Utilities urge federal reforms to increase transmission infrastructure

By the OGJ Online Staff

HOUSTON, Apr. 18-- Eleven utilities that compose the Alliance for Competitive Electricity, a group formed to advocate for certain federal energy legislation, urged Congress to address infrastructure needs to improve the wholesale electricity market.

The group released a report "Meeting our Nation's Needs for Adequate Supplies of Reliable and Reasonably Priced Electric Power" Monday.

The group said open access requirements to the transmission grid must be extended to municipal, cooperatively owned, and federally owned entities. The report said 27% of the transmission facilities in the US are not subject to Federal Energy Regulatory Commission jurisdiction and are beyond the commission's open access requirements.

This limitation was illustrated when FERC ordered certain independent generators to make refunds to California customers. But it did not have the authority to order the public power entities to make $170 million in refunds for alleged overcharges because federal regulators have no jurisdiction over these entities.

The report also called for establishment of RTOs to ensure the grid is operated on a regional basis in support of wholesale markets.

Some RTO rules effectively limit participation by publicly owned transmission owners. Tax code provisions preclude private use of tax exempt utility property. These entities could allow their transmission assets to be placed in an RTO without violating private use rules, if the tax code were changed.

The policy advocacy group explained the grid is being used very differently than originally intended. It is being used more intensively. Increased transactions between power marketers and wholesale consumers have strained the transmission system.

The Alliance cites statistics from the North American Electric Reliability Council that transmission loading relief (TLR) events have skyrocketed in the last 2 years. A transmission loading relief order is given by reliability coordinators to relieve transmission constraints or reduce load on the line when the grid reaches an operational limit.

Even though TLRs are increasing, the Energy Information Administration said investment in transmission decreased 5% relative to total electricity production between 1990 and 1996.

"New investment in transmission has fallen even as system peak demand grew over the last decade," the report said.

The utilities warned without adequate investment in infrastructure, reliability will be compromised, prices will increase, and efficiency decline. To encourage investment, the utilities suggested FERC implement non-cost-based forms of regulation to reward investment.

Under the traditional system, transmission owners are allowed to recover prudently incurred costs, plus a return on investment. The report said the system is not working. Transmission is not being adequately valued even though it is essential for the wholesale electricity markets to function competitively.

Finally, the group called for regional planning of transmission facilities overseen by FERC and federal eminent domain for transmission facilities.