Is a Showdown Inevitable? THE GEE STRATEGIES GROUP Robert W. Gee Principal NATIONAL CONFERENCE OF STATE LEGISLATURES ANNUAL MEETING ENERGY & TRANSPORTATION

Is aIs aShowdown Showdown Inevitable?Inevitable?

THE GEE THE GEE STRATEGIES GROUPSTRATEGIES GROUP

Robert W. GeeRobert W. GeePrincipalPrincipal

NATIONAL CONFERENCE OF STATE LEGISLATURES NATIONAL CONFERENCE OF STATE LEGISLATURES ANNUAL MEETINGANNUAL MEETING

ENERGY & TRANSPORTATION COMMITTEEENERGY & TRANSPORTATION COMMITTEESan Antonio, TexasSan Antonio, Texas

August 13, 2001

Electric Transmission Siting: Electric Transmission Siting: Assessing the state v. federal Assessing the state v. federal

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THE GEE STRATEGIES GROUPTHE GEE STRATEGIES GROUP 2

Today’s FocusToday’s Focus

What is the problem?What are the issues?What are the arguments on both sides?What solutions are being considered?


The ProblemThe ProblemElectricity demand has been growing, and

will continue to grow Volume of wholesale power trading

transactions is escalating Originally designed for local use,

transmission lines are now being used to move power over longer distances

Grid congestion is erupting Grid is under stress, and reliability is being

threatened


Past and Future: Past and Future: Surging Electric Surging Electric

DemandDemand

From 1949 to 1999, U.S. population expanded 83 percent, but electricity sold by utilities grew 1,180 percent

Per-capita average consumption of electricity in 1999 was seven times higher than in 1949

For next 20 years, demand for electricity projected to increase per year by 1.8 percent ( to 393 gigawatts, or combined grids of Japan and Germany)


393 GW = 1,300 New Projected Power 393 GW = 1,300 New Projected Power Plants Plants

Projected New Generating Capacity and Retirements, 2000-2020 Projected New Generating Capacity and Retirements, 2000-2020 (gigawatts)(gigawatts)

Source: EIA Annual Energy OutlookSource: EIA Annual Energy Outlook 20012001


GridGrid Use: Power Sales Have Been Use: Power Sales Have Been Growing Dramatically. . .Growing Dramatically. . .


. . . But Transmission Investment. . . But Transmission InvestmentHas Been Steadily Declining. . . Has Been Steadily Declining. . .

Source: E.Hirst, “Transmission Crisis Looming?” Source: E.Hirst, “Transmission Crisis Looming?” Public Utilities FortnightlyPublic Utilities Fortnightly, September 15, 2000, September 15, 2000


. . .. . .Requiring a 200 Percent Increase in Requiring a 200 Percent Increase in Transmission Line Relief Measures To Transmission Line Relief Measures To

Alleviate CongestionAlleviate Congestion

Source: ABB, taken from Eastern InterconnectionSource: ABB, taken from Eastern Interconnection


Transmission Grid Transmission Grid TransformationTransformation

Local multi-state regional superegional FERC Order 2000: all public utility transmission

owners and operators required to submit filings to create Regional Transmission Organizations (RTOs).

RTOs address essential transmission functions on a regional basis, including grid operation, reliability, congestion management, & planning and expansion

July 2001: FERC mandates consolidation of various RTO proposals

Future Vision: 5 “Super RTOs” in Nation



The IssuesThe Issues

With regional character of grid, can needed transmission capacity be timely built under current law and procedures?

Who should decide whether new lines are needed?

Who should decide where new lines are sited?


Current Certificate and Siting LawCurrent Certificate and Siting Law

States & local entities hold authority to decide whether lines are needed and where they are sited

Legacy from era when transmission was primarily local Thus, despite emergence of RTO role, states still hold the

cards for determining whether and where new lines get built But for interstate natural gas pipelines, federal law confers

certificate (“need”) authority on Federal Energy Regulatory Commission with legally enforceable right of certificate holder to enforce eminent domain authority to site if necessary


Current Status of State Siting Current Status of State Siting Authority (2000 Survey)Authority (2000 Survey)

12%: do not conduct a state level review of transmission line siting or were unaware whether they had siting jurisdiction

78%: one primary state agency responsible for electric line permitting (usually state PUC), with other state and local agencies having input

33%: review transmission lines 100 kV 24%: review transmission lines > 100 kV 19%: review transmission lines > 200 kV 50% of state PUC’s see role as aiding dispute resolution,

either between utilities or between the utility and the public

Source: Edison Electric Institute/Resource Strategies, Inc.Source: Edison Electric Institute/Resource Strategies, Inc.


