A group of Pacific Northwest and California power companies has joined utilities from the Southeast and other regions to oppose widespread cost-sharing for transmission expansion to carry wind and solar power to distant markets.
A letter from 14 power companies and organizations in the Northwest, sent Feb. 19 to Senate Majority Leader Sen. Harry Reid (D-Nev.) and Minority Leader Sen. Mitch McConnell (R-Ky.), calls for developers and customers of new renewable power to pay for transmission connecting their projects to customers.
"A policy that assigns costs of new transmission facilities to the users of new transmission facilities will properly allocate the costs," according to the letter, whose signers include the Oregon Municipal Electric Utilities Association, the Sacramento Municipal Utility District, and the Washington Public Utility Districts Association in Washington state.
The letter is identical in large part to one the two Senate leaders received Feb. 9 from 27 companies, written by Bruce Edelston, president of the Energy Policy Group in Atlanta, on behalf of Southern Co. and others on the letter.
Yesterday, the Industrial Energy Consumers of America, representing U.S. manufacturing interests, weighed in with a similar argument in a letter to Reid and McConnell, arguing that transmission projects should be planned and paid for locally. "[W]e do not think it is appropriate that some portions of the country would subsidize other regions," it said.
The new lobbying campaign centers on S. 1462, energy legislation that passed the Senate Energy and Natural Resources Committee last June with bipartisan support. It included new policies for transmission planning, siting and cost allocation.
A tangled power fight heads toward the Senate floor
Christine Tezak, a financial analyst with Robert W. Baird and Co., said the flurry of letter writing suggests an expectation that the transmission issue could be headed for the Senate floor soon. Sen. John Kerry (D-Mass.) has indicated that transmission policy would be part of the climate legislation he hopes to introduce in several weeks. "If we want to get the economy moving, it seems to me, you have to build out an American grid," Kerry said this week. "We have a gaping hole in the middle of our nation, which prohibits investment."
"There is enough movement going on Capitol Hill that everybody is reinforcing their positions," Tezak said.
Other industry participants say the letters appeared to have been intended as a warning shot toward the Federal Energy Regulatory Commission not to push too hard on new transmission policy.
DOE's National Renewable Energy Laboratory in Golden, Colo., said last month that wind generation could provide 20 or 30 percent of generation capacity in the Eastern Interconnection by 2024, but only with a major transmission build-out. Hitting a 20 percent target with no offshore wind would require 10 big direct-current (DC) lines running between the Great Plains and the East Coast, spanning nearly 22,700 miles. Alternatively, if wind power is also developed aggressively offshore and in the Great Lakes, six long-haul DC lines would be needed, covering 17,000 miles.
Renewable energy advocates argue that the cost of such lines should be broadly borne. "The economic, environmental and security benefits of renewable energy are widely shared, so the cost of new transmission for renewable energy should be widely shared as well," the Energy Future Coalition says.
Before S. 1462 made it out of the Senate Energy committee, Sen. Bob Corker (R-Tenn.) surprised committee colleagues -- and renewable energy partisans -- with a cost allocation amendment that passed in committee. It would require FERC to allocate costs of "high-priority national transmission" projects regions only if costs "are reasonably proportionate to measurable economic and reliability benefits."
The WIRES coalition, a lobbying group representing power companies that favor grid expansion, has called Corker's amendment "impractical and a detriment to investment." Critics of the measure say it would lead to drawn-out court cases.
"It is certainly WIRES' view that that [Corker's amendment] represents a reduction in FERC's discretion over regional transmission, and that would be a mistake," said WIRES counsel James Hoecker, a former FERC chairman. WIRES sent a letter to senators in November, arguing that Corker's amendment could make it impossible to build needed new high-voltage transmission facilities with broad regional benefits. Sixty energy companies and renewable energy and environmental advocacy organizations signed it.
2 regions try to overpower FERC
The letters sent this month by Southern and its allies, and the Northwest companies, defend Corker's position, and argue that regional energy policies should determine where and when new transmission is built.
Edelston, a longtime legislative strategist for Southern, said the prospect of energy legislation in the Senate motivated his letter signers. "A lot of companies are really concerned about the transmission cost allocation and the planning issue, and are getting their thoughts in," he said.
The first of the two letters said, "[W]hile our organizations strongly support the development of renewable and other clean energy course, we believe that national policy should not be biased toward building remote generation resources connected to population centers with long, multi-state transmission lines."
Some regions will find better ways of meeting clean energy goals than importing distant wind power, the letter said, including demand-side management and efficiency gains, more nuclear power, local wind generation or rooftop solar. Its signers include Southern Co., DTE Energy Co., Ameren Corp., Entergy Corp., Northeast Utilities, Progress Energy and the Salt River Project.
The letter also seeks to curb FERC's future role, saying that transmission planning should remain regional, "rather than placing FERC in the role of national transmission planner."
Jessica Matlock, director of government relations for the Snohomish County Public Utility District in Washington and one of the authors of the Feb. 19 letter, said companies in her region were asked to sign the earlier letter, but declined. "We had similar issues, but we wanted to put in a Northwest perspective."
"We are very proud of our renewable energy and our energy efficiency [programs], and we wanted more of that flavor. If you want to bring on renewable energy, you should be looking at your own backyard first," she said. The Northwest letter does not challenge FERC's planning role.
Power producers can play NIMBY, too
The broader approach to transmission planning and cost policies is also under attack from governors from the Northeast and some Western states. New England governors and industry executives want to develop their own wind resources offshore to create jobs. The Tennessee Valley Authority, based in Corker's home state, has the same goal.
Former FERC Chairman Joseph Kelliher, now an executive with Florida-based FPL Group, told a Washington conference last week that self-interest is much in play in the dispute. "Some incumbent generators ... would prefer not to see low-cost wind from the Midwest" competing in their backyard, he said. The Corker amendment was designed, in his view, to make it harder for FERC to spread costs of new transmission widely.
Michigan-based ITC Holdings, an independent transmission company whose proposal to run lines to Great Plains wind farms has been stymied, also contends that some utilities opposing broad cost allocation are looking after their parochial needs. New transmission "is not in their best interests because it opens their market to increase competitive pressures," ITC said in a filing to FERC.
FERC Chairman Jon Wellinghoff has sought a middle ground. "I agree that utilities, state regulators and regional planners should have primary responsibility for designing the grid in their regions," Wellinghoff said in a December letter to Arizona Gov. Janice Brewer (R).
But requiring wind and solar developers, or utilities in renewable energy regions, to bear all the costs of new transmission will make it less likely that the new generation gets built, he said. FERC needs regulatory flexibility to balance a region's needs while supporting renewable energy expansion, he added.
Correction: The bill that passed the Senate Energy and Natural Resources Committee last June is S. 1462. An earlier version gave an incorrect bill number.