February 5, 2010

Utilities Lining Up Against Administration On Transmission Siting

BY GEORGE LOBSENZ

Twenty-three utilities—and possibly more—are lining up against the Obama administration’s efforts to give the Federal Energy Regulatory Commission more power over transmission siting and cost allocation, with sources and documents indicating the companies will call for changes to Senate legislation on grid expansion.

Sources made available to The Energy Daily an unsigned, draft letter to Senate Majority Leader Harry Reid (D-Nev.) and Senate Minority Leader Mitch McConnell (R-Ky.) that expressed concerns about provisions of transmission siting legislation passed last year by the Senate Energy and Natural Resources Committee.

Specifically, the letter called for removal of provisions giving FERC authority to review and change transmission expansion plans developed by state and industry officials in the nation’s two major regional grids, the Eastern and Western interconnections.

In addition, the letter voices support for provisions authored by Sen. Bob Corker (R-Tenn.) that make it harder for FERC to broadly allocate the costs of building new interstate power lines to bring renewable energy from remote wind and solar farms to urban areas. Corker’s legislation would bar the commission from spreading costs among ratepayers in many states unless FERC showed that such power lines brought “measurable economic and reliability benefits” to those being charged.

Administration officials and FERC Chairman Jon Wellinghoff oppose Corker’s legislation as hampering efforts to finance long-haul clean energy power lines, which they contend will provide broad national and regional benefits justifying FERC action to spread those costs widely.

Administration officials—and officials with many utilities seeking to build long-haul power lines—also say FERC must be given more authority over grid expansion and cost allocation because states too often block needed transmission projects due to opposition from affected landowners or ratepayer groups who contend they will get little benefit from new lines.

Sources said lobbyists for Atlanta-based Southern Co. were primarily responsible for drafting the letter, and documents obtained by The Energy Dail y suggest other lobbyists are also trying to round up industry support for the letter to Reid and McConnell.

A spokesman for Southern Thursday denied his company was leading industry efforts on the letter, saying other utilities were also working on the initiative.

The documents show Southern is on a list of 23 utilities that, as of Tuesday, were “definite” supporters of the draft letter. The documents also indicate that various lobbyists had been assigned to reach out to more than 20 other utilities and energy industry groups labeled “possible” supporters.

While there was no confirmation from any of the utilities involved that they were, in fact, planning to sign the draft letter, the documents show these utilities as “definite” supporters of the letter along with Southern: Arizona Public Service; Alliant Energy; Ameren; Chelan Public Utility District; Consolidated Edison; CMS Energy; DTE Energy; Imperial Irrigation District; Indianapolis Power & Light Co.; JEA, the municipal utility for Jacksonville, Fla.; MEAG Power, a public power supplier in Georgia; Northeast Utilities; the Orlando Utilities Commission; Platte River Power Authority; PPL; Progress Energy; PSEG; Salt River Project; Santee Cooper; Seattle City Light; Snohomish Public Utility District; and the municipal utility for Tacoma, Wash.

Several of those utilities already have expressed concern publicly about the Obama administration’s plan to broadly spread the costs of “national interest” power lines, particularly lines to bring power from burgeoning wind farms in the Midwest to the East Coast.

Utilities and governors in the Northeast have suggested it would be cheaper and more economically beneficial to their region to develop nearby renewable energy resources—such as offshore wind—rather than have their ratepayers effectively subsidize renewables development in the Midwest.

Many utilities and state officials in the Southeast, Northwest and West are more generally leery of giving FERC authority over their transmission expansion priorities, and say existing regional planning groups will do a better job of determining how best to grow their grids.

The draft letter voices many of the same sentiments.

“With respect to transmission planning, we believe that it is critical to capitalize on existing open and transparent local and regional processes, rather than placing FERC in the role of national transmission planner,” the letter said.

“Local and regional planning processes take into account the needs of local and regional customers, the local economic impacts of alternatives, and local and regional circumstances that influence transmission plans.

“Thus,” the letter said, “we think the goals of [Senate transmission legislation] will be best served by deleting language that would allow FERC to approve or modify a submitted interconnection-wide transmission plan that may be inconsistent, or in conflict, with local or regional plans.”

On the cost allocation issue, the draft letter argued against allowing FERC to broadly spread transmission costs in a way that would result in national policy that would be “biased toward building remote generation sources connected to population centers with long, multi-state transmission lines.”

While saying utilities generally supported the development of renewable resources, the letter contended that some regions would cut costs and boost economic development by pursuing energy efficiency improvements or developing local renewable resources, “such as on-shore and offshore wind closer to the load centers of the East Coast.”

The letter suggested that allowing FERC to broadly “socialize” transmission costs would distort price signals to the market and unfairly subsidize developers of remote renewable energy facilities.

“If developers and potential customers of these [remote renewable] resources don’t have to pay the costs of transmission associated with their decisions, the price signal is lost and distant resources will have an unwarranted price advantage over local alternatives, including conservation investments or distributed renewable resources,” the letter said.

And in a clear reference to keeping Corker’s provisions in the bill, the letter added: “Absent specific language [in the bill] on cost allocation, broad proclamations that ‘everyone’ benefits from any new transmission investment will create unfair market advantages and will lead to the imposition of high transmission costs on consumers who may experience no tangible benefits.”