The Siting Quagmire Persists
There’s been no success yet in getting the second element into position — siting transmission lines that no one wants to see. The struggle between states and the federal government for control of siting led to the compromise in EPAct that provided FERC "backstop" siting authority if the states refused to site critical facilities. This law was all but emasculated by a recent court decision, and only one utility has so far even attempted to initiate the FERC siting process. Even with potential investors on board, siting uncertainties remain a major impediment to getting steel in the ground.
Renewables May Bridge the Political Gap
The events of 2008 changed the political landscape. The oil price shocks and the image of former President Bush begging Saudi Arabia to pump faster seem to have created a broad national consensus, this time with legs, that America must be more energy self-sufficient. At the same time, consensus seems to have reached a tipping point that something significant needs to be done to reduce human impact on the climate. We now have an activist president, with a Congress of the same party, for whom solving both energy and climate issues is a top priority.
A widely recognized solution to both the energy and climate challenges is increased use of renewable energy resources, and enhanced interest in renewables may finally force Congress to resolve the siting dilemma to enable power from regions with abundant wind and solar resources to reach load centers. This issue has led to sightings of strange bedfellows. Republican oil maverick Boone Pickens now cavorts with Nancy Pelosi and Harry Reid to promote transmission line construction, and national trade associations that often disagree on electric issues jointly advocate strengthening the federal government’s role in transmission siting.
So far in 2009, a plethora of new proposals, studies, and reports have been released, and legislation has been introduced, addressing the urgent need to get "green power" lines built. This consensus for action may finally force states to lessen their resistance to a greater federal role in siting.
The Allocation Issue
Still to be answered is the question of who pays for new transmission lines. Spread over the broadest rate base, the cost of the new facilities would not be a significant part of the overall cost of power. However, ratepayers living between the resource and load centers question why they should pay more so that electrons can zip across their state, when they see no benefit. This issue raises the question of whether the costs should be allocated to those who are "responsible" for their incurrence or whether everyone should pay for new lines because they benefit the whole nation. Although important, aligning this element with the others will likely require resolution through compromises, and the resolution may vary by project and region.
Thus, 2009 may finally be the year that prospective transmission builders get the returns and financial flexibility they need to make projects work — as well as clear rules on how to get lines sited and paid for.
—Brian R. Gish (briangish@dwt.com) is of counsel in Davis Wright Tremaine’s Energy Practice Group.
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