How can federal and state regulators work together to improve the nation's electricity transmission? During today's OnPoint, Dave Raskin, a partner in the electric power practice at Steptoe & Johnson and the Tres Amigas transmission integration project's FERC counsel, explains how state and federal regulators are cooperating to increase the grid's flexibility. He also discusses the impact of a clean energy standard on the nation's transmission system.
Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Dave Raskin, partner in the Electric Power practice at Steptoe & Johnson and FERC counsel for the transmission integration project Tres Amigas. Dave, thanks for coming on the show.
Dave Raskin: Thank you for having me.
Monica Trauzzi: Dave, Tres Amigas is a project that would connect the three independent electricity grids in the U.S. Where does the project stands at this point?
Dave Raskin: Right now they're finishing up the engineering work and we are negotiating interconnection agreements with neighboring utilities. So the project is moving along as planned and we hope to have the interconnection agreements done later this summer and perhaps be able to commence construction later in the year or sometime next year at the latest.
Monica Trauzzi: OK, so you're negotiating agreements, how difficult is that? How much of a challenge is that with all the different state regulators?
Dave Raskin: Well, I would say it's less the state regulators than the fact that you're joining markets that have never been connected before. And so people have to take a hard look both at the reliability aspects of the deal and the economics. So it takes a long time to get done. It's something different and new and so you've got to educate people as you go, but we're doing quite well I think.
Monica Trauzzi: How does this project breakdown along FERC and state lines? I mean is this something that regulators -- going back to those regulators, are they jumping on board with it?
Dave Raskin: Well, FERC has definitely jumped on board. They've given us approvals that we need to go forward with the project. I think one of the interesting aspects of this deal is that it will connect Texas, which is independent from the interstate grid, with the Eastern and Western interconnections which are FERC jurisdictional. And Texas seems willing to do this, but they don't want to lose their status as an independent grid. And so we have to work through those issues with them in order to get the deal done.
Monica Trauzzi: Is there any reason why we shouldn't pursue this project?
Dave Raskin: I can't think of any. It's bringing markets together. It will allow prices that are now separate by hundreds of millions of dollars a year to come together, allow the market to be more efficient and it will also allow substantial amounts of renewable power to get onto the grid and go to different markets, make their output more valuable.
Monica Trauzzi: All right, renewable energy, it's the major thing that everyone's talking about right now when it comes to transmission. What are your concerns with a possible federal clean energy standard and how that could play into projects like this and transmission siting in the future?
Dave Raskin: Well, I think the issue with the clean energy standard is that the president has included natural gas within it and I think that unless you carve out a separate category for renewables, I think a lot of the coal will be displaced with natural gas based on economics. But it will force renewable suppliers to bring their costs down in order to compete. The prior version had a separate renewable standard that did not include nuclear and natural gas, so there are advantages to both approaches. But this seems to be the one that's politically doable.
Monica Trauzzi: Right and how can you do a clean energy standard without natural gas? I mean the numbers just won't add up.
Dave Raskin: I think that's exactly right.
Monica Trauzzi: To expand clean energy sources in the nation's electricity supply, what needs to be done in terms of transmission siting?
Dave Raskin: Well, I think there are three aspects of transmission that need to be dealt with. The first is planning. We need someone with responsibility to decide what needs to get built, to look at the transmission system as a national system rather than a local system and make choices. The second thing you need are rules for recovering the costs. FERC is trying to deal with those two aspects of this issue in a rulemaking that it should issue in the next few months. Siting is something that's very difficult right now because FERC doesn't have the authority as a federal regulator, nor does any other federal agency, to cite transmission lines. So you're trying to build an interstate grid in circumstances where individual states have authority to site or not to site the lines and it creates some tension between federal needs and state needs.
Monica Trauzzi: Are we putting the cart before the horse though in this situation where we're talking about possibly implementing a clean energy standard? Many states already have their own renewable portfolio standards, but we don't have the transmission in place to move all this energy around.
Dave Raskin: It's a very serious problem and I think if you talk to renewable power developers most of them would tell you that transmission is one of the most difficult issues they face. On the other hand, it's obviously doable. Texas has managed to figure out a way to build out their transmission grid and interconnect thousands of megawatts of wind. And California's doing the same thing. So where there's a will there's a way, it's a matter of getting people working together to expand the grid.
Monica Trauzzi: Are there legal obstacles that FERC faces when it comes to transmission siting?
Dave Raskin: Yes, FERC has very limited backstop authority and a decision by the Fourth Circuit last year limited that authority even further, pretty much undermining the statute. So FERC right now doesn't have the authority it needs to site new transmission and that issue has been in front of Congress for quite a while now and it's really a bellwether as to whether there's a consensus to build out the national transmission system.
Monica Trauzzi: Let's go back to Tres Amigas for a moment. How critical is the rare earths issue going to be when it comes to the success of a project like that? We're looking at China and their strong hold over rare earths. Is that something that's a concern for the project leaders on Tres Amigas?
Dave Raskin: No, I don't think so. I think that technology to build Tres Amigas and all the other aspects of this are doable with American technology and I don't think China will have any impact on it.
Monica Trauzzi: OK, we'll end it right there. Thank you for coming on the show, nice to see you.
Dave Raskin: Thank you very much.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
[End of Audio]