Key Takeaways
The Federal Energy Regulatory Commission (FERC) has voted to issue two rules that orders states and utilities to plan together for cost allocation for projects and to include new technologies and new considerations when preparing long range plans.
This is a departure from the norm and comes at a time when transmission investments have stalled because of economics, interest rates and an unwillingness by some state regulators to take actions that would hike costs for their consumers.
Some states have been reluctant to accept rate increases resulting from building transmission lines needed by a neighboring state to obtain intermittent wind and solar power, whose best resources often lie far from demand centers.
FERC’s new rules will result in increasing energy prices for consumers to pay for the conversion of the grid to accommodate more weather-driven renewable energy.
The Federal Energy Regulatory Commission (FERC) finalized a pair of transmission rules to accelerate the planning and permitting of long-distance electric transmission lines and iron out disputes over who pays for the projects. This is sparking controversy as it is viewed as trampling states’ rights and as being designed principally to speed intermittent, weather-driven renewable energy currently in vogue. The first rule focuses on interregional transmission development and cost allocation, while the second could help fast-track permitting in certain areas. The Federal Energy Regulatory Commission rule on regional planning and cost allocation requires grid planners to consider wider benefits of transmission in their 20+-year plans. The rule calls for the plans to factor in changing power-and-demand mix, extreme weather events, and technologies that can get more power out of existing lines at a lower cost of building new projects. The rule is an update to a 2011 order that is seen to have failed to spur investment in regional lines at a time when the U.S. power grid is coming under stress and electricity inflation has hit a 40 year high. The commission’s second rule is intended to open a pathway to federal permitting of transmission lines within certain national interest corridors established by the Energy Department, who released a preliminary list of potential corridors on May 8. The rules could lead to many new high-voltage power lines as well as more wind and solar power.
While Congress granted the commission new power to greenlight permits for projects stalled at the state level, that power is limited. Regulators have minimal authority to push projects through when they get held up by financial, environmental and property rights disputes that often reach across state lines. The commission, however, approved a measure to exercise those powers if projects stall in the 10 national transmission corridors identified by the Energy Department. The department’s draft plan for the corridors includes about 3,500 miles of power lines across the country. According to the Biden administration, tens of thousands of miles of new lines need to be built by 2035 to keep up with demand and meet its climate goals. The amount of new transmission lines installed in the United States has dropped since 2013, when 4,000 miles were added. The nation now has difficulty bringing online even 1,000 new miles a year.
A state, for example, may want to build transmission networks for renewable energy, whose sites are often far away from demand centers where the best wind or solar resources are located, but those lines must go through another state where regulators worry that their ratepayers will unfairly get burdened with covering the bill for the other state’s renewable energy favoritism. The new FERC rules, however, force regulators and utilities across state lines to align their long-term goals and draft infrastructure investment blueprints. As such, the new federal requirements are intrusive, forcing higher prices on Americans that could get little or no benefit from the added lines that promote renewable energy at the expense of ratepayer pocketbooks.
Across the United States, plans for new power projects, largely wind and solar, are languishing due to delays in their ability to connect to the grid. The backlog of new power projects, mostly solar, wind and battery storage, seeking to connect to the grid jumped by 30 percent in 2023 from the previous year, according to a report by the Lawrence Berkeley National Laboratory, following the lavish subsidies for renewable energy incorporated within the Inflation Reduction Act.
The new rules come as demand for power is rising, driven by new manufacturing, electric vehicles and giant data centers catering to artificial intelligence. That has caused utilities to scramble to adapt, some backtracking on plans to retire fossil-fuel power plants or add new natural-gas generation despite Biden’s regulations against these power generators. In Georgia, the state’s main utility, Georgia Power, has increased demand projections sixteen-fold and plans to use more natural gas to meet that demand. Virginia’s largest utility, Dominion Energy, which supplies electricity to most of the state’s data centers, expects their power use to quadruple over the next 15 years, representing 40 percent of the utility’s demand in the state.
The planning requirements could spur utilities to adopt more grid-enhancement technologies, such as sensors and power flow control devices, which can improve the transmission of electricity across existing lines and are often cheaper than building new power lines.
Federal rules of this nature may conflict with oversight of utilities by local regulators and lead to increases in consumer bills in states where consumers do not necessarily benefit. Several attorneys general have threatened to sue the government over the rule, claiming FERC, an independent agency, is overstepping its authority in order to bring more renewable energy onto the grid to support Biden’s climate goals.
The Biden administration also has other initiatives to spur transmission construction. Last month, the Energy Department became the lead federal agency coordinating environmental approval of major transmission projects to fast-track grid-infrastructure construction. The plan is to reduce the red tape grid planners face as they pursue separate approvals from various federal agencies such as the Environmental Protection Agency, Interior Department, and the Agriculture Department.
Conclusion
The goal of the new FERC rules is to encourage construction of new high-voltage lines that enable developers to bring more energy online quickly, particularly politically favored renewable energy. FERC approved two rules: one that will require companies that produce and transmit electricity to weigh factors such as supply and demand over at least two decades and another that addresses permitting of critical projects in areas that lack adequate transmission capacity. The rules require states and utilities to collaborate on 20-year plans that consider demand forecasts and equitable ways to pay for the projects. The rules, however, could allow transmission lines to be built in states where ratepayers will be paying for power lines they do not need and clash with local regulators that look at the best technologies and pathways for their constituents. The FERC rule changes are to benefit Biden’s climate agenda and his mandates and regulations to electrify everything with primarily wind and solar power despite FERC being an independent agency.
