Released October 21, 2011 | SUGAR LAND
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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--"Difficult," "messy," and "uncertain" were three words used repeatedly by speakers during an industry web conference Thursday on the recently issued Order 1000 on electric transmission from the Federal Energy Regulatory Commission (FERC) (Washington, D.C.).
In adopting its 620-page Order 1000 this past July, FERC, an independent agency that is part of the U.S. Department of Energy (DoE) (Washington), sought to provide general guidelines to the U.S. Power Industry on planning for, and allocating the costs of, new interstate electric transmission projects. For more on the rule, see the July 28, 2011, article - Surge in Spending Could Follow FERC's Transmission Cost-Allocation Order.
There is wide agreement within the Power Industry that the U.S. interstate transmission system is broken. In the absence of a national electricity policy, states have gone their own way in enacting renewable portfolio standards (RPS) that have led to a significant increase in construction of new renewable generation projects. But many more renewable energy projects have not broken ground due to lack of available transmission capacity or the inability of regional transmission organizations (RTOs) to determine which parties should pay for what portion of proposed transmission projects.
Without clear legal guidance or an accepted industry standard on valuing and apportioning the costs and potential benefits of transmission projects, U.S. transmission project development has ground to a virtual standstill. Any hope that Order 1000 would quickly clear away longstanding impediments to transmission project development evaporated over the last three months as lawyers, engineers, and lobbyists combed through FERC's massive and momentous order.
"There have been decades of underinvestment in transmission," Nina Plaushin, vice president of federal affairs for ITC Holdings Corporation (NYSE:ITC) (Novi, Wisconsin) told the October 20 web conference. "Transmission investment has badly trailed the growth of generation and customer demand." ITC Holdings, the largest stand-alone transmission company in the U.S., has invested about $2 billion in transmission projects in recent years, and stands ready to invest another $3.9 billion in the near future, once the legal and policy roadmap becomes more settled, she said.
In July, when FERC issued Order 1000, Michael Goggin, manager of transmission policy for the American Wind Energy Association (AWEA) (Washington, D.C.), told Industrial Info there was a backlog of about 275,000 megawatts (MW) of wind power that was sitting in a queue, unable to move forward because of inadequate transmission capacity. "We would not expect all of those projects to go forward. But an upper range of what could reasonably expect to get built is 100,000 to 150,000 MW of new wind generation, according to the North American Electric Reliability Corporation (NERC) (Princeton, New Jersey)," he added. The NERC estimate cited by Goggin doesn't include non-wind resources like solar or gas-fired generation.
During Thursday's web conference, sponsored by TransmissionHub (Aurora, Colorado), Cynthia Marlette, a former general counsel at FERC, summed up the views of several speakers when she said, "We're in for a long haul in implementing Order 1000. This will be a long, hard fight" as FERC and interested parties work through nettlesome details associated with transmission planning and cost-allocation principles. Order 1000 did not address siting issues associated with interstate transmission projects, but some industry analysts expect the commission to tackle that issue soon.
Marlette, now affiliated with Patton Boggs LLP (Washington, D.C.), told the web conference it took about six years, from 1996 to 2002, for one of FERC's previous transmission orders, Order 888, to work its way through the courts, including the U.S. Supreme Court. Marlette represents a group of Western energy companies seeking to build about 30 transmission projects.
Several speakers said that, despite its 620 pages in length, FERC did not provide sufficient details and definitions in Order 1000. "This rule may fall under its own weight unless FERC gives the industry further guidance," said David B. Raskin, a partner at Steptoe & Johnson LLP (Washington, D.C.). Several speakers said FERC set out fuzzy principles regarding the conditions under which incumbent owners of transmission lines could refuse requests from other companies to use those existing lines to transmit electricity to third parties.
Plaushin acknowledged that transmission projects can be expensive investments, often exceeding $100 million. But she said transmission costs only account for about 7% of a customer's monthly electric bill, citing 2009 data from the U.S. Energy Information Administration (EIA), the statistical and analytic branch of the DoE. "Transmission projects often pay for themselves, and sometimes even save consumers money," she told the web conference. "Every time we put steel into the ground doesn't mean (electric) prices are going to go up."
None of the speakers at the web conference would hazard a guess as to how long it may take to fully litigate Order 1000, but there was consensus that litigation was virtually inevitable. "It typically takes at least two years before an appellate court will rule on any case involving FERC," said Steptoe & Johnson's Raskin. "It's often hard to get the courts to overrule FERC. But this order will be litigated because FERC was not acting under authority of Congress. And FERC did that because we have a dysfunctional Congress that can't, or won't enact a national energy policy."
