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There Oughtta Be a Law to Fix the Grid—and There Is!

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Federal policies to introduce more choice in electricity supplies, and competition from new technologies and companies, continue to evolve and improve. These reforms have greatly fostered the growth of renewable energy across the United States. And a court decision today will help ensure that they continue to do so.

Old oil-burning plant. Photo credit: S. Clemmer

Old oil-burning plant. Photo credit: S. Clemmer

What’s at stake?

Key to opening the generation business to new entrants is access to, and expansion of, the transmission system. The Federal Energy Regulatory Commission has beaten a court challenge to Order 1000, the agency’s most recent reform to transmission planning. Some key elements of Order 1000 are 1) permission to plan transmission to meet public policy requirements, such as cleaning up the carbon emissions from power plants; and 2) instructions to plan transmission with neighboring grids, which can be relevant for moving large amounts of wind power from windy states to population centers.

Below are some excerpts from the D.C. Circuit decision on Order 1000 released August 15.

There is a law!

“First, the Commission possesses greater authority over electricity transmission than it does over sales. Even though Federal Power Act Section 201(b) does ‘limit FERC’s sale jurisdiction to that at wholesale,’ there is no textual warrant for the suggestion that the Commission lacks jurisdiction over retail transmission.”

The jurisdiction over the electric industry makes great distinctions between retail and wholesale sales, but here the Court makes clear that transmission is not confused in the same way. This may have implications for some of the distributed generation and “smart grid” technology deployments beginning to blossom.

Isn’t this a monopoly? Not all the time

Another important area challenged in Order 1000 was the idea that existing utilities can maintain a monopoly over transmission through a “right of first refusal” over the efforts of new companies to build new transmission. The Court made reference to economics textbooks and competition to find that new suppliers can bring lower charges (aka rates) to transmission users than if there is no competition to build new lines.

“Petitioners contend that the relationship between rights of first refusal and rates is just attenuated. We disagree…Petitioners’ argument is unconvincing and certainly does not demonstrate that Section 206 unambiguously precludes the Commission’s assertion of authority…Section 206 is ambiguous, and the Commission reasonably concluded that inclusion of rights of first refusal in tariffs and agreements is a ‘practice…affecting [a] rate.’ The Commission therefore was authorized to regulate rights of first refusal to the extent it found their inclusion was unjust or unreasonable.”

Reform is NEEDED

The Court also recognized that transmission expansion has been discouraged and even blocked by the unreformed electric power industry. For renewable energy to meet 30% of our electricity supply, transmission has to grow.

“Prior to Order No. 1000, the deficiencies in transmission planning and cost allocation practices were well-understood and not based on guesswork, as petitioners claim. For example, the Commission addressed the dangers posed by inadequate planning in Order No. 888 when it encouraged transmission providers to form RTOs and ISOs. Growth in demand without growth in transmission investment led to the Commission’s adoption of the transmission planning reforms in Order No. 890.

“For example, industry economists at The Brattle Group ‘identified approximately 130 mostly conceptual and often overlapping planned transmission projects,’ with a total cost of over $180 billion, and concluded that ‘a large portion of these projects will not be built due to overlaps and deficiencies in transmission planning and cost allocation processes.’ …Under the circumstances, the Commission concluded that the threat to just and reasonable rates was acute.”

Hooray

Consumer interests and clean energy advocates are celebrating this win in the courts. UCS has supported the legal defense of Order 1000, and joined in a brief filed by Earthjustice and NRDC which was also signed by the Conservation Law Foundation, the Environmental Defense Fund and the American Wind Energy Association.

Posted in: Energy, Global Warming Tags: , , , , ,

About the author: Michael Jacobs is a senior energy analyst with expertise in electricity markets, transmission and renewables integration work. See Mike's full bio.

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  • Richard Solomon

    GOOD to read of some positive news in efforts to develop renewable sources of energy around the USA! I hope this will encourage local and regional utilities ‘to get on with it’ when it comes to this process.

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