The U.S. Federal Energy Regulatory Commission (FERC) is in the midst of a key rulemaking on planning and building an electric grid. But the plan has serious flaws, says Mike Jacobs at UCS, rooted in the lack of coordination and control at the federal level. FERC wants the states to work with the utilities to define the sharing of benefits and costs from transmission, describe resource areas (like wind, solar, geothermal) where transmission is needed, and the criteria to use in decision-making. FERC has also deferred to the states to decide what benefits must be counted in decisions regarding what consumers and power plant owners will pay for new transmission. Jacobs warns that when utilities have the option to limit planning, limit competition, ignore benefits, and resist state directives, that’s what they will do. He says that the identification of benefits and beneficiaries should not be optional. And FERC must give an illustration of the steps needed for two adjacent states to negotiate for one transmission line the costs, benefits and criteria with the affected utilities, the general public, and any commercial entities that want to shape that decision.
Space missions are a federal matter, but states determine energy policy and infrastructure decisions. Right now, states and the federal government have a choice that will define our country’s options for clean energy and planning the power grid for the challenges ahead. This choice reveals how the electric grid, and the work to cut global warming emissions, are shaped by our political structures.
Duties are being split between the states and the federal government
The federal government funds space exploration. NASA, after all, is the National Aeronautics and Space Administration. We don’t have states launching rockets into space. Efforts to protect the planet from climate change, however, depend on the states and the federal government sharing responsibilities.
The federal government’s role is dominant in interstate commerce and the flow of electricity between states. Private utilities with multistate territories are accepted by state regulators. States approved utilities joining interstate regional grid operators.
Federalism also means states have authority over power plant types and power plant construction, while the Federal Energy Regulatory Commission (FERC) has authority over the transmission system that links power plants and enables energy to flow across state borders.
Huge opportunity to shape the decade
FERC is in the midst of a key rulemaking, with the potential scope and impact that comes along once a decade. The prospects for the United States reducing global warming emissions depends on planning and building an electric grid for a clean energy transition. Often the electric grid is described by an analogy to the road system that moves people and goods. But the history and capacity to build roads is thousands of years old. Every state and most every town in the United States has a highway or road department. By contrast, planning the electric grid just isn’t what most state and local governments do.
New grid-planning roles for states
FERC’s proposed rules introduce new grid planning roles for states. To make progress with an energy transition, FERC is directing electric utility companies and regional grid operators to include states in several vital decisions in which states previously did not participate. FERC is proposing that the states sit down with the utilities to define the sharing of benefits and costs from transmission, describe resource areas (think wind, solar, geothermal) where transmission would be desired, and the criteria to use in decision-making.
States, however, have limited resources and capability to participate in transmission planning negotiations. Back to the analogy, transmission is more like rocket science than road building. With that in mind, FERC should reconsider its proposed requirement that utilities “seek the agreement” of states on transmission cost sharing, and give states “a period of time to negotiate” amongst several states, generation owners, utilities, and consumer interests.
12 categories of “benefits”
Let’s look at the topic of benefits from investing in the grid. Insufficient transmission contributed to the awful power outages in Texas in February 2021 that left more than 200 people dead. Insufficient transmission also is causing huge delays in building renewable energy facilities that displace coal and fossil gas power plants. Additional renewable energy supplies would protect consumers from price increases and geopolitical disruption of energy markets. FERC, for example, cited in its rulemaking Midwestern transmission upgrades that provide a $2.20 to $3.40 benefit from each dollar invested.
In fact, the FERC rulemaking uses the words “benefit” or “benefits” 580 times. The proposed rules include a table suggesting 12 categories of measurable, valuable electric system reliability and economic benefits that utilities may use in discussions with states and use in their cost allocation decisions. But, despite this recognition of benefits, FERC deferred to others to decide what benefits must be counted in decisions regarding what consumers and power plant owners will pay for new transmission. FERC passes those decisions on to the states in the lower 48, which are then expected to work with 125 utilities that provide transmission in any number of permutations and combinations.
This is not the way forward
No, this is not the way forward. We know from past FERC rulemakings on transmission planning that when utilities have the option to limit planning, squelch competition, ignore benefits, and resist state directives, that’s what they will do. Even FERC knows this. The whole rulemaking is premised on failure of utilities to plan ahead for changes in the energy supply.
States need to speak out
Two things need to change. First, benefits and beneficiaries simply are not optional. I expect lawyers will flesh out the standing principle that “beneficiaries pay.” Second, FERC commissioners should hear from states about the circuitous and unsupportable processes hinging on coordinating multiple states described in the proposed rule. FERC commissioners need an illustration of the steps necessary for two adjacent states to negotiate for one transmission line the costs, benefits and criteria with the affected utilities, the general public, and any commercial entities that want to shape that decision.
We have pressing needs to invest in the grid. This rulemaking needs to be more direct and more useful.
Mike Jacobs is a senior energy analyst at the Union of Concerned Scientists
This article is published with permission