Powering America Hearing on Transmission Infrastructure Development: FERC Isn’t Batting 1000

On May 10, 2018, the House Energy Subcommittee held a hearing on the state of electric transmission infrastructure, particularly focusing on transmission planning, the efficacy of Order No. 1000 and the future of the transmission grid.  Important take-aways from the hearing included:

• Consensus that Order No. 1000 has not worked to incentivize transmission infrastructure development in the way that was intended, and particularly, has not resulted in development of interregional transmission projects.
• The Commission and Congress should rethink transmission incentives, including considering how to best incentivize new technology and whether performance-based incentives might be appropriate.
• Significant offshore wind generation is coming to the East Coast; we need to think about how to best support its interconnection.

Six witnesses testified on the state of transmission infrastructure.  Former FERC Commissioner Tony Clark, now a senior advisor at the law firm of Wilkinson Barker Knauer LLP, discussed the white paper he recently issued, considering the status and efficacy of Order No. 1000, and arguing that it has fallen short of its goals.[1]  Mr. Clark asserted that Order No. 1000 may not have been as effective as hoped because it tried to do too much.  He also focused his testimony on multiple decisions before FERC, including rates of return, transmission incentives and siting, which will have significant impacts on transmission development.

Edward Krapels, the founder and CEO of Anbaric Development Partners, an independent transmission, micro-grid and storage developer, focused his testimony on the importance of the development of offshore wind and the transmission infrastructure (in the form of OceanGrids) to support it.  Mr. Krapels also noted that interregional transmission projects are not being built in the manner that FERC may have hoped, when it promulgated Order No. 1000.

Ms. Jennifer Curran, MISO’s Vice President of System Planning, testified about the MISO Multi-Value Project (“MVP”) process, how it works and the benefits that it brings to the ISO.

Dr. Ralph Izzo, the President and CEO of Public Service Enterprise Group (“PSEG”) talked about PSEG’s transmission development efforts and their management of their grid.  He also argued that Order No. 1000 has not only not met its goals, but has actually hindered transmission development and should be repealed.  He asserted that Order No. 1000 caused political discord between states and forced ISOs into roles for which they are unprepared.

John Twitty, the Executive Director of the Transmission Access Policy Study Group (“TAPS”), argued that section 217(b)(4) of the Federal Power Act put the focus of transmission planning on serving the needs of load-serving entities (“LSE”), including transmission-dependent LSEs, but that directive has not been achieved.  He asserted that LSEs must have more of a seat at the transmission development table, and pointed to transparency concerns in PJM and CAISO.  He also noted that there is no need for incentive transmission rates of return given the already high guaranteed rates of return.

Finally, Rob Gramlich, the Founder and President of Grid Strategies LLC and the Executive Director of the Working for Advanced Transmission Technology (“WATT”) Coalition, asserted that FERC has been too focused on resilience in the form of propping up uneconomic generation facilities, and needs to shift its focus to help create the transmission grid needs in the future.  He noted that broad regional planning and beneficiary-pays based cost allocation have worked well, but the development of interregional transmission has foundered.  He explained that transmission incentives should be aligned to better promote advanced transmission technology development, and provided eight other potential steps FERC, DOE and Congress could take to help encourage transmission development.

Among the questions asked by Members, Vice Chairman Olson asked the witnesses to testify about the development of the Competitive Renewable Energy Zones (“CREZ”) which helped to solve issues related to the location of significant wind resources as compared to where load and population centers are located.  Mr. Gramlich commented that the CREZ model, as well as the ERCOT market model, have worked well and should be considered for other regions.  Mr. Krapels chimed in that the offshore wind in the Northeast US may benefit from a CREZ-type approach.

Mr. Olsen also asked witnesses to comment on the incorporation of advanced technologies into the grid.  Mr. Gramlich explained the work of the WATT Coalition, noting that they do not believe that there needs to be new incentives or changes in incentives, but the existing incentives should be better aligned to reward advanced technologies.  Ranking Member Bobby Rush also picked up on these themes, questioning whether Order No. 1000 is a good way to incorporate the deployment of new distributed energy resources.  Mr. Gramlich commented that bringing distributed energy resources into the wholesale markets would be helpful.

In response to a question from Representative Long, the witnesses commented on the importance of competition in transmission development, including its role in reducing prices but highlighting the need for more stakeholders at the table.

The hearing signaled several key issues coming up for FERC 2.0, including revisiting the transmission incentives policy, which was created in 2006 and last substantively considered in 2012.  Witnesses pointed out that some of the technology currently being deployed on the grid did not exist in 2006, and some not even in 2012 – such that the existing policy may not have appropriate metrics or parameters to consider them.

The future of Order No. 1000 – as well as regional and interregional transmission planning generally – has also been teed up for the Commission’s consideration.  Witnesses agreed that the concept of regional and interregional transmission planning is important, but the process created by Order No. 1000 has not been productive.  The Commission will need to consider how to best incentivize and plan major transmission.

[1] Clark, T., Order No. 1000 at the Crossroads: Reflections on the Rule and its Future (April 2018), available at  http://www.wbklaw.com/uploads/file/Articles-%20News/
2018%20articles%20publications/WBK-%20TC-Order%201000%20whitepaper%20Final.pdf