Two more states consider bills giving utilities first go on transmission projects

Published on February 11, 2022 by Kim Riley


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Incumbent utilities in Wisconsin and Missouri hope soon to see right-of-first-refusal laws adopted that would guarantee them first dibs on building large, new transmission lines in their service areas without having to compete for the projects against third-party transmission builders.

Two bills under consideration in those states would essentially make an end run around a provision in the landmark Order No. 1000, instituted in 2011 by the Federal Energy Regulatory Commission (FERC) to eliminate the federal right of first refusal on regional transmission projects and allow more companies to compete for the development of such projects. 

Iowa, Minnesota, Michigan, and the Dakotas have all adopted similar laws that supersede the FERC order, which reformed electric transmission planning and cost allocation for public utility transmission providers. The FERC rule also opened up regional transmission projects to competition by allowing non-utility companies to bid on transmission projects, the idea being that this would result in more transmission development and lower the cost of projects.

But since the federal rule was passed, it has been unsuccessful in bringing more efficient projects to Wisconsin’s transmission planning process and has resulted in far less collaboration and coordination among transmission owners, Karl Hoesly, Xcel Energy’s regional vice president of regulatory and government affairs, told Daily Energy Insider. 

“In fact, these rules have resulted in extensive delays in transmission development due to the overly prescriptive planning requirements, and since that time several states have passed similar laws to ensure state control and oversight,” Hoesly said.

Xcel Energy provides safe, reliable and affordable generation, transmission and distribution of electricity to more than 263,000 customers in nearly 500 communities in northwestern Wisconsin, said Hoesly.  

In Wisconsin, the investor-owned utility is watching Senate Bill (SB) 838, which 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 which connects to transmission facilities it already owns. SB 838 is under consideration in the Wisconsin State Legislature’s Senate Committee on Utilities, Technology and Telecommunications.

MISO was approved as the nation’s first Regional Transmission Organization (RTO) in 2001 and is an independent nonprofit organization that supports the delivery of wholesale electricity and operates energy and capacity markets in 15 states and the Canadian province of Manitoba. 

“We support SB 838 because we believe a right of first refusal for major transmission projects is a better model to meet Wisconsin’s energy policy goals, which are already overseen through well-established processes at the PSCW [Public Service Commission of Wisconsin],” said Hoesly. 

At the same time, he said, Wisconsin’s utility partners have a long history of shared planning and investment to provide the state’s customers with access to reliable and affordable energy, and transmission projects are subject to Wisconsin’s robust Certificate of Public Convenience and Necessity (CPCN) procedure, which the PSCW reviews and evaluates for cost and need, among other items. 

Additionally, Wisconsin’s investor-owned utilities are regulated and must file reviews every two years with the PSCW to ensure the reasonableness of rates, Hoesly said. 

“This includes the cost of transmission projects, ensuring they are competitively priced and in the public interest,” he said, adding that Xcel Energy also engages in a competitive procurement process when constructing these projects, drawing from the same pool of equipment suppliers and service providers that outside transmission developers do.

“SB 838 is about reliability in Wisconsin and the need for complex transmission systems to work together, and we believe Wisconsin should have control over the future of its reliable transmission grid,” said Hoesly. 

There are other benefits to SB 838, according to Bill Marsan, executive vice president and general counsel for Wisconsin-based American Transmission Co. (ATC), a privately owned company founded more than 20 years ago as the first multi-state, transmission-only utility in the United States. ATC’s transmission system includes 7,859 miles of lines and 495 substations in Wisconsin.

“This bill solidifies that Wisconsin, like the majority of other states in the MISO region, will continue to control the reliability of the grid in the state by preventing the introduction of disparate developers constructing a hodgepodge of projects built to varying standards and fragmenting the system as it was in the past, which would reintroduce duplication in efforts, associated costs, and addressing system issues as piecemeal,” Marsan said. 

And because the state’s transmission providers currently rely upon an independent process to develop project cost estimates and rely on a competitive process to select the contractors that will ultimately build the PSCW-authorized lines, while also managing costs throughout the construction cycle, the subsequent savings get passed along to their customers.

“Despite what some opponents contend, ATC’s support for this bill is not an effort to prevent competition,” explained Marsan. “On the contrary, we have and will continue to rely on a robust, competitive process to actively manage our projects’ construction costs, which are capped and monitored by the PSCW.”

Marsan also pointed out that the Wisconsin State Legislature helped establish ATC in 1999 in response to growing concerns over the reliability of the state’s electric grid. 

“At the time, Wisconsin had one of the weakest transmission systems in the United States,” he said. “Today, Wisconsin has a safe, reliable and cost-effective transmission system, and passing this legislation will ensure the state’s right to control the expansion and operation of the transmission grid.”

In Missouri, House Bill (HB) 1811 is similar to the Wisconsin proposal and would specify that an incumbent electric transmission owner or its affiliate has the right to construct, own and maintain an electric transmission line that has been approved for construction in a transmission plan and connects to its own facilities or that connects to its own facilities and facilities owned by a non-incumbent electric transmission owner. 

St. Louis-based Ameren Missouri is hoping the bill becomes law, according to Warren Wood, vice president of regulatory and legislative affairs for the utility, which provides electric generation, transmission and distribution services, as well as natural gas distribution service. 

Ameren Missouri, which is one of two rate-regulated utility subsidiaries of the publicly traded Ameren Corp., owns and operates a 2,970-mile transmission system. According to its 2020 Integrated Resource Plan, Ameren Missouri will construct 19 of 20 transmission projects that have been approved by the MISO Board of Directors in Missouri for completion before 2025. The projects will address future reliability issues and provide for continued safe and reliable service to customers. 

“Federal law currently gives Regional Transmission Organizations, such as [MISO], the power to decide who builds future transmission projects in Missouri,” Wood told Daily Energy Insider. “Federal law also provides a mechanism for states to assert control over who builds certain types of transmission projects in their jurisdictions. 

“HB 1811 aims to allow the state to have more control over who builds these projects, granting incumbent transmission owners additional rights, recognizing the longstanding presence of those entities in local communities and the relationships they have with customers, landowners and local elected officials,” said Wood.

Incumbent transmission asset owners like Evergy and Ameren Missouri also know the local landowners and elected officials and can best serve their customers’ needs in terms of safety and reliability, according to Missouri Energy Development Association (MEDA) President Trey Davis.

MEDA represents the largest investor-owned electric, natural gas, and water companies in the state and Davis said MEDA members work diligently to provide safe, reliable and affordable services for their customers.  

Davis said that HB 1811 and its companion bill SB 1003, “recognize this work on behalf of incumbent transmission asset owners while granting those owners rights to construct cost-competitive projects that connect to their systems in the long-standing communities they serve.”

And competition for building transmission projects in Missouri already does exist, according to Davis, who said that HB 1811 and SB 1003 maintain the ability, for example, for developers to construct merchant projects that aren’t subject to the MISO or Southwest Power Pool (SPP) planning processes.  

And when soliciting competitive bids for projects, Missouri’s incumbent transmission asset owners’ economies of scale can be utilized that keep costs down because of the size of most incumbents, Davis said.

“States in the MISO and SPP footprint are continually building protections and rights for incumbent transmission asset owners such as outlined in HB 1811 and SB 1003,” said Davis. “Out-of-state transmission owners do not have a long-standing history of living and working in the local communities like the incumbents and they do not create or maintain long-term, Missouri-based utility jobs.”

Neither HB 1811 nor SB 1003 have yet seen any committee action in the Missouri General Assembly.