Transmission Rules to Back Planning of Long-Range Power Lines

US energy regulators are poised to finalize two major rules next Monday aimed at accelerating the planning and permitting of long-distance electric transmission lines and ironing out disputes over who pays for those projects.

The first Federal Energy Regulatory Commission rule, on regional planning and cost allocation, is expected to require grid planners to consider wider benefits of transmission and craft at least 20-year plans.

The proposed rule called for the plans to factor in changing power-and-demand mix, extreme weather events, and technologies that can get more power out of existing lines at a fraction of the cost of building new projects. The rule will be a sprawling update to a 2011 order that is widely seen to have failed to spur investment in regional lines at a time when the US power grid is coming under stress.

The commission’s second rule, if finalized as proposed, opens a pathway to federal permitting of transmission lines within certain national interest corridors established by the Energy Department. The DOE released a preliminary list of potential corridors on May 8.

Long-Awaited Rules

The rules are likely to generate some controversy over the role of state regulators, who generally have the authority to site and permit transmission lines running through their states.

The commission is also expected to draw complaints from competitive power developers if it finalizes a barrier on competitive bidding on transmission lines, siding with electric utilities who say competition can raise prices and cause delays.

FERC may weigh in on proposed methods to monitor cost increases, addressing concerns from at least one commissioner that consumers may end up overpaying for some grid projects.

Clean energy advocates, electric utilities, consumer groups, and environmental organizations have clamored for the final rule on regional planning and cost allocation since it was proposed more than two years ago.

“This is a part of a long and storied lineage of important transmission rules to come out of FERC,” said Christina Hayes, executive director for Americans for a Clean Energy Grid and a former FERC attorney. “It’s way overdue at this point.”

While the regional planning rule is much bigger in scope, the permitting rule would allow FERC to permit projects that states have rejected.

Costs and Benefits

Extreme weather, a wave of renewable energy seeking to connect, and soaring demand from electric vehicles, manufacturing, and data center deployment have all raised the stakes for regulators to create the right incentives for development.

The Energy Department estimates regional transmission capacity must more than double by 2035 and interregional transmission capacity must expand by more than fivefold.

In the previous transmission order, known as Order 1000, “some things worked and some things didn’t,” Hayes said. “We’re hoping this will unstick some of the things that didn’t work.”

The basic idea behind the regional planning of transmission is to allocate costs of a transmission line in a manner that’s “roughly commensurate” with benefits realized. In practice, those methods have been highly contentious and frequently litigated, ClearView Energy Partners, an independent research firm in Washington, noted in a report to clients last month.

By requiring grid planners to consider benefits—the proposed rule listed 12 potential benefits regions and utilities may consider in long-term planning—regulators hope the costs will be spread more broadly and fairly.

“Consumers are paying billions of dollars for a transmission grid that’s barely keeping the lights on, and it’s because most utilities and grid operators are not doing a good job at long-term planning,” said Caitlin Marquis, managing director at Advanced Energy United, a trade association of clean energy businesses. “This FERC order will be an opportunity to make sure grid operators and utilities are actually planning to build an electric grid of the future.”

Seeking Agreement

Democratic FERC Chairman Willie Phillips has sought common ground with Commissioner Allison Clements (D) and Commissioner Mark Christie (R), who hold sometimes clashing views on allocating costs and the need for more transmission.

Clements has said FERC should strengthen the mandate on power grid planners to consider transmission benefits and require some sort of federal “default mechanism” to enforce an agreement among states if they don’t come to an agreement on their own.

Christie, a former Virginia state regulator, wrote a blistering letter in March that urged FERC to seek approval from all states that would host a line planned to fulfill another state’s public policy goal.

Should the commission override state opposition, “FERC will likely face years of protracted litigation, jeopardizing transmission investment in long-term projects that could serve consumers,” Christie wrote to four House Republicans from New York.

“The proposed rule already contains other highly controversial provisions likely to attract litigation; loading it up with even more legally dubious provisions will only increase the risks in the uncertain future it faces,” the letter said.

Christie’s letter drew disagreement from Ted Thomas, a former Republican chairman of the Arkansas Public Service Commission.

“In his letter, Commissioner Christie seemed to conflate ‘public policy’ projects with ‘clean energy,’” Thomas wrote. “In my view, it is in the national interest to approach the power grid the same way we have approached the internet, the interstate highway system, and telecommunications—all of which require standardization and interoperability that is only made possible by good planning.”

Thomas noted the Conservative Energy Network, a national network of conservative state-based energy organizations, submitted letters to FERC expressing their support for long-term transmission planning.

Uncertainty Ahead

The planning rule could also face legal vulnerability on its position on competition. The rule included a reinstatement of electric utilities’ ability to block bidding on regional projects, called the right of first refusal.

FERC has been under intense pressure from supporters of competition—and fielded rare criticism from the Justice Department and Federal Trade Commission—to roll back that proposal and expand competition, arguing consumers save money when projects are bid out.

A move to expand competition could draw legal challenges from transmission owners, said Larry Gasteiger, executive director of WIRES, a trade association that advocates for transmission companies, and a former FERC official.

The final rule may be shaped further, with Clements planning to depart the commission as early as June 30, and three nominated commissioners awaiting Senate confirmation. The final rule will go through rehearing requests and compliance filings drawn out over many months.

“It could actually really change significantly depending on what their views are,” Gasteiger said, of the nominated commissioners. “We’re seeing the potential for a lot more uncertainty than you would normally see with a major rule.”