Panel examines transmission investment under FERC Order 1000

SAN ANTONIO – Competition in the construction of major power transmission lines has been lukewarm and likely won’t heat up much even if Federal Energy Regulatory Commission (FERC) Order 1000 is expanded, panelists at the National Association of Regulatory Utility Commissioners (NARUC) concluded Tuesday.

The possibility of expanding Order 1000, which allows for competitive bidding on the construction of major new transmission lines in the United States, was suggested last month by FERC Commissioner Richard Glick in remarks at a wind industry conference.

But Emma Nicholson, senior project manager at Concentric Energy Advisors, told the NARUC audience that Order 1000 did not need to be either scrapped or expanded. “I would not significantly expand the scope of Order 1000,” she said. “I would leave it as it is. I think there could be improvement with better planning processes, longer planning horizons, and more integration among local and regional planning agencies.”

Concentric Energy Advisors produced a study in June that concluded there was no basis to expand the scope of transmission grid projects selected through solicitation processes because incumbent transmission owners develop reasonable project cost estimates while delivering the infrastructure projects that improve reliability for customers. Concentric said its review of publicly available data suggested that incumbent transmission owners experienced either no or fairly modest cost changes over the life of a project’s development, with final or updated project cost estimates varying from initial cost estimates by between -2.9 percent and 7.0 percent.

Experts at the NARUC Annual Meeting in Texas noted that many utilities and regional transmission organizations were generally leery of long-distance transmission projects large enough to fall inside the parameters of Order 1000. Planners, they said, were more comfortable working on smaller-scale transmission in the interest of shorter planning windows, less risk of litigation over rates, and not having to work on meshing one team with a group from a different company with possibly a whole different work culture.

“A lot of it is being in the right place at the right time and in the right culture,” said Ed Tatum, vice president of RTO and Regulatory Affairs for American Municipal Power in Ohio. “The world has changed a lot, unfortunately. Competition got hard and a lot of entities decided to not do competition anymore, we are going to do a regulated play. Every time you have a chance to put up a transmission line, you are going to do it within your own organization because you get a rate of return to the shareholders.”

Regulators also expressed doubts about joint projects with other utilities that could cloud the impact it would have on the ratepayers in their states who would be asked to foot at least part of the bill. “Until the cost allocation is taken care of and the folks who are going to pay for these projects are going to see the benefits, then you are going to continue to not see it,” said Commissioner Talina R. Mathews of the Kentucky Public Service Commission. “The low-hanging fruit projects that were pre-1000 are gone.”

Meanwhile, Judy Chang, principal at The Brattle Group, said Order 1000 could become a more effective tool for regulators and grid operators if they put a little more effort into becoming increasingly comfortable with a competitive-bidding regime.