FERC Fails to Support Transmission Development
- Jul 19, 2022 6:39 pm GMT
Skimming through my newsfeed this morning, I came across some sad news for transmission development in the U.S.A. FERC has rejected National Grid’s most recent proposal for cost recovery in their $1.2 billion New York State powerline.
National Grid’s request had proposed permission to recover its part of the project on a state-wide basis, in addition to an extra 0.5% return on equity. In comments made to the media, FERC representatives have stated that the utility failed to justify why a departure from the status quo, i.e. the 2015 [transmission service charge] ROE settlement, was necessary.
If FERC’s denial of National Grid’s proposal wasn’t discouraging enough, FERC Commissioner Mark Christie hinted at a possible consumer-friendly revision of the current status quo. Here’s how he was quoted in an Utility Dive article on the recent ruling:
“As this commission considers other potential reforms related to regional transmission planning and development, it is imperative that incentives like the abandoned plant incentive, [the construction work in progress] incentive, and [the regional transmission organization] participation adder are all revisited to ensure that all the costs and risks associated with transmission construction are not unfairly inflicted on consumers while transmission developers and owners stand to gain all the financial reward."
Christie’s view, in my opinion, is narrow and short-sighted. Rising energy prices, especially during a time of general inflation, is a cause for concern. I feel for all the households feeling the pinch this year, I really do. But stifling transmission development is not the solution. Medium-term, it will only compound our problems.
As it currently stands, there are around 8,100 proposed generation and storage projects that are sitting in interconnection queues across the country. The review process for such projects generally takes around 3.7 years to finish. Many projects drop out before finishing.
This represents a highly consequential inefficiency in a country where power prices are through the roof, and many parts of the region are plagued by unreliable service.
It’s hard to explain just how dire the United State’s need for faster and better transmission development is. Just consider this fact reported in an Atlantic article last year: “Since 2009, China has built more than 18,000 miles of ultrahigh-voltage transmission lines. The U.S. has built zero.”
Luckily, despite the latest regression, FERC has been generally proactive on streamlining the sitting process for transmission projects in recent years. A proposal last month, for example, seeks to remedy the logjam in two significant ways: studying requests in groups, instead of individually, and by imposing larger financial commitments to ensure the requests are for real. The new rules would also dole out fines to those who miss review deadlines.
FERC’s proposal would certainly move the needle in the right direction.
However, recent rulings and comments coming out of the agency suggest a lack of urgency. Transmission projects in the U.S. are always underdogs due to current regulations and community input mechanisms. FERC should support them in anyway possible, even if it hurts customers in isolated instances in the short term. Longterm, more lines will be better for us all.
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