‘No compelling reason not to’: Former FERC chairs, commissioners call for federal transmission overhaul

Source: By Catherine Morehouse, Utility Dive • Posted: Monday, February 1, 2021

Federal regulators must tackle interregional transmission planning in order to maximize the capacity of wind and solar power on the U.S. power grid, a bipartisan group of former Federal Energy Regulatory Commissioners and Chairs agreed last week.

Their consensus follows the release of a comprehensive report released from the nonprofit transmission advocacy group Americans for a Clean Energy Grid (ACEG) that calls for robust interregional planning in order to widen access to cheap renewable energy resources, as well as improve the overall resilience and reliability of the grid. The report calls for more than just a system upgrade — it asks for a comprehensive overhaul of the current utility-by-utility piecemeal transmission buildout.

“There is no climate plan that is serious if it does not envision a significant interregional transmission upgrade to the grid that we have today.”

Nine former FERC bipartisan commissioners and chairs agreed during a webinar hosted by ACEG Wednesday that now is as good a time as any to make such a change. Costs for solar and wind are at record lows, and the Biden administration is calling for 100% clean electricity in the U.S. by 2035. Most stakeholders agree that goal is not possible without significant transmission reform.

“There is no climate plan that is serious if it does not envision a significant interregional transmission upgrade to the grid that we have today,” said Pat Wood III, who was FERC chair from 2001-2005, during the webinar. “And I think it’s imperative for FERC to lead on this.” Wood leads Hunt Energy Network, a load management platform for distributed generation.

“I think it’s very timely to take stock right now of where we are,” said former FERC Chair James Hoecker, who served from 1997-2001. “It seems to me that, at best, we’re maybe on the 50 yard line. There’s an awful lot left to do. The electric power grid definitely needs to grow, [and] it needs to grow at the interregional, inter-market level.” Hoecker is now senior counsel & energy strategist at Husch Blackwell.

“There’s no compelling reason not to do this,” said Nora Mead Brownell, FERC commissioner from 2001-2006. “It is in the national interest.” Brownell is on the board of a distributed solar company and is the principal and founder of Espy Energy Solutions.

Though there is broad consensus that transmission overhaul needs to change, there is some difference in opinion on how that should happen. Some say such a process should not be limited to the FERC “technocratic” process. And utilities argue that some ideas — such as introducing more competition into the process and reducing their roles as the main transmission owners — should be dismissed.

The need for interregional planning

Transmission infrastructure was originally built in order to connect major urban centers to centralized power plants built near cities. But wind and solar power — the fastest growing resource additions in the U.S. — are inherently more distributed and tend to be sited in more rural areas where there is more land.

There were 734 GW of new resources stuck in interconnection queues at the end of 2019 — almost 90% of which were wind, solar or energy storage, according to an ACEG study from earlier this month.

“There’s too much emphasis on competition just for the sake of competition.”

The current transmission process relies heavily on individual investor-owned utility projects rather than competitive bidding. Only 3% of U.S. transmission investments were considered “competitive” between 2013 and 2017, according to a 2019 Brattle report — and many believe competitive bidding is the most effective way to plan transmission.

Utilities are most opposed to this, and argue that “elements of competition” already exist in the current process.

Get electric utility news like this in your inbox daily. Subscribe to Utility Dive:

“There’s too much emphasis on competition just for the sake of competition,” said Phil Moeller, former FERC commissioner, who now serves as executive vice president of the Edison Electric Institute. He added that he appreciated many elements of the report, including an emphasis on ensuring a “robust system” is in place for future load shifts, policy changes and other factors that cause the power sector to evolve accordingly.

The most recent effort to expand competition for transmission projects came from FERC in 2011 under Chair Jon Wellinghoff. Order 1000 attempts to regionalize the planning process among utilities, and align that planning with public policy but the order falls short of requiring such planning, according to the ACEG report.

“I certainly agree … that Order 1000, I think, has fallen short on its vision. Certainly short on my vision of it, and probably short on … the rest of us who voted on it.”

“FERC should go beyond the Order 1000 requirement that regions simply ‘consider’ public policy, and require that they incorporate it into a holistic assessment of transmission needs,” the report reads.

“I certainly agree … that Order 1000, I think, has fallen short on its vision,” said Wellinghoff during the webinar. “Certainly short on my vision of it, and probably short on … the rest of us who voted on it. There’s a lot more I think that we can do there.”

Wellinghoff, currently CEO of GridPolicy, also emphasized that competition should be central to any new order on transmission.

“When we do look at expanding and reforming these orders … we need to get more competition in the system,” he said.

FERC’s role

ACEG’s paper recommended the commission consider reducing or eliminating a transmission owner’s ROE in instances where there are planning deficiencies. And it advocates for FERC to go farther as well, pushing for the commission to open a section 206 proceeding, finding that current tariffs are unjust and unreasonable, and new transmission planning and guidelines should be implemented.

“Reforms to ensure that regional and interregional planning processes better assess future needs, evaluate a full range of solutions, and focus on increasing cost effectiveness of new infrastructure for customers are well within the Commission’s statutory authority, and its mandate to identify and serve the interests of electricity consumers,” the report said.

“There’s little question that FERC has the authority to push harder, with respect to interregional planning and cost allocation. And clearly that’s needed.”r

Commissioners on Wednesday agreed FERC has “ample” authority when it comes to transmission planning, something that has become even more clear after lawsuits questioning whether Order 1000 went too far were struck down by the courts.

“I think at the time [of Order 1000] FERC was concerned about whether it had the authority to be more prescriptive, with respect to inter regional transmission projects,” said former Chairman Norman Bay, who served from 2015 to 2017. “But I think, given the way in which Order 1000 has been upheld in court, there’s little question that FERC has the authority to push harder, with respect to interregional planning and cost allocation. And clearly that’s needed.” Bay serves as the head of the energy regulatory and enforcement group of the law firm Willkie Farr & Gallagher.

But one panelist argued that the planning process should be rethought altogether, making it less of a “technocratic exercise” and more of a collaborative stakeholder process.

Our country’s current decarbonization goals and transmission needs take planning “beyond an exercise in engineering to one that has to embrace other stakeholders, and even other industries, much more intensively,” said Peter Fox-Penner, founder and director of the Boston University Institute for Sustainable Energy.

“It must be an exercise that integrates transmission planning into the national imperative to decarbonize the energy system,” he said. “And that that’s an important challenge that I think requires processes and interactions and analytic exercises that engage stakeholders differently, while maintaining the fidelity of the FERC’s jurisdiction and its authority.”

Transmission planning under Biden’s FERC

The current FERC has a clear appetite for transmission reform.

Chair Richard Glick, named head of the agency by President Joe Biden last week, has said transmission reform would be a major priority for him. Commissioner Neil Chatterjee also said this week that ensuring the commission has the transmission structure in place is “priority one” for him. Coupled with Commissioner Allison Clements, a recent Democratic appointee, the commission is in a good position to act, said Curt Hébert, a former FERC chair, who described Clements as “a wealth of talent.”

“I think you’re going to see them move forward,” said Hébert. “They understand there’s a challenge created by renewables.”

Whether the commissioners agree on how to approach reform remains to be seen. One area that FERC has power over is how much return on equity (ROE) a transmission owner can earn.

Chatterjee during his time as chair pushed to incentivize transmission projects based on the benefits that project would provide to customers. Glick at the time argued that although he agreed with the premise, he disagreed with the execution.

“Incentives must actually incentivize something. A payment that does not incentivize anything is a handout, not an incentive,” he wrote in his partial dissent. Further, he pointed to comments filed about the broader benefits transmission can provide, and expressed his concern that issues such as regional planning were not receiving “adequate attention.”

“Attempting to use the current transmission system to access those resources will generate enormous congestion costs, significantly increasing the cost of delivered power. So too will a piece-meal approach to expanding the transmission grid that does not adequately consider the fundamentals underlying the need for additional transmission,” he wrote.