Transmission Hell

National Interest Electric Transmission Corrid...

National Interest Electric Transmission Corridor via Wikipedia

Do not touch the transmission line siting process!

That was the straight talking advice from Senator Jeff Bingaman (D-NM).  And since he is Senate Energy and Natural Resources Chairman his advice counts.  He addressed his comments to the US Department of Energy which recently proposed a workaround to its long stalled responsibility to facilitate national interest interstate electric transmission construction.   US DOE issued a Transmission Siting Narrative and a Transmission Outline seeking public comment.

US DOE has had nothing but bad luck since Congress gave it this responsibility under the Energy Policy Act of 2005.  The problem is Congress did not resolve any of the significant policy disputes that stand in the way of progress in addressing the nation’s electric transmission limitations.  What disputes?

  • Who’s On First?  The most sensitive political dispute is the long simmering conflict over state authority to site and approve transmission lines versus Federal authority and interests in assuring interstate commerce and energy security with a robust and efficient transmission grid. The practical result of this unresolved conflict is trying to build electric transmission is like root canal surgery without Novocain.
  • Fragmentation.  The ugly twin sister to the ‘who’s on first’ problem is the fragmented process and the endless opportunities to frustrate project approval even for transmission lines judged necessary.  Part of this is our fragmented North American transmission grid structure requiring duplicative process when you cross the grid boundaries.  This is like having to get a new drivers license in each state when you want to take a vacation cross country. And then there is NIMBY and the ability of virtually any self proclaimed environmental advocate to gain standing and thus the de facto authority to speak for the public interest—as that party interprets it.  Often multiple parties claim this right to speak for the public interest.  Usually, none of these interveners have an economic stake in the project.  They don’t care how much it cost or how long it takes.  In fact, delay is good because the real goal is often not building the project at all. The bottom line: It is almost and everywhere faster, cheaper and easier to build new power generation than to attempt to build electric transmission.
  • Congestion Pricing. Because transmission is difficult to site, permit and build, parts of the transmission grid are bottlenecked creating congestion.  The engineering solution to congestion is to build more transmission capacity, but absent the authority to do that, FERC and the regional transmission organizations that run the fragmented grid have tried congestion pricing to ease the bottlenecks.  Location marginal pricing was seen as the economists’ contribution to the transmission dilemma.  By allowing prices to rise in congested transmission segments, as the theory goes, users will find alternative paths for access or delivery to energy to avoid higher prices. The problem, of course, is that the worst congestion is caused by the absence of alternatives and locational marginal pricing adds high cost injury to the insult of congestion.  On the other hand, if you own a congested transmission line you are the troll at the bridge able to extract high tolls for traversing the line.  RTO’s game this endlessly and market participants jockey to exact higher rents or reduce LMP expenses. The bottom line: higher costs for all.

US DOE did its job under the Energy Policy Act of 2005 and performed credible transmission congestion studies in 2006 and 2009. It designated two national interest electric transmission corridors (NIETC) in the Southwest and one in the Mid-Atlantic regions.  And then it got sued for failing to conduct “reasonable and appropriate environmental impact studies”.  Never mind that the NIETC congestion corridors were an admission of the obvious—these are the worst congestion bottlenecks we need to fix.  Never mind that no specific transmission projects were proposed in these NIETC corridor designations on which anyone could perform appropriate NEPA studies.  Never mind that US DOE had been directed by Congress to do this work.  The result of the lawsuit was to overturn four years of planning work and throw out the NIETC designations with an admonition from the court to start over.

US DOE must do its next congestion study by 2012.  So now you understand why US DOE has issued its latest proposal to “delegate” its transmission planning responsibility to FERC and get this stinky mess off its shoes.  The problem is Congress directed US DOE to do the work not FERC and typically an agency cannot presume to second-guess Congress when it says do something.

The comment period on the US DOE proposal closed September 9th and Senator Bingaman’s admonition to the parties not the attempt this sleight of hand is probably all the input US DOE needs to hear.