Power Leaders Would Give FERC Siting Authority

Energy officials last week urged Congress to clear away the regulatory, legislative, tax and rate-related hurdles that are holding up construction of much-needed new power transmission and natural gas transportation facilities to serve the nation's expanding energy appetite.

Electricity leaders especially drove home the need for federal lawmakers to grant the Federal Energy Regulatory Commission either full or partial eminent domain authority to use in the siting of transmission facilities, similar to the authority it now has for natural gas pipelines. The Bush administration energy task force endorsed this action in the energy policy report that was released last Thursday.

"We recommend granting [FERC] the authority to site electric transmission facilities consistent with this authority [for gas pipelines] under the Natural Gas Act [NGA]," said Stan Szwed, vice president of transmission for FirstEnergy Corp, during an oversight hearing last Tuesday called by the Senate Energy and Natural Resources Committee to look into the need to bolster the nation's existing transmission and transportation infrastructure.

David N. Cook, general counsel for the North American Electric Reliability Council (NERC), stressed the need for Congress to entrust eminent domain authority in one "central" place --- either with FERC alone or with a regional group of state authorities in conjunction with FERC. Presently, utilities must obtain siting approval from the individual states and/or localities through which their transmission facilities would traverse, which he said is a time-consuming process. He believes the process could be streamlined considerably if siting were handled by a single authority.

Even Committee Chairman Frank Murkowski (R-AK) seemed to be leaning in this direction. "The reason we have to do it federally --- even though I'm opposed to it in theory --- [is because] the states are incapable of coming to grips" with the siting issue, he declared.

"It may be that you should repose some [siting] authority within the FERC, [but] that ought to be exercised in conjunction with people [state or local authorities] who are very close to the local situation," suggested Commissioner William Nugent of the Maine Public Utilities Commission. "It may be that you will find a model" in the NGA for awarding FERC eminent domain authority over the siting of transmission facilities. But "I don't think you ought to ignore the very substantial input that you get from people who are working every day [at the local level]."

In addition to awarding FERC siting authority, FirstEnergy's Szwed called on Congress to reform transmission ratemaking to reflect the risk of uncertainty so that companies can earn competitive rates of return to attract investors in their projects; enact tax reforms to remove disincentives to the creation of regional transmission organizations (RTOs); repeal the Public Utility Holding Company Act (PUHCA), which he said makes it difficult to form RTOs; repeal or streamline Section 203 of the Federal Power Act, which allows for time-consuming FERC reviews; and avoid giving FERC the authority to mandate RTOs.

In addition, NERC's Cook urged Congress to pass legislation that would establish mandatory reliability rules for transmission companies. He also stressed the need for more favorable rates of return to attract investors to new transmission projects. "We're being penny-wise and pound-foolish about the transmission system," he said.

"There's no magic bullet to resolve the problems" facing the nation's transmission infrastructure. "We need to pursue a whole portfolio of actions," Cook noted.

Without congressional action, the nation's electric transmission system will remain relatively static. He projected that the existing North American transmission network --- which currently includes about 200,000 circuit miles of high-voltage lines --- will grow by less than half a percent a year over the next decade. That means there should be a "little over" 200,000 circuit miles of lines by then.

"The lack of additional transmission capacity means that we will increasingly experience limits on our ability to move power around the country. The existing grid is also being pushed hard, and used in ways for which it was not designed. The systems were not generally designed to move large blocks of power from one part of the country [to another] across multiple systems," Cook said. Given this phenomenon, he noted the industry is seeing far more grid congestion and more violations of reliability rules.

On the natural gas front, Jerald V. Halvorsen, president of the Interstate Natural Gas Association of America (INGAA), reported that the gas pipeline infrastructure wasn't much better. "The current natural gas infrastructure will not support [the] 30 Tcf market" that's been predicted for 2010, he said.

A recent INGAA study estimated the industry will need to invest $34 billion in new pipeline and storage projects just to keep up with the market, he told the committee. That's about $2-2.5 billion a year. He applauded FERC for processing many of the new projects for the California market quickly. "We think they're headed in the right direction."

However, he called on the White House Council on Environmental Quality (CEQ) to form an interagency task force, with FERC as the lead agency, to develop a memorandum of understanding (MOU) aimed at expediting the permitting of interstate gas pipelines. This also was proposed by the Bush energy task force last week.

He also expressed INGAA's support for the development of "at least one natural gas pipeline from Alaska" to the Lower 48 states. "Producers report 6-8 Bcf/d of gas is currently being re-injected in [the] North Slope. The gas coupled with 1.2 Bcf/d estimated to come from the Mackenzie Delta is expected to comprise 10% of the natural gas supply for North America by 2015. I cannot underscore...the urgency of getting this natural gas to market in the Lower 48 states."

The Bush administration task force last week called on the United States to work with both Alaska and Canada to build a gas pipeline from Alaska.

With respect to power supply, Cook said NERC --- which last week issued its 2001 Summer Assessment for the June-September period --- expects conditions in California to be worse this summer than initially predicted by the California Independent System Operator (Cal-ISO). NERC predicts California will see rotating blackouts for about 260 hours this summer, with the average size of the curtailment pegged at 2,100 MW. This could rise to as much as 5,000 MW during peak demand periods, Cook told the committee (see related story this issue).

The Pacific Northwest will not have any available power to export to California or elsewhere this summer due to the "extreme drought" facing the region, he said. In fact, if the Pacific Northwest doesn't get "significant precipitation" this summer and fall, NERC says it could face power shortages next winter.

New England and New York will have adequate resources for the summer, but the areas still "bear watching" because they are "particularly sensitive to long-term heat waves."

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