Citing market distortions, rate increases and state inaction, Commissioner Philip Moeller renewed calls for FERC to be given more authority to site major new electric transmission lines.
“I continue to support us having expanded authority, the definition of which, the parameters of which, would be defined by federal law,” Moeller said Sept. 18 during a discussion with reporters hosted by Platts. “I would hope that a new Congress would at least strongly consider this going forward.”
Moeller reported that some discussions have been held recently in that regard. For instance, he said some of those talks involved possibly giving FERC the extensive powers that it currently exercises to site new interstate natural gas pipelines, or something more limited such as the “backstop” electric transmission siting authority that the agency thought it had until a court ruling essentially negated that authority. Moeller said those efforts “collapsed,” however.
Overcoming transmission siting hurdles has been a constant challenge in the electric power sector, thanks to a costly and laborious process that can entail obtaining approval from multiple state and township councils. Moeller, who also cited federal resource agencies as a hindrance, said the difficulty in building electric transmission lines has led to perverse consequences.
“One of the reasons we are going toward gas is because frankly sometimes it is easier to build a gas plant, even though more transmission would be a more efficient and cost-effective solution toward serving particular load,” he said.
Moeller argued that before the adverse court decision, the “specter of FERC hanging” over the shoulders of states led to greater state cooperation in siting new power transmission projects. With that incentive now gone, Moeller expressed hope that a wave of Order 1000 transmission planning and pricing compliance filings due on Oct. 1 will help lead to more needed lines being built. He predicted that the processing of those filings will be the “most massive workload project that has ever hit the FERC.”
Still, he expressed concern that “if we do experience a period of economic growth that is tied to more consumption … it is pretty hard to turn on the process of a multiyear construction transmission line all of a sudden. So our clear signals are necessary.”
Yet another concern, Moeller said, is that in responding to the filings and providing guidance, FERC adds to the uncertainty for transmission developers.
Moeller has been particularly worried about local congestion because he said it is a bigger driver of electricity bills, though he said he does not get the sense that the commission is receptive to opening up that discussion.
On the other hand, he argued against a greater focus on long transmission lines. While conceding that long lines are very expensive, and “extremely difficult” to get built because they are multi-jurisdictional, he contended that most of them are focused on getting wind power to load centers.
Mulling transmission project incentives
With development of transmission projects stymied by risks and other hurdles, Moeller said he is supportive of new mechanisms to draw project financing.
“I am open to creative ideas to get the necessary dollars to get the infrastructure built. I hope that is part of the discussion of an energy bill next Congress,” Moeller said.
One of the ideas under consideration is a vehicle similar to a real estate investment trust. Under such a vehicle, the transmission project would be operated independently but could draw investment under a different part of the tax code that would make it more attractive. Another idea being considered is the creation of a master limited partnership, or MLP, structure for transmission projects, although Moeller said such a program would take a change in federal law.
Still, Moeller cautioned that whatever incentives FERC develops, they should guard against unintended consequences.
“The incentives need to be done in a way that create clarity, and yet don’t box us in because there will be individual projects that should be evaluated on a case-by-case basis,” he said.
Moeller added that the incentives need to be nuanced to account for the possibility that some intrastate transmission projects, for example, are more challenging to execute than interstate projects.
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