The Federal Energy Regulatory Commission is expected tomorrow to issue a new rule on transmission planning and cost allocation that will support regional efforts to modernize the electric power grid and bring these low-cost renewable resources to market.
Simple economics tells us that the more supply we have of a resource, the lower the price – and indeed, wind in Texas, for example, has been shown to reduce the total cost of electricity in that state. Competition has that effect.
Some incumbent utilities would prefer not to expose their own generation capacity to competition, and they are bellyaching about the cost to consumers of these transmission investments. But transmission charges are a minor fraction of any electricity bill, and the savings from increased competition are expected to offset and quickly repay the investments needed to modernize the system – without even counting the benefits from increased reliability of the grid.
For decades, planning and cost allocation have been the graveyards where hopes of building modern regional grids capable of delivering inexpensive clean power to customers have gone to die.
Cost allocation – the formulas that decide how ratepayers share the costs of these large investments in our infrastructure – has traditionally been simple and straightforward: everyone pays according to how much they benefit. FERC’s new rule will not change that, it will simply help regions account for all the benefits that transmission provides. The agency has signaled that its guiding principle will be to ensure that those who do not benefit from transmission do not pay for it.
That is exactly the right approach. Any other path would discourage investment in the grid and with it the resource development, jobs, and access to cheaper forms of power it would support.
Transmission, by its very nature, is an enabler. It enables all types of power – solar, wind, coal, natural gas or nuclear – to reach consumers. While it does not discriminate, transmission does have the power to open up uncompetitive energy markets to competition from cheaper forms of energy like wind.
Many Americans currently do not have access to competitive energy supplies. Many regions, including much of the Northeast and Mid-Atlantic, suffer from high congestion costs. Many incumbent utilities benefit from the inflated electric bills of ratepayers in these markets.
Thankfully, growing numbers of industry veterans and clean energy developers are rejecting the divisive and self-serving approach that has kept Americans waiting far too long for the efficient and modern electric grid they deserve. A broad group of utilities, manufacturers, transmission developers, renewable power companies and other energy stakeholders has spoken out against legislation proposed by Sen. Bob CorkerRobert (Bob) Phillips CorkerRepublicans, ideology, and demise of the state and local tax deduction Cheney set to be face of anti-Trump GOP How leaving Afghanistan cancels our post-9/11 use of force MORE (R-TN) that would take a different approach to these critical issues.
The signatories of that letter and others look forward to FERC’s final rule to end the disputes over aligning costs and benefits of transmission development. The states and regions are moving forward to modernize our grid and ensure that our energy future is bright.
Bill White manages the National Clean Energy Transmission Initiative for the Energy Future Coalition. During the Clinton Administration, he served as Senior Advisor to EPA Administrator Carol Browner.