As federal regulators begin the long process of tackling transmission reform, one of several outstanding challenges will be how to allocate costs, according to Federal Energy Regulatory Commission Chair Richard Glick.
"When you're talking about money — when you're talking about who pays and how much — that's always a difficult issue," Glick said in an interview with Utility Dive. "I suspect that's going to be a significant topic to wade through as well as we go forward," he added. Clarification from Congress on how FERC should think about transmission benefits, and how those are weighed, would also be helpful, Glick said.
Experts agree cost allocation will be a difficult hurdle to navigate as the commission thinks about how it should reform transmission planning. "The main barrier to getting significant transmission into RTO plans and interregional plans is the debate about who should pay," said Rob Gramlich, executive director of Americans for a Clean Energy Grid and founder and president of Grid Strategies, in an email.
Transmission reform is considered a key policy development needed to unleash gigawatts of renewables onto the U.S. power grid, experts agree. FERC last week took an initial step toward revisiting its policies, which were last updated in 2011, by opening a comment period on an advanced notice of proposed rulemaking (ANOPR). The commission will likely host technical conferences this fall as part of its effort to build a record before it issues a NOPR.
Glick ultimately wants to see an outcome that better prepares for future resource buildouts, expedites the interconnection process and improves cost allocation to better assess relative benefits. Cost allocation is poised to be one of the commission’s biggest challenges, but Glick said FERC's recent joint task force with the National Association of Regulatory Utility Commissioners will help determine what allocation is appropriate.
"We know that the states play a huge role in ... how transmission costs are allocated," he said. "And because I think to the extent you can't figure out where the costs are allocated, it's very difficult to build the transmission facility in the first place."
Current policy generally puts the majority of system costs for new transmission facilities onto power providers, which can cause renewables generators to back out of the interconnection queue altogether. Those withdrawals cause further delays to the already-clogged queues, according a March report from Concentric Energy Advisors prepared for renewables industry groups. For example, a Tenaska complaint in front of FERC alleges that the Southwest Power Pool overcharged it millions of dollars in upgrade costs, which it says are not needed for its project, and would benefit other projects in the queue.
Ultimately, because transmission is a public good, it benefits multiple participants, and a decision from FERC is needed to make the final call, said Gramlich.
"But it's hard politically and legally for FERC to do that unilaterally, so we need a way to get regional consensus on cost allocation," he said. States can play a key role in this, Glick said.
One thing that would also help, Glick said, is better legislative direction about how costs should be allocated. Current law requires FERC to allocate costs commensurate with the benefits, "but it's not entirely clear on what the benefits are, what commensurate means and all that," Glick said. Congress could clarify, for example, whether costs could be allocated based on reliability, if a transmission line relieved congestion and improved the performance of other power lines in the region.
"It would be helpful from my perspective if Congress … would clarify that," Glick said.