New FERC rules intended to ease grid upgrades

The Federal Energy Regulatory Commission released a ruling today that will enable grid upgrades to help bring more renewable energy to market.

The new rules build upon changes approved in December for the Midwest, allowing costs for transmission upgrades supporting “multi value projects,” i.e., those that enable states to meet renewable energy mandates, to be passed on to consumers. The changes today essentially apply that standard nationwide.

In a column posted yesterday on Grist, Bill White of the Energy Future Coalition explains further:

While FERC’s rule will be hundreds of pages long, it is likely to focus on just two topics: how regions plan and pay for transmission. For decades, planning and cost allocation have been the graveyards where hopes of building modern regional grids capable of delivering inexpensive clean power to customers have gone to die.

Cost allocation — the formulas that decide how ratepayers share the costs of these large investments in our infrastructure — has traditionally been simple and straightforward: Everyone pays according to how much they benefit. FERC’s new rule will not change that; it will simply help regions account for all the benefits that transmission provides — including, for the first time, the benefits of meeting state clean energy standards. The agency has signaled that its guiding principle will be to ensure that those who do not benefit from transmission do not pay for it.

Not everyone supports the change. In an op-ed published in The Hill last week, Bruce Edelston, a consultant for utilities, says the new rules will unfairly burden consumers:

Michigan consumers may be the first to experience FERC- approved sticker shock — a $500 million a year surtax on their utility bills. In December, FERC issued an order that socializes the cost of certain new transmission lines across 13 Midwestern states. Michigan could be forced to pay 20 percent of at least $16 billion for new wind farms in other states that will provide virtually no benefits to Michigan consumers.

The market should determine what generation and transmission should be built. Instead, under its proposed rules, FERC would pick winners and losers, favoring remote renewable projects that require a transmission build out costing hundreds of billions of dollars over cheaper and possibly greener energy projects built closer to home.

White dismisses those claims, pointing out that transmission costs represent a small portion of customers’ bills, and suggests utilities are just looking out for their own bottom line:

It’s easy to see why these utilities are opposed to transmission reforms and are supporting a transmission bottleneck of their own: to keep collecting billions in unnecessary costs every year from customers trapped in congested and uncompetitive regions. Many Americans currently do not have access to competitive energy supplies. Many regions, including much of the Northeast and Mid-Atlantic, suffer from high congestion costs. And incumbent utilities benefit from the inflated electric bills of ratepayers in these markets. Transmission has the power to open up uncompetitive energy markets to competition from cheaper forms of energy like wind.

In a news release, FERC Chariman Jon Wellinghoff called the decision “an important step forward.”

“Our action today promotes efficient and cost-effective transmission planning and the fair allocation of costs for new transmission facilities. These changes will provide consumers with greater access to efficient, low-cost electricity.”

Photo by Seattle Municipal Archives via Creative Commons

2 thoughts on “New FERC rules intended to ease grid upgrades

  1. “…the benefits of meeting state clean energy standards…”

    There is no benefit to tax or rate payers. Higher taxes, higher electrical rates, no environmental benefits, kills birds and bats, and no reduction in CO2. Only a big monetary boost to wind developers – mostly foreign owned.

    Mark Glaess, General Manager, Minnesota Rural Electric Association. April 2011 “We now know that the wind mandate has cost this state close to $100 million because that breeze occurs when it is least needed. Those costs will only get worse as the renewable mandate increases until we hit 25% by 2025. How about the cost to reduce Minnesota’s carbon emissions (which in the world-wide scheme does not matter)? According to a research paper authored by Peter Nelson for the “American Experiment,” the cost of carbon reduction statewide costs, on average, $208 per ton. Your electric co-op, which must spend more to meet conservation demand because our loads are largely residential, spend an “average” of $473 per ton of CO2 – double the state’s average. Australia is pushing for a $25 tax per ton of carbon emissions. How long can the State of Minnesota pay magnitudes more? Which again raises the question legislators who mandate this and mandate that must ask: What, exactly, are we getting for our money?”

    Great River Energy “Energy from renewable resources has proven to be more expensive than expected, especially when compared with the cost of energy in the wholesale power market. Also, the intermittent energy we obtain from wind turbines tends to be most abundant at night and during the spring and fall of the year. These times do not match well with the peak demands on our system—hot summer and cold winter days. Unfortunately, in order to meet our RES obligations, Great River Energy must purchase intermittent wind energy whenever the wind blows, even if there is an excess supply of energy available in the market at off peak times. We are paying more for the energy than it would cost to purchase from the wholesale power market. In fact, Great River Energy is often called upon to ramp down and on occasion shut down one of the most cost-effective regional plants, Stanton Station in North Dakota, because of the impact of wind energy on the Midwest power grid. These unanticipated costs are significant and contribute to higher electricity rates for our members. In these continued difficult economic times, Great River Energy is especially concerned about any cost increase that will harm the economic well-being of our member-consumers.”

  2. That’s only one side of the story. Xcel Energy and Otter Tail Power would beg to differ with that assessment, as we found out when reporter Dan Haugen looked at the issue back in May.

    Do you have a more effective policy prescription for reducing CO2 emissions?