Released June 13, 2011 | DENVER, COLORADO
en
Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The U.S. electric transmission system is broken, but federal regulators are poised to begin fixing it in the next few weeks, a former chairman of the Federal Energy Regulatory Commission (FERC) (Washington, D.C.) said at an energy-industry conference last week in Denver.
"When the electric system changes, the grid needs to change too, and that hasn't happened," said Joseph Kelliher, the executive vice president for federal regulatory affairs at NextEra Energy Incorporated (NYSE:NEE) (Juno Beach, Florida), to about 100 attendees at KEMA's fourth annual "Utility of the Future Leadership Forum" on June 7. "We need a grid that facilitates development of clean energy resources, and we don't have that now."
From 2005 to 2009, Kelliher was chairman of FERC, the federal agency that regulates interstate transmission of electricity and natural gas. FERC is an independent branch of the U.S. Department of Energy (DoE) (Washington, D.C.). Kelliher said his former employer will take a significant step to fixing the broken interstate electric transmission system in the next few weeks, when it votes on a Notice of Proposed Rulemaking (NOPR) on transmission planning and cost-allocation principles.
"Federal transmission policy may change more in the next 18 months than it has in the previous 75 years," Kelliher said last Tuesday. "Fixing the regulation of interstate transmission holds to key to fulfilling the potential of clean energy resources."
A FERC spokesperson could not say exactly when the commission was scheduled to vote on the NOPR.
Kelliher said the NOPR is one key to removing the obstacles that impede the construction of interstate transmission lines. He noted that large interstate gas pipeline projects typically receive regulatory approval in months, but interstate electric transmission projects take years, and in some extreme cases more than a decade, to gain regulatory approval. That's because current regulation gives each affected state and local authority the ability to reject the portion of an interstate transmission project that passes through their jurisdiction. Opposition from a single county or state has led to the delay or termination of numerous electric transmission projects. Inability to secure transmission access has slowed development of renewable electricity projects.
"We will never have an effective national transmission policy if we continue to allow state and local agencies to veto interstate projects that create broad regional benefits," Kelliher told Industrial Info after the conference. "We know many projects have been abandoned because of local opposition. What we don't know is how many projects are never even proposed because the owners don't think they could obtain all the necessary local regulatory approvals."
Kelliher said FERC has taken a "huge" amount of industry comments since last June, when the NOPR was officially announced. The draft rule is said to be several hundred pages in length.
In the NOPR, FERC sought comments on its proposal to require state and regional transmission planners to take into account needs driven by public policy requirements established by state or federal laws or regulations. The FERC draft rule also would require transmission providers to establish a closer link between cost allocation and regional transmission planning by identifying and establishing cost allocation methods for beneficiaries of new transmission facilities.
Too often a proposed generation project is scuttled because regional transmission organizations require it to bear the full cost of building or expanding a transmission line to connect the generator to the grid. This is the case even though other parties may receive indirect benefits from a proposed line, often in the form of added reliability.
FERC's NOPR also would require adjacent transmission planning regions to improve their coordination with respect to facilities that are proposed for neighboring regions, so that the public interest is better served than if separate interregional facilities were built. The agency also seeks to "level the playing field" by limiting the advantages enjoyed by incumbent owners of transmission facilities.
Flaws in the transmission planning and cost-allocation processes have sharply limited investment in the utility industry's transmission and generation assets. As surplus generation and transmission capacity have dried up, each state and local agency has sought to maximize its own advantage, often at the expense of neighboring jurisdictions. As Kelliher sees it, institutional problems have made a bad situation worse.
The former FERC chairman cautioned that the upcoming vote on transmission planning and cost allocation will solve only part of the nation's transmission problems. A separate but related issue concerns FERC's ability to overrule state authorities and mandate transmission projects in particular areas to maintain a robust national transmission system. Congress gave FERC this authority in a 2005 law, but the agency suffered a reversal in a federal court when it tried to exercise that authority. Kelliher noted that FERC's upcoming vote on transmission planning and cost allocation will not address interstate transmission siting issues. That will have to wait for another day.
What makes Kelliher particularly optimistic about the scheduled FERC vote is that it doesn't require any action on the part of Congress or the Obama administration. He noted that one of the most significant changes in federal energy policy, the Energy Policy Act of 1992, occurred during a period of divided government in Washington, D.C. "In fact, it is precisely when Congress and the White House have been unable to agree that FERC has been able to make significant changes to the nation's electricity policy," Kelliher told the KEMA conference attendees.
Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. IIR's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
"When the electric system changes, the grid needs to change too, and that hasn't happened," said Joseph Kelliher, the executive vice president for federal regulatory affairs at NextEra Energy Incorporated (NYSE:NEE) (Juno Beach, Florida), to about 100 attendees at KEMA's fourth annual "Utility of the Future Leadership Forum" on June 7. "We need a grid that facilitates development of clean energy resources, and we don't have that now."
From 2005 to 2009, Kelliher was chairman of FERC, the federal agency that regulates interstate transmission of electricity and natural gas. FERC is an independent branch of the U.S. Department of Energy (DoE) (Washington, D.C.). Kelliher said his former employer will take a significant step to fixing the broken interstate electric transmission system in the next few weeks, when it votes on a Notice of Proposed Rulemaking (NOPR) on transmission planning and cost-allocation principles.
"Federal transmission policy may change more in the next 18 months than it has in the previous 75 years," Kelliher said last Tuesday. "Fixing the regulation of interstate transmission holds to key to fulfilling the potential of clean energy resources."
A FERC spokesperson could not say exactly when the commission was scheduled to vote on the NOPR.
Kelliher said the NOPR is one key to removing the obstacles that impede the construction of interstate transmission lines. He noted that large interstate gas pipeline projects typically receive regulatory approval in months, but interstate electric transmission projects take years, and in some extreme cases more than a decade, to gain regulatory approval. That's because current regulation gives each affected state and local authority the ability to reject the portion of an interstate transmission project that passes through their jurisdiction. Opposition from a single county or state has led to the delay or termination of numerous electric transmission projects. Inability to secure transmission access has slowed development of renewable electricity projects.
"We will never have an effective national transmission policy if we continue to allow state and local agencies to veto interstate projects that create broad regional benefits," Kelliher told Industrial Info after the conference. "We know many projects have been abandoned because of local opposition. What we don't know is how many projects are never even proposed because the owners don't think they could obtain all the necessary local regulatory approvals."
Kelliher said FERC has taken a "huge" amount of industry comments since last June, when the NOPR was officially announced. The draft rule is said to be several hundred pages in length.
In the NOPR, FERC sought comments on its proposal to require state and regional transmission planners to take into account needs driven by public policy requirements established by state or federal laws or regulations. The FERC draft rule also would require transmission providers to establish a closer link between cost allocation and regional transmission planning by identifying and establishing cost allocation methods for beneficiaries of new transmission facilities.
Too often a proposed generation project is scuttled because regional transmission organizations require it to bear the full cost of building or expanding a transmission line to connect the generator to the grid. This is the case even though other parties may receive indirect benefits from a proposed line, often in the form of added reliability.
FERC's NOPR also would require adjacent transmission planning regions to improve their coordination with respect to facilities that are proposed for neighboring regions, so that the public interest is better served than if separate interregional facilities were built. The agency also seeks to "level the playing field" by limiting the advantages enjoyed by incumbent owners of transmission facilities.
Flaws in the transmission planning and cost-allocation processes have sharply limited investment in the utility industry's transmission and generation assets. As surplus generation and transmission capacity have dried up, each state and local agency has sought to maximize its own advantage, often at the expense of neighboring jurisdictions. As Kelliher sees it, institutional problems have made a bad situation worse.
The former FERC chairman cautioned that the upcoming vote on transmission planning and cost allocation will solve only part of the nation's transmission problems. A separate but related issue concerns FERC's ability to overrule state authorities and mandate transmission projects in particular areas to maintain a robust national transmission system. Congress gave FERC this authority in a 2005 law, but the agency suffered a reversal in a federal court when it tried to exercise that authority. Kelliher noted that FERC's upcoming vote on transmission planning and cost allocation will not address interstate transmission siting issues. That will have to wait for another day.
What makes Kelliher particularly optimistic about the scheduled FERC vote is that it doesn't require any action on the part of Congress or the Obama administration. He noted that one of the most significant changes in federal energy policy, the Energy Policy Act of 1992, occurred during a period of divided government in Washington, D.C. "In fact, it is precisely when Congress and the White House have been unable to agree that FERC has been able to make significant changes to the nation's electricity policy," Kelliher told the KEMA conference attendees.
Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. IIR's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
