhaul a series of rules in the next year targeting transmission projects prompted concerns that consumers could be paying for more than their fair share of the expensive projects.

New lines are needed to move power from areas with wind and solar generation to states and cities with goals of consuming higher amounts of renewable energy. Climate change-driven extreme weather events require a hardening of existing lines and the ability to shift power to regions experiencing outages.

The meeting between FERC commissioners and officials from California, Massachusetts, Michigan, Pennsylvania, and other states cast a spotlight on perhaps the toughest questions in green-lighting grid projects: Who benefits from a new project and who should pay?

“We should exercise a little bit of caution in just saying: ‘We are going to blend all of these benefits. We are going to build every single project we can, and we are going to justify it with these lists of dozens of different benefits,’” said Andrew French, a member of the Kansas Corporation Commission. “It still needs to meet a cost-benefit test.”

Second Gathering

The meeting was the second gathering of the Joint Federal State Task Force on Electric Transmission, established in June 2021 to include all five FERC commissioners and 10 state utility commissioners from every region of the country.

Some states balk at paying for projects that deliver power primarily to other states.

Clashing state policies on clean energy procurement was an “elephant in the room,” FERC chairman Richard Glick said.

“If we were just to say only the states that have the policy on carbon should have to pay for the transmission line, we’d be leaving a whole bunch of other benefits on the table and, I think, violating what the courts have told us,” Glick said.

‘Tremendous’ Benefits

Some benefits are going unnoticed, said Allison Clements, a Democratic FERC member. The February 2021 cold blast that caused widespread power outages in Texas and other states prompted neighboring regions to send spare power to help ease the pain.

Those lines “provided tremendous critical benefits,” Clements said. “And we don’t have a particular way of capturing these benefits, even though we see them playing out in real life.”

FERC could consider offering benefits to underserved and disadvantaged communities as part of transmission planning, said Willie Phillips, the newest FERC member and a former Washington, D.C. utility commissioner.

“A less siloed approach probably makes sense, and I also think some expanded set of benefits makes sense as well,” he said.

But with a longer list of benefits comes the ability to spread costs to more consumers—potentially justifying projects that carry few tangible benefits, said FERC commissioner Mark Christie, a former Virginia utility commissioner.

Consumers should be protected against paying for transmission lines, which can cost hundreds of millions of dollars, that don’t benefit them or that don’t pan out as expected, Christie said.

“Benefits have to be specific and verifiable in order to justify cost allocation,” he said.

Christie used the hypothetical example of a proposed line to deliver clean power to Virginia to meet that state’s Renewable Portfolio Standard to reach 100% clean electricity by 2050. “Should consumers in Indiana pay for that? I mean, you can take any line that’s ever been built and say there’s a benefit.”

Urging Flexibility

The state commissioners urged FERC for flexibility so utility commissioners and regional planning officials can pursue projects that work best for their region.

But they acknowledged the inherent bickering that comes with the project bill.

It’s a bit like splitting costs of a large, expensive dinner party without a fully itemized bill, said Jason Stanek, a member of the Maryland Public Service Commission.

“I think the answers will be more important to some regions, some states and some utilities than others, especially if you’re the party who ordered the side salad and water and everyone else at the table ordered filet mignon,” Stanek said.

To contact the reporter on this story: Daniel Moore at dmoore1@bloombergindustry.com

To contact the editor responsible for this story: Rebecca Baker at rbaker@bloombergindustry.com