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FERC chair wants to offer new incentives, require planning to buildout grid

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Essential Energy Insights - February 2021

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Six trends shaping the industries and sectors we cover in 2021

Six trends shaping the industries and sectors we cover in 2021


FERC chair wants to offer new incentives, require planning to buildout grid

Federal Energy Regulatory Commission Chairman Richard Glick on Feb. 11 said he plans to prioritize actions that boost the buildout of electric transmission infrastructure by offering new incentives and requiring better interregional planning. He also warned that a long-simmering backstop siting problem may require new legislation from Congress.

"We need to recognize that a significant build-out of the transmission grid will be necessary to allow for substantial development of the country's renewable resources to meet policy goals established by the states and the federal government," the Democrat said in outlining his priorities during his first call with reporters since he was elevated to the chairman's seat last month.

Glick noted that Order 1000, a decade-old transmission planning rule, has so far failed to produce a single new interregional transmission line. In fact, Glick said, the rule has had a perverse effect by incentivizing incumbent utilities to build an increasing number of local reliability projects shielded from competitive bidding.

"Essentially utilities have an incentive to build these shorter reliability, supplemental project-type lines because in that case, they don't have to subject those types of projects to a competitive bidding process," Glick said. "I think we need to figure out a way to address what I think is a disincentive."

Glick also cited a pending rulemaking (RM20-10) on proposed changes to the commission's transmission incentives policies, a proceeding that was struck from last month's agenda shortly before the final open monthly meeting with Republican Commissioner James Danly as chair.

Glick said he dissented from the March 2020 proposed rule in part because he thought it did not go far enough in incentivizing new transmission lines built pursuant to state or federal policies.

"I still think we should do that," Glick said.

Asked about a recent discussion around FERC's backstop siting authority in situations where a state has denied an interstate transmission project, Glick noted that no such projects have come before the agency since the U.S. Court of Appeals for the 4th Circuit in 2009 vacated the commission's implementing rules for a related provision of the Energy Policy Act of 2005.

Section 1221 of that statute made the U.S. Department of Energy responsible for identifying national interest electric transmission corridors after conducting a grid congestion study. It also gave FERC authority to issue permits for transmission projects in cases where applicants do not qualify for a state permit or a state has "withheld approval" of a permit for more than one year.

"I think it's somewhat much ado about nothing at this point because there aren't any proposed projects where people come to FERC and say, 'You need to step in and engage in the backstop siting process,'" Glick said.

With President Joe Biden aiming to decarbonize the U.S. power sector by 2035, however, Glick expects DOE to revisit the corridor issue after it languished for years under the Trump administration.

The chairman also said Congress can help resolve legal uncertainty clouding the issue by passing additional legislation that clarifies FERC's authority in instances where a state has denied a permit for an interstate transmission project.

"Given lots of focus on that particular issue, it would be helpful if Congress could clarify what it meant back in 2005 in light of the 4th Circuit decision," Glick said. "That would certainly be helpful to us."

Glick was also asked to weigh in on the feasibility of Biden's carbon-free-by-2035 vision for the U.S. power sector.

"I've been involved for a long time on electricity issues, and I always see people say, 'It can never be done,' whenever someone sets a target, and then we're always exceeding those targets," Glick said.

With FERC prohibited from discriminating according to technology type, Glick said the commission's main challenges ahead will be ensuring that markets function smoothly while incentivizing greater investment in the nation's transmission system.

"We do have a duty to figure out where the industry is going and recognize the fact that there is going to be a lot more demand for electricity," Glick said. "I think we have to figure out policies that will hopefully promote greater investment in the transmission grid to facilitate access to cleaner resources."