FERC Commissioner Nora Brownell sees a "growing belief" that the power industry's planning process "is narrowly focused and isn't particularly inclusive, nor is it transparent."
Evidence indicating that the existing planning process model isn't up to snuff "is in the growing congestion points in PJM, which has been a big issue for the states. It was an issue in the RPM [reliability pricing model] technical conference," Brownell told reporters last Tuesday following prepared remarks at the National Energy Marketers Association (NEMA) annual membership meeting in Washington, DC. "It's an issue out West, where you have this huge demand," as well as an issue in the Northeast, Brownell added.
Fuel diversity also comes into play. "We are going to be dealing with fuel diversity in a significant number of places," Brownell said. "You're never going to overbuild transmission -- I mean, that's just not going to happen -- but you may build transmission without having thought of the opportunities in another place," she said.
Brownell praised the efforts of Wyoming and other western states "where they said they want to leverage their coal and wind assets to go to the growth centers in Las Vegas and Salt Lake City and California. That to me is good planning because they saw a wonderful opportunity and they saw a wonderful need and they married up. It was a robust planning process."
The governors of Utah, Nevada, California and Wyoming last month announced a new partnership with state utilities to flesh out specifics on the $5-7 billion, 1,300-mile Frontier Line high-voltage electric transmission link from Wyoming to California.
Meanwhile, Brownell remains baffled by the term "economic upgrade" and appears less than impressed with reliability upgrades. "For the life of me, I don't know what an economic upgrade is, except tomorrow's" reliability upgrade. "And reliability upgrade? That isn't looking at big, robust interstate transmission. That's looking at kind of little fixes over time."
The Commission's ongoing proceeding on reform of Order 888 may serve as a venue to address planning process shortcomings.
When asked how open access transmission tariff reform could address planning shortfalls, Brownell said, "I think we could say we expect this kind of a planning process to be in place." FERC could say, "This is, at the very minimum, what we expect to see. I also think we could deal with it in transmission incentives."
The federal energy regulator said that "there isn't any part of the world that has it just right" when it comes to planning, "and I don't know if you ever get it just right, but I don't think you can ask small, narrow questions. It just doesn't make any sense. We didn't build highways that way."
In her prepared remarks, Brownell asked audience members at the NEMA meeting to think about whether it is in the public interest "for a company or an organization to plan by a few, for a few."
When she looks at certain parts of the U.S. and sees "a very fragile grid" and customers "who are having to buy more expensive, dirty, old generation that has no pressure from the competitive market to retire because the transmission grid is too fragile or there's been purposeful disinvestment, so that you can't get to that generation, is that real planning, is that in the public interest? I think not."
Planning "needs to ask more than what do we need to do for reliability. That's a kind of a short-term fix. I think we need to ask other questions. What do we need to do to accommodate fuel diversity? What do we need to do for the economic development of the region? What do we need to do to lower the cost of the delivered price of energy? I think those are legitimate questions."
Brownell said that the U.S. is "20 years in the hole" in terms of investment in the transmission system "and we need to play catch up. And I think if we play catch up by just letting people step up to the plate and have big projects thrown into ratebase, without any transparent and inclusive planning process, we're making a huge mistake."
Brownell also said that under the umbrella of 888 reform, FERC is looking "at standardizing ATC [available transfer capability] calculations. Making visibility, transparency possible. Knowing what the imports are..."
During her remarks, Brownell noted that the Energy Policy Act of 2005 (EPAct 2005), among other things, repealed the Public Utility Holding Company Act of 1935. EPAct 2005 also provided the Commission with expanded authority over certain utility corporate transactions under section 203 of the Federal Power Act, including certain mergers and acquisitions of securities by holding companies.
FERC has new responsibilities "to really look at market power and cross-subsidization, and I think cross-subsidization will be the real kind of surgical technique that we need to use more effectively and, frankly, states over time, I think, have done this maybe more than the federal government has, and so we'll be working closely with the states on that," Brownell said.
"One of the new responsibilities we have to look at in mergers is the issue of cross-subsidization," she noted. Cross-subsidization "is very subtle and it's very hard to find and states have done it more typically in retail rate cases and things like that than I think we have." She said that cross-subsidization is "probably equally as important" as the market power issue. "It just requires kind of looking at different things."
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