John Szoka is the CEO of the Conservative Energy Network and former member of the North Carolina House of Representatives. Ted Thomas is the founding partner of Energize Strategies and former chairman of the Arkansas Public Service Commission.
While the Federal Energy Regulatory Commission is receiving a lot of attention thanks to President Biden’s recent nominees, the current FERC commissioners have an important ruling pending on their docket that is just as deserving of notice. As the United States grapples with an increasing demand for electricity and decreasing reliability of the power grid in certain regions, FERC is considering new guidelines for transmission planning. This rule would create a robust, well-planned transmission network, enabling market competition for electric generators and expanding the geographic reach of generators so that more Americans have access to reliable energy.
As conservatives, we believe that excessive government planning can impair efficiencies naturally brought about by the free market. However, it is in the national interest to approach the power grid the same way we have approached the internet, the interstate highway system and telecommunications — all of which require standardization and interoperability that is only made possible by good planning. A well-planned network broadens the scope of markets and reduces costs to customers.
A central feature of the proposed FERC rule is use of a longer time horizon for transmission planning. Although forecasting for planning is more difficult with a longer time horizon, not being ready for expected or, more importantly, unexpected load growth puts America’s economic and national security at a greater risk. “Amid explosive demand, America is running out of power. AI and the boom in clean-tech manufacturing are pushing America’s power grid to the brink. Utilities can’t keep up,” warns a recent Washington Post business section headline. A longer planning horizon will help assure that the grid is ready for whatever future demand may arise.
Cost allocation for transmission lines that are in multiple states and utility service territories will always be a complex and difficult negotiation. The proposed rule would standardize planning processes and benefit metrics. This would enable an “apples to apples” comparison across regions to better determine what is working and what is not. The rule also minimizes costs by consolidating transmission planning and interconnection queue processes, eliminating silos and repetitive processes.
Modeling of benefits and allocation of costs to states that are commensurate with those benefits is, and will remain, a challenge and some question whether FERC has the authority to issue such a rule. It should be noted that the Federal Power Act gives FERC jurisdiction over the transmission of electric energy in interstate commerce. Furthermore, this rule would not require transmission to be built, rather it requires a more standardized and longer-term study of whether transmission should be built to better inform decision making processes at the state level. Decision makers for such projects will be state officials if payment for transmission lines is expected to come from retail electricity rates. A robust grid that increases state options with respect to generation is not a threat to state jurisdiction.
Furthermore, recent severe winter storms have demonstrated the value of being able to move large quantities of electricity over long distances to areas experiencing power outages. The capability to move electricity long distances will restore power to families in the dark more quickly and will reduce the impact of severe weather events. Enhancing the geographic reach of electric generators will reduce the risk of outages by enabling generation outside of a severe weather impact area to serve load inside the impacted area. The North American Electric Reliability Corp. has been directed by Congress to study regional transfer capability. The results of this study should identify ways to further reduce the risk of blackouts caused by severe weather.
Transmission planners have much to learn from our not-too-distant history. The telecommunications revolution that brought us cell phones and the internet teaches us that innovation happens at the edge of a network. That is to say that a stable, standardized, interoperable network comes from good planning. A strong ruling from FERC will increase grid reliability and benefit all electricity consumers because a well-planned electric transmission network will enable market driven innovation and price competition, benefiting all forms of energy generation.