2000 Survey (con’t.)2000 Survey (con’t.)

“In regions of the country where transmission companies, independent system operators (ISOs), or similar types of organizations have been established, state utility commission regulatory authority is evolving. An increased federal presence may emerge in an attempt to resolve regional siting conflicts. At this time no definite end-point has been attained.”Source: Edison Electric Institute/Resource Strategies, Inc.Source: Edison Electric Institute/Resource Strategies, Inc.


Criticism of States Is Not New. . . Criticism of States Is Not New. . .

National Governors’ Association study: siting and certification cited as critical factors impeding construction of needed transmission lines (1987)

Federal Office of Technology Assessment report : siting new electric transmission lines deemed almost impossible because of the obstacles encountered in regulatory review and approval (1989)


But It May Grow: Transmission Lines Claimed But It May Grow: Transmission Lines Claimed by Some as Needed Todayby Some as Needed Today

765-kV line proposed by American Electric Power in Virginia and West Virginia

Two lines (230 kV and 345 kV) between Minnesota and Wisconsin

500-kV line between Georgia and Florida Expanded interfaces between Indiana and Michigan Expanded interfaces between PJM and New York and between

New York and New England Additional transmission from Wyoming to eastern Colorado Additional transmission facilities to serve the growing loads of

various areas, including Boston, New York City, Long Island, San Francisco, and San Diego.

Source: E. Hirst, Expanding U.S. Transmission CapacitySource: E. Hirst, Expanding U.S. Transmission Capacity


Most Noted Contentious Most Noted Contentious CasesCases

765-kV line proposed by American Electric Power in Virginia and West Virginia: pending 10 years, earliest expected completion by 2004

Chisago-Apple River transmission line project: 39-mile, 230-kilovolt (kV) line between Minnesota and Wisconsin; began 1996, construction anticipated by 2004 on scaled-down basis; 220-mile, 345-kV Arrowhead- Weston line

300-MW transmission cable running below Long Island Sound, linking New Haven, Connecticut, to Shoreham, New York: rejected by Connecticut Siting Council March 2001


Solutions Part 1: Give Siting Solutions Part 1: Give Siting Power to FERC (The Case “For”)Power to FERC (The Case “For”)

Increasingly interstate nature of transmission is undeniable; federal role necessary for new facilities to facilitate interstate and interregional transactions

Absent direct local benefit, state through which a utility line must pass may be reluctant to authorize its construction, regardless of benefit to interstate commerce

Capacity planning and siting must be coordinated regionally; role is beyond that of individual state

New lines benefit the entire network (economically and from reliability standpoint)

Federal authority can better coordinate diverse state and local interests involved in process


Solutions, Part 2: Leave Siting Power Solutions, Part 2: Leave Siting Power with the States (The Case “Against”)with the States (The Case “Against”)

States have not stood in way of valid transmission proposals, even in Conn. where new route being chosen

FERC not necessarily more timely than states, evidenced by longevity of pipeline cases

Pipelines not transmission lines: line of sight still at issue for those not compensated; greater numerical opposition to transmission lines

States have succeeded in siting all existing transmission and generation thus far

Unlike FERC, states could choose between siting generation in lieu of transmission


Proposals to Confer Federal Proposals to Confer Federal Siting AuthoritySiting Authority

Sen. Frank Murkowski (R-Alaska) in 106th Congress (S. 2098): power of eminent domain to FERC

Sen. Mary Landrieu (D-LA) stand-alone bill: give FERC eminent domain “back-stop” authority if state and local authorities fail to act within 180 days

Sen. Jeff Bingamen (D-N.Mex.) white paper: (1) authorize creation of regional regulatory compacts charged with exercising jurisdiction over transmission planning, expansion and siting, (2) give FERC siting authority as back-stop capable of being ceded to “appropriately constituted regional entities”; and (3) allow such bodies to exercise all or some jurisdiction previously exercised by states currently at risk of FERC preemption, such as setting regional reserve requirements, maintenance requirements and market monitoring


Current Positions of Other Current Positions of Other State OrganizationsState Organizations

National Governors’ Association: opposed to federal preemption of state & local siting authority; concur on need for transmission line expansion & multistate cooperation; task force formed to work with DOE

National