Major US power consumers call for regulation to increase transmission project competition

A group of 73 major US power consumers called on Congress Aug. 3 to strengthen competitive transmission project bidding processes as part of the infrastructure legislation currently being debated, with the group citing a lack of competition as significantly increasing costs for electricity customers.

"On behalf of the Electricity Transmission Competition Coalition (ETCC) and the undersigned organizations, we urge you to protect electric ratepayers in any electric transmission infrastructure legislation, including H.R. 3684, the Infrastructure Investment and Jobs Act," said a letter addressed to the Senate Energy and Natural Resources Committee and the House Energy and Commerce Committee.

The newly formed ETCC is led by the Industrial Energy Consumers of America, which is a 501(c)(6) nonprofit member-led organization representing the interests of manufacturing companies.

"We want legislation that will promote transmission competition through a requirement ensuring that investor-owned utilities cannot skirt around it," Paul Cicio, president of the Industrial Energy Consumers of America, said in a phone call. The initiative would be implemented by the Federal Energy Regulatory Commission, he said.

Cicio said the group is not opposing anything in the current bill and just looking to add the transmission competition provision.

The infrastructure bill under negotiation was said to include $73 billion for power infrastructure, with the White House calling it "the single largest investment in clean energy transmission in American history."

However, consultant ClearView Energy Partners noted that the Senate summary only authorizes approximately $28.8 billion for electric grid infrastructure. The Senate is looking to pass the bill in the coming days.

Transmission spending from investor-owned electric utilities increased 42% from $17.7 billion in 2013 to $25.1 billion in 2019, but transmission projects subject to competition represent only about 3% of US transmission investments between 2013 and 2017, according to the letter sent to the Congressional committees.

"Those on the energy committees know about FERC order 1000 which was designed to bring competition, but those committee members have not been informed that order 1000 is not working," Cicio said.

Transmission expansion dynamics

FERC order 1000, issued in 2011, is a final rule intended to reform the commission's electric transmission planning and cost allocation requirements for public utility transmission providers, but its success has been questioned by current and former FERC commissioners and chairs.

Speaking during the remotely held S&P Global Platts Northeast Power and Gas Conference in May, Commissioner Alison Clements said no one thinks order 1000 was a smashing success, though it had great intent.

Every living former FERC chair has said it is time to update the order, Clements said.

The ETCC letter contended that some utilities have relied on local planning to avoid competition, contrary to the intent of FERC order 1000, "and consumers are paying the price through increased transmission costs."

However, discerning the degree to which transmission cost increases have resulted from a lack of competition versus costs associated with replacing aging infrastructure is not straightforward.

"A lot of transmission is being built to replace aging infrastructure and it is very hard to distinguish between what asset replacements are needed now, which can wait, and which can be done more efficiently through regional optimization," Rob Gramlich, executive director of Americans for a Clean Energy Grid, said in a phone call.

In fact, FERC issued an Advance Notice of Proposed Rulemaking (RM21-17) July 15 to explore the need for more holistic transmission planning, cost allocation and generator interconnection processes, to plan the power grid for the future, Gramlich said.

The current challenge in the industry is between asset owners and consumers over how much infrastructure replacement is really needed, he said, which comes at an "unfortunate time" because the industry also has to expand interregional capacity to connect renewable energy resources to high demand centers.

Gramlich also questioned the timing of the ETCC's letter, given the infrastructure bill being in late-stage negotiations, saying the request is "not realistic" at this point in the process.

"Contrary to what the letter claims, there is already substantial competition built into the transmission development process, from engineering and construction services down to the materials being used," Adam Benshoff, vice president of regulatory affairs at investor-owned utility trade group Edison Electric Institute, said in an email.

"It is critical that we focus on identifying opportunities to accelerate the timeline for approving, permitting, and building these transmission projects, not further complicating or delaying it," Benshoff said, adding that "most of the transmission investments in the last five years have been devoted to reliability and local needs because the regional transmission planning process has determined that these projects are the most efficient and cost-effective way to meet system needs and to enhance the reliability and resilience of the energy grid."

"It is important to recognize that an increase in capital expenditures does not necessarily correlate to increased bill costs. The cost of electricity has remained at or below the rate of inflation for decades, even while electric companies are investing record amounts," he said.