Dive Brief:
- Entergy, Xcel Energy and seven other utility and transmission companies want the Federal Energy Regulatory Commission to halt the practice of putting regional transmission projects out to bid in the Midcontinent Independent System Operator and Southwest Power Pool regions.
- Requiring competitive bidding for certain transmission projects — instead of giving them to incumbent utilities — slows transmission development by 16 to 20 months on average, the utilities said in an April 7 complaint filed at FERC. They asked FERC to make a decision by July 16.
- Former FERC Chairman Neil Chatterjee told Utility Dive he disagrees with the complaint’s argument. “The competitive solicitation process has challenges and can certainly be improved but throwing the baby out with the bath water as the complainants suggest is counterproductive and not in the interest of consumers,” Chatterjee, chief of governmental affairs for Palmetto, said in an email. “The commission should focus on reforming the process, not suspending it.”
Dive Insight:
A group representing large energy users and consumer advocates — the Electricity Transmission Competition Coalition — urged FERC to reject the petition.
“Without competition, a monopoly incumbent utility has zero incentive to reduce costs because the more they spend the more their profits increase,” the group said in a press release filed at FERC on Wednesday. “Transmission competition in MISO and SPP has historically enhanced cost, schedule discipline and accountability, while non-competitive projects have not.”
The complaint is part of a long-running dispute over who should build major transmission projects: incumbent utilities or third-party transmission companies. Utility companies including American Electric Power and Evergy own some of the third-party transmission companies.
In an effort to lower costs, FERC’s Order 1000 on transmission planning and cost allocation — issued in 2011 — required that regional transmission projects be open to bidding by third-party transmission companies.
Some states responded by passing laws giving their incumbent utilities a right of first refusal for those projects. In MISO, for example, eight states adopted ROFR laws, although two of them were overturned in court.
Utilities pressed FERC to give them back the right of first refusal when the agency looked at revamping its transmission planning rules earlier this decade. The agency’s transmission planning and cost allocation proposal issued in 2022 — which eventually became Order 1920 — proposed restoring a right of first refusal for regional transmission projects that investor-owned utilities and public power utilities jointly developed. However, the feedback FERC received on the idea was “intensely negative” and was dropped, former FERC Chairman Richard Glick said in an email to Utility Dive.
“I suspect there will be a number of stakeholders that strongly oppose the complaint, which is much broader in scope than what the [notice of proposed rulemaking] had proposed,” said Glick, a principal at GQS New Energy Strategies.
The U.S. needs more generation and transmission to meet electric demand growth forecasts, and speed is a priority, according to Glick.
“But it is difficult to blame one aspect (a competitive solicitation process) of a larger set of issues, including permitting, supply chain, regulatory decision making, etc. … that produce the timeframes regions are currently facing,” he said.
In the just-filed complaint at FERC, utilities and transmission companies argue that the bidding processes at MISO and SPP are delaying transmission projects needed for AI data centers and manufacturing facilities, “posing existential threats.”
Bringing power lines online faster will lower consumer costs, in part because hyperscalers have promised to pay for the grid infrastructure needed to serve them, according to the complaint. “Customers will also pay less over time because high-voltage transmission reduces congestion and line losses and enables access to the most affordable resources,” the companies said.
The utility coalition presented FERC with two options: exempt any transmission project from bidding requirements if delaying the project would delay service to generation or load; or pause the solicitation requirements for five years.
The complaint was filed by International Transmission Co., Ameren, American Transmission Co., Cleco Power, Entergy, Evergy, Oklahoma Gas & Electric Co., The Empire District Electric Co. and Xcel.
The Electricity Transmission Competition Coalition told FERC that competitive bidding lowered costs on six recent SPP competitive projects by 21% on average and on eight MISO projects by 38%.
Refuting the utilities’ assertion that competitive bidding results in delays, the group noted that two recent competitive projects came online as scheduled in SPP last year, with a third project set to meet its in-service date next month.
The utilities' argument in the complaint “misses the mark entirely,” according to Kent Chandler, a senior fellow at the R Street Institute, a public policy think tank based in Washington, D.C., and former member of the Kentucky Public Service Commission. R Street is a member of the Electricity Transmission Competition Coalition.
“What matters is how quickly the transmission can be placed into service after identifying a problem, not the duration of any distinct part of that process,” Chandler said in an email to Utility Dive. “The complainants treat a competitive solicitation period as a wasted addition of time, but the evidence doesn't support that.”
The work that goes into responding to a solicitation is significant because if the applicant wins, it is committed to the project, including the in-service date and cost, he said.
Utilities didn't want FERC Order 1000, and some “are seeking to roll it back now that real money is at stake with the billions-of-dollars in planned transmission needs,” Chandler said.
