'Very real' tension between grid operators, state regulators on display in Ark. siting case

For almost a year, a utility's plans to build a 50-mile transmission line that would cut a 150-foot-wide swath through the scenic Ozark Mountains has roiled northwest Arkansas.

But the dispute over the siting of the $123 million high-voltage line, requested by the region's grid operator to bolster reliability and avoid potential outages, has become supercharged in the weeks since an Arkansas judge selected a route that cuts through neighboring Missouri.

The judge's order is final in the coming days unless the Arkansas Public Service Commission intervenes. That would put the utility developing the project, Southwestern Electric Power Co. (Swepco), in the awkward position of asking regulators in Missouri -- a state where it doesn't operate -- to approve a power line that starts and ends in Arkansas.

Like any transmission siting dispute, the case pits a utility against angry landowners, the need to bolster the region's bulk power system against the aesthetic and environmental consequences of clearing trees and erecting giant steel support towers.

But this battle also taps into a tension that can exist between the regional grid operator, in this case the Southwest Power Pool, and state regulators.


"That tension is very real, in part because of the institutional purposes" of state utility commissions and regional transmission organizations, said Jim Rossi, a law professor at Vanderbilt University. "It also arises because of the legal structure."

While utility commissions focus more closely on electric rates and reliability within a state's borders, grid operators are looking at how electricity markets work within multistate regions.

"Regional concerns will sometimes align with those state concerns, but often they're broader," he said.

There has been fierce political backlash since the Arkansas judge's Jan. 17 order choosing the transmission route through southern Missouri.

Two bills have already been filed in the Missouri Legislature specifically aimed at stopping the project, including one that would block the use of eminent domain to condemn needed right of way.

Although the project was conceived seven years ago in the name of bolstering the grid in the entire Ozarks region, not everyone views it that way.

"With no Missouri interest in this line, it simply doesn't make sense to run the line through our state," said state Sen. David Sater, a Republican from tiny Cassville, the county seat of rural Barry County.

Officials in neighboring McDonald County, the other Missouri county affected, were more blunt.

"It is our desire to be good neighbors respecting Arkansas' sovereignty," the county commission said in a letter filed with the Arkansas PSC last week. "We ask -- no we demand -- that same level of cooperation and respect be given to Missouri and its citizens."

Challenging terrain for transmission

The 345-kilovolt transmission line was ordered by the Southwest Power Pool to bolster reliability of the grid in southern Missouri and northwest Arkansas.

Need for the project was identified through a pair of 2007 studies, including a review of SPP-wide transmission needs in the coming decade. Both studies pointed to possible overloading and voltage violations on two existing transmission lines as a result of increased electricity demand.

Based on the analysis, Southwest Power Pool in 2008 issued notice to Swepco, a unit of utility giant American Electric Power Co., to construct the line.

An engineering firm hired to develop potential routes noted in testimony that siting the line would be a particular challenge in the growing northwest Arkansas area, characterized by an increasing population and related development combined with rugged terrain and various national parks and cultural landmarks.

Ultimately, a half-dozen possible routes were proposed by Swepco, including a preferred route contained within the state -- the route also favored by the Arkansas PSC staff. Route 109, the path chosen by the judge last month, was ranked fifth of the six options by the utility.

Part of the reason it scored low in Swepco's analysis was that the utility recognized the regulatory barriers of the route, which jogs north then travels 25 miles through Missouri along the state border before dipping back into Arkansas.

"Routes outside of Arkansas create considerable regulatory complications," the utility said in testimony filed with the Arkansas PSC last year.

Geography and politics weren't the only obstacles.

Swepco's request also ran into forceful opposition from Save the Ozarks, a group of residents concerned about the project's impact on the scenic beauty, culture and environment in a prized corner of the Natural State -- a mountainous and densely wooded area dotted with caves and springs and home to several endangered or threatened plants and animals.

Doug Stowe, a member of the group and a woodworker who moved to Eureka Springs, Ark., in 1975, said testimony during evidentiary hearings on the project last year demonstrated the transmission line is no longer needed because of a slowdown in electricity demand growth following the recession and a separate reliability project completed by Entergy Corp. He also believes the project is being pursued not to benefit electric reliability in the immediate area but as part of a larger plan to move bulk power through the state.

'Only reasonable route'

Arkansas Administrative Law Judge Connie Griffin noted the Swepco case had drawn "possibly the largest number [of public comments] ever received in a siting docket." In the end, she granted the utility authority to construct the project and said the path through Missouri was "the only reasonable route."

Griffin's ruling will be final unless the Arkansas PSC steps in and orders changes within 30 days -- a deadline that's just days away. And it authorizes construction of only the Arkansas portion of the project.

Swepco must also get regulatory approval in Missouri, a process the utility hasn't yet begun.

Peter Main, a Swepco spokesman, said the utility didn't seek concurrent approval from Missouri regulators because its preferred route for the transmission line was located entirely within Arkansas.

Natelle Dietrich, director of utility operations for the Missouri Public Service Commission, on Tuesday said she wasn't aware of any discussions so far between Swepco and the commission or its staff.

Based on a recent transmission line siting case in Missouri, Dietrich said the state PSC's criteria for approving such projects include a demonstrated need for the service, economically feasibility, and a qualified and financially able applicant. And one measure almost certain to be a battleground: The project must promote public interest.

And the clock is ticking. Not clearly addressed yet is whether Swepco can meet a mid-2016 deadline for completing the project to avoid the potential for overloading transmission lines and local outages.

Main said the utility is working to meet that deadline even though there's also no statutory deadline for the Missouri PSC to act on an application for a certificate to build a transmission line, and such cases can last for a year or longer.

No FERC authority

About the only certainty moving forward is that Save the Ozarks will appeal the judge's ruling unless the Arkansas PSC takes the unexpected step of rejecting the project outright in the coming days.

Beyond that, there's been only speculation on how the brewing border war over the transmission line unfolds.

While rare, state battles over transmission projects can be ugly.

In one 2007 case, Arizona regulators nixed a transmission line that would have transported electricity from a hub near the Palo Verde nuclear plant to Southern California, calling the project a "230-mile extension cord." It led to debate in Washington over whether the federal government should assert greater control over the approval of high-voltage lines.

In the Arkansas case, while Swepco may have contractual obligations to the Southwest Power Pool, the grid operator has no legal authority to require Missouri regulators to approve the line, Rossi said.

Nor does the Federal Energy Regulatory Commission have power to require it to be built.

"FERC has limited legal authority to step in and pre-empt the states," Rossi said. Recent court rulings have further limited that authority. And the project is not within an area where federal regulators have backstop siting authority.

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