Expansion of the Electric Transmission Grid Faces FERC Regulatory Challenges

Vol. 53 No. 2

By

Michael J. Thompson is a shareholder in Wright & Talisman, P.C., in Washington, D.C. He represents and advises clients in regulatory matters and transactions involving the electric, natural gas, and oil pipeline industries. He has extensive experience in rate, tariff, enforcement, and rulemaking proceedings before the FERC and state utility commissions, as well as related appellate proceedings. Patrick L. Morand is an associate at Wright & Talisman, P.C., in Washington, D.C., where he represents the firm’s electric utility and natural gas industry clients in a variety of regulatory and commercial matters involving FERC, CFTC, and state regulation.

In 2009, the US Department of Energy’s Energy Advisory Committee declared that controversy about cost allocations represents “the single largest impediment to any [electric] transmission development, especially across multiple [regional transmission organizations, or “RTOs”] or across RTO and non-RTO regions.”1 Whether that preeminence is still true today may be debatable, but there certainly remains ample uncertainty about how responsibility for the costs of major transmission upgrades should be allocated among ratepayers. Moreover, cost allocation is not the only regulatory issue at the federal level that potentially hinders timely planning and construction of new transmission facilities. Recent orders of the FERC2 promulgating rules concerning regional and interregional transmission planning, as well as increasing pressure on FERC to revisit the rates of return on equity that it allows in utilities’ rates for interstate transmission services, could be additional obstacles to modernizing and expanding the transmission grid. This article provides an overview of the risks these contentious issues harbor for transmission investment.

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