Support solidifies for Wisconsin power line construction bill
Investor-owned utilities, a bipartisan swath of state legislators, and numerous other stakeholders support a proposed bill in Wisconsin known as right of first refusal that would give electric transmission companies first dibs on building interstate power line systems.
“Job number one is construction and maintenance of a power grid to support safe, reliable, and affordable electricity for homes and businesses,” said Marc Spitzer, a partner at Steptoe & Johnson LLP and a former commissioner at the Federal Energy Regulatory Commission (FERC).
“Due to multiple factors, transmission is notoriously difficult to build,” said Spitzer, noting that the Wisconsin bill “would ensure that companies with a proven track record of surmounting local opposition have the first crack at building new power lines needed to keep the lights on.”
Most recently, the Wisconsin Legislature’s Senate Utilities and Technology Committee during a Nov. 10 executive session voted 4-1 to recommend passage of Senate Bill (SB) 481, while the companion Assembly Bill (AB) 470 on Nov. 2 passed the state’s Assembly Energy and Utilities Committee with a 12-4 bipartisan vote.
Both bills were unveiled on Oct. 4. SB 481 was introduced by Wisconsin Sen. Julian Bradley (R-Franklin) and two other GOP senators, while State Reps. Kevin Petersen (R-Waupaca) and Jeffrey Mursau (R-Crivitz) joined five other Republicans to offer AB 470.
If enacted, the bill would grant an incumbent transmission facility owner the right to construct, own, and maintain a transmission facility that has been approved for construction in the Midcontinent Independent System Operator’s (MISO) transmission plan and that connects to transmission facilities owned by that incumbent owner, according to the text of the bill.
Currently, MISO — which is regulated by FERC and operates the regional electric grid that covers the upper Midwest — has used a competitive bidding process to select operators for new interstate lines that connect to the regional network, per a 2015 FERC order.
Known as Order No. 1000, the final rule reforms FERC’s electric transmission planning and cost allocation requirements for public utility transmission providers.
Order 1000 also includes a reform that calls on public utility transmission providers to remove from FERC-approved tariffs and agreements a federal right of first refusal (ROFR) for a transmission facility selected in a regional transmission plan for purposes of cost allocation, subject to specific limitations.
Spitzer told Daily Energy Insider that elimination of the federal ROFR by FERC was a “well-intentioned but mistaken effort to expedite construction of interstate electric transmission.”
“The cumbersome federal solicitation process has mutated into a bureaucratic morass that impedes grid expansion,” he wrote in an email. “The past 11 years show lassitude produces supply chain challenges, carrying charges, and ultimately cost overruns borne by ratepayers.”
Another former FERC Commissioner, Tony Clark, agrees.
“Opponents suggest that the Order 1000 transmission solicitation process results in lower cost transmission projects,” said Clark, senior advisor at Wilkinson Barker Knauer LLP. “Studies continue to debunk this assumption.”
In practice, Clark said that the Order 1000 process incentivizes merchant transmission providers to submit unrealistically low bids for projects to win the solicitation. But once they win the right to construct the projects, they are too often unable to build it on-time and on-budget, he added.
“When budgets and timelines are not met, they may seek recovery of over-budget costs from FERC anyway,” said Clark.
Furthermore, he said the Order 1000 solicitation process adds at least a year — often more — to the development process for projects that are needed for a mix of reliability and economic reasons.
“The net result is a lose-lose,” said Clark. “Customers lose the time value of the benefit of the delayed projects, and they are placed into service at rates that are more expensive than if they were simply assigned to the existing, regulated company that operates the grid in the state.”
Chris Ventura, the Midwest director for the Consumer Energy Alliance, which also supports the pending Wisconsin bill, told Daily Energy Insider that there’s a fundamental misunderstanding in the purported benefits of so-called competitive transmission solicitations.
“Concentric Energy Advisors reviewed competitively solicited transmission projects and concluded that ‘competitive solicitations have not been successful in driving cost savings and have added delays to the development of transmission infrastructure. Competitive solicitations added as many as 1,000 days to the development of transmission projects, and many experienced cost escalations, further questioning the value of competitive solicitations,’” said Ventura.
Additionally, many of the ‘cost caps’ heralded as a means to protect consumers in competitive solicitations have exclusions that allow developers to recover costs above those caps, making the entire notion of cost caps illusory at best, he said.
“Companies can underbid projects and have government agencies wave a magic wand to recover charges for their negligence, directly from working families and small businesses,” said Ventura. “This is worse than crony capitalism; it is socialism wrapped in the guise of free market economics.”
Wisconsin is set to have at least $2 billion worth of transmission lines built over the next decade under its MISO-approved plan and supporters say AB 470/SB 481 would give utilities already conducting business in the state the ROFR to construct, own, and maintain a new transmission line that connects to one of their existing ones.
American Transmission Co. (ATC), Xcel Energy, and Dairyland Power Cooperative, the three transmission utilities serving the state, all support the pending bill. The Wisconsin Electric Cooperative Association also registered in favor of the legislation last week.
During an Oct. 10 public hearing before the Assembly Energy and Utilities Committee, Mike Hofbauer, ATC’s executive vice president and chief financial officer, testified that passing the proposed bill will save Wisconsin consumers money.
“The idea that a ROFR for incumbent utilities to build transmission projects in Wisconsin would lead to higher costs for Wisconsin customers is simply wrong,” Hofbauer said. “Wisconsin customers will pay less for a regional transmission project that is built by an incumbent utility than they would if that project was built by an out of state developer.”
Holding everything else constant, if an incumbent utility builds such a project, Wisconsin rates will decrease, while rates will go up if an outside developer builds it, he added, which is due to the way that costs are allocated across the region for these projects.
“Other states that have passed ROFR laws, including eight of 15 MISO states, emphasize a state’s rights rather than a federal model to expand their transmission system,” testified Karl Hoesly, president of Xcel Energy Wisconsin & Michigan, during the same hearing. “All have successfully developed projects that access new generation resources, save customers money, and increase reliability. Federal regulation of transmission development does not work.”
Meanwhile, a variety of consumer and environmental groups, along with a conservative think tank contend that the bill would create a monopoly in the power transmission business, a theory that bill supporters quash.
“My friends at Americans for Prosperity incorrectly depict the sluggishly bureaucratic and cost-overrun plagued federal process as ‘competition.’ In fact, passage of AB 470 would allow Wisconsin to embrace competitive procurement at the state level. Real as opposed to faux competition,” Spitzer said.
He also pointed out that while some state ROFR opponents argue rates would increase, the MISO transmission tariff allows incumbents to spread certain project costs across the region.
“Therefore, costs from regional projects built by remote developers are borne entirely by Wisconsin ratepayers, whereas the formula allows local utilities to reduce that impact to save Wisconsin customers money,” said Spitzer.
Clark concurred saying that states with ROFR laws on the books are more likely to see needed transmission projects brought online in a timely manner and at a lower cost than states that default to the flawed federal Order 1000 transmission procurement regulations.
“State ROFRs result in savings to customers, and a more orderly and reliable build-out of the grid,” said Clark.
According to the Consumer Energy Alliance, passage of the measure will ensure that transmission projects in Wisconsin are constructed in the most affordable manner possible — avoiding unnecessary and costly delays that would increase costs to Wisconsinites, said Ventura.
“With reliability a major concern throughout MISO, and most of the country delaying necessary transmission investments,” he said, “consumers are not seeing the benefits that the timely construction of transmission projects can deliver, such as reducing costs by avoiding congestion and increasing grid reliability.”
Currently, it’s unknown when the state Senate and Assembly will vote on a final bill.