By Brian Wingfield
July 21 (Bloomberg) — The Federal Energy Regulatory Commission approved a rule designed to lure new investors in U.S. high-voltage power lines by establishing requirements for planning and financing projects.
“The final rule will profoundly affect the development of our nation’s transmission system in the coming decades,” FERC Chairman Jon Wellinghoff said today at a commission meeting in Washington.
The agency voted 5-0 with Commissioner Philip Moeller offering a partial dissent. The rule didn’t say whether a utility can thwart competitors “by refusing to upgrade” its power-line system, Moeller said in a statement.
The regulation, proposed in June 2010, is intended to help determine planning for high-voltage transmission lines as additional renewable-energy resources such as wind and solar power are connected to the nation’s electric grid.
Investment in 100 major transmission projects may reach as much as $61.2 billion within the next decade, according to the Edison Electric Institute.
FERC’s rule requires utilities to participate in regional planning that allocates costs for new lines to those who benefit, and neighboring regions must coordinate to ensure that their efforts are cost-effective, according to an agency fact sheet.
“Rules that provide certainty and clarity up-front on a regional basis will engender much needed investment in transmission,” said Commissioner Marc Spitzer.
Regional Flexibility
The rule doesn’t specifically define “region,” Wellinghoff told reporters after the meeting. In some areas of the U.S., such as the Mid-Atlantic and Midwest, regions are already defined by existing grid operators. In other areas, including the Southeast, two or more utilities “can form a region as they choose,” he said.
Regional plans also must consider state mandates to promote renewable energy, according to FERC.
“This rule will facilitate the development of utility- scale solar power in the Southwest,” Rhone Resch, chief executive officer of the Solar Energy Industries Association, said today in a statement.
Today’s rule gives independent developers an opportunity to build new lines because it curtails utilities’ first right to construct new transmission, Wellinghoff said.
ITC Holdings, AEP
Independent developers include ITC Holdings Corp. of Novi, Michigan, and closely held LS Power Group of New York. American Electric Power Co. of Columbus, Ohio, and Ameren Corp. of St. Louis, which have transmission-building subsidiaries, also may benefit from the provision.
FERC’s limit on “right of first refusal” generally applies to regional projects, according to the commission fact sheet. It doesn’t include upgrades to existing power lines.
Utilities “have a responsibility” to build new transmission lines that are needed to ensure reliability in their service territories, David Owens, executive vice president for business operations at the Edison Electric Institute in Washington, said in a phone interview yesterday.
Power companies including Southern Co. of Atlanta and DTE Energy Co. of Detroit have been concerned that FERC’s rule would dump transmission costs on customers who don’t benefit.
“Those that receive no benefits should not be allocated costs,” Wellinghoff said today. The rule establishes principles for determining who pays for the lines that are part of regional plans to build them. Costs should be “roughly commensurate” with estimated benefits, he said.
Benefits Considered
“None of that tells us at this point what a benefit is,” Sue Sheridan, president and chief counsel of the Coalition For Fair Transmission Policy, a group that includes Southern and DTE, said in a phone interview today.
The costs of high-capacity power lines “that benefit the entire region need to be shared” and can form a strong “backbone” making electricity delivery in adjacent states more reliable and efficient, Nicholas Akins, American Electric’s president said in an interview at the National Association of Regulatory Utility Commissioners conference in Los Angeles yesterday.
A bipartisan group of lawmakers led by Senator Bob Corker, a Tennessee Republican, has sponsored a bill that would force FERC to measure the benefits of interstate power lines so that costs can be spread only among consumers served by the lines.
The bill would slow transmission investment in the U.S. because it would supersede rules that apply to projects that are already underway, said Joseph Kelliher, a former FERC chairman and executive vice president for federal regulatory affairs at NextEra Energy Inc. of Juno Beach, Florida.
“Every single one of those rules is subject to being overturned by the Corker bill,” he said in a phone interview yesterday.