Raskin's assessment of Congress was echoed by Sue Sheridan, a former Capitol Hill staffer who is now president and chief counsel of the Coalition for Fair Transmission Policy (CFTP) (Washington, D.C.).
Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info'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.
In adopting its 620-page Order 1000 this past July, FERC, an independent agency that is part of the U.S. Department of Energy (DoE) (Washington), sought to provide general guidelines to the U.S. Power Industry on planning for, and allocating the costs of, new interstate electric transmission projects. For more on the rule, see the July 28, 2011, article - Surge in Spending Could Follow FERC's Transmission Cost-Allocation Order.
There is wide agreement within the Power Industry that the U.S. interstate transmission system is broken. In the absence of a national electricity policy, states have gone their own way in enacting renewable portfolio standards (RPS) that have led to a significant increase in construction of new renewable generation projects. But many more renewable energy projects have not broken ground due to lack of available transmission capacity or the inability of regional transmission organizations (RTOs) to determine which parties should pay for what portion of proposed transmission projects.
Without clear legal guidance or an accepted industry standard on valuing and apportioning the costs and potential benefits of transmission projects, U.S. transmission project development has ground to a virtual standstill. Any hope that Order 1000 would quickly clear away longstanding impediments to transmission project development evaporated over the last three months as lawyers, engineers, and lobbyists combed through FERC's massive and momentous order.
"There have been decades of underinvestment in transmission," Nina Plaushin, vice president of federal affairs for ITC Holdings Corporation (NYSE:ITC) (Novi, Wisconsin) told the October 20 web conference. "Transmission investment has badly trailed the growth of generation and customer demand." ITC Holdings, the largest stand-alone transmission company in the U.S., has invested about $2 billion in transmission projects in recent years, and stands ready to invest another $3.9 billion in the near future, once the legal and policy roadmap becomes more settled, she said.
In July, when FERC issued Order 1000, Michael Goggin, manager of transmission policy for the American Wind Energy Association (AWEA) (Washington, D.C.), told Industrial Info there was a backlog of about 275,000 megawatts (MW) of wind power that was sitting in a queue, unable to move forward because of inadequate transmission capacity. "We would not expect all of those projects to go forward. But an upper range of what could reasonably expect to get built is 100,000 to 150,000 MW of new wind generation, according to the North American Electric Reliability Corporation (NERC) (Princeton, New Jersey)," he added. The NERC estimate cited by Goggin doesn't include non-wind resources like solar or gas-fired generation.
During Thursday's web conference, sponsored by TransmissionHub (Aurora, Colorado), Cynthia Marlette, a former general counsel at FERC, summed up the views of several speakers when she said, "We're in for a long haul in implementing Order 1000. This will be a long, hard fight" as FERC and interested parties work through nettlesome details associated with transmission planning and cost-allocation principles. Order 1000 did not address siting issues associated with interstate transmission projects, but some industry analysts expect the commission to tackle that issue soon.
Marlette, now affiliated with Patton Boggs LLP (Washington, D.C.), told the web conference it took about six years, from 1996 to 2002, for one of FERC's previous transmission orders, Order 888, to work its way through the courts, including the U.S. Supreme Court. Marlette represents a group of Western energy companies seeking to build about 30 transmission projects.
Several speakers said that, despite its 620 pages in length, FERC did not provide sufficient details and definitions in Order 1000. "This rule may fall under its own weight unless FERC gives the industry further guidance," said David B. Raskin, a partner at Steptoe & Johnson LLP (Washington, D.C.). Several speakers said FERC set out fuzzy principles regarding the conditions under which incumbent owners of transmission lines could refuse requests from other companies to use those existing lines to transmit electricity to third parties.
Plaushin acknowledged that transmission projects can be expensive investments, often exceeding $100 million. But she said transmission costs only account for about 7% of a customer's monthly electric bill, citing 2009 data from the U.S. Energy Information Administration (EIA), the statistical and analytic branch of the DoE. "Transmission projects often pay for themselves, and sometimes even save consumers money," she told the web conference. "Every time we put steel into the ground doesn't mean (electric) prices are going to go up."
None of the speakers at the web conference would hazard a guess as to how long it may take to fully litigate Order 1000, but there was consensus that litigation was virtually inevitable. "It typically takes at least two years before an appellate court will rule on any case involving FERC," said Steptoe & Johnson's Raskin. "It's often hard to get the courts to overrule FERC. But this order will be litigated because FERC was not acting under authority of Congress. And FERC did that because we have a dysfunctional Congress that can't, or won't enact a national energy policy."
Raskin's assessment of Congress was echoed by Sue Sheridan, a former Capitol Hill staffer who is now president and chief counsel of the Coalition for Fair Transmission Policy (CFTP) (Washington, D.C.).
Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info'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.
