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Brownell Sees Merit in Flexibility on Transmission Incentives

FERC Commissioner Nora Brownell last week made the case for why it would make sense for the Commission to avoid adopting a one-size-fits-all approach to the crafting of a policy on incentives designed to boost investments in the nation's transmission infrastructure.

Among other things, the Energy Policy Act of 2005 (EPAct) directs FERC to develop a policy related to transmission incentives. Under EPAct, FERC must take steps to provide incentive-based rates to promote transmission investment.

"I've talked to a lot of people about what we need to do to incent transmission," Brownell said in an appearance before an energy conference sponsored by Infocast in Washington, DC. "I think we'll get a pretty good policy statement out, but I've changed my mind from three years ago. I think there's still things we ought to do on a case-by-case basis."

FERC should lay out "here's kind of what we think are the basics, but I think we ought to leave ourselves open to if a real innovative solution walks in the door, I think we ought to be prepared to give it a little extra along the way. And I'm not sure we're going to know all of the possible models that walk in the door."

Meanwhile, EPAct also calls on FERC to finalize new rules addressing the establishment of an electric reliability organization (ERO), development of mandatory electric reliability standards and enforcement procedures for reliability violations. In comments filed at the Commission, several states -- including New York and California utility regulators -- said FERC should keep an open mind in terms of regional differences when it comes to reliability rules.

"I think the regional rules ought to reflect physical differences," Brownell said. "Probably vegetation management is a regional issue because trees grow differently in different parts of the country. Communication -- calling your neighbors in an emergency -- I'm not sure. I have a very hard time with that."

At a later point, Brownell commented on the lay of the land as it relates to energy markets in the U.S. "We have choices. We've created markets that aren't really markets because we've just mitigated them to death, so we haven't allowed price signals to be sent. We decided not to structurally separate in this country the way they did in the UK, so we've created regional transmission organizations, which are artificial constructs. We've allowed them to mitigate, mitigate, mitigate, so people don't see price signals and now we create capacity markets or resource adequacy or whatever, that are also artificial constructs, and then we mitigate those."

Lifting price caps allows participants to "see energy prices," which in turn spur investment, she said. "But if you don't have the political backbone to do that, you have capacity markets and then you have to make sure that they're sending appropriate price signals and you're not overpaying or underpaying."

Brownell said that the U.S. has "decided to go down what is a very complex path of restructuring in this country. I think history will say we took the most expensive, cumbersome, long-term way to get to a place than anyone could possibly have imagined. But we're on that path, so we're going to have capacity markets, because the ugly reality is we're not building anything. We're not building generation, we're not building transmission, and these are not decisions that we can make overnight."

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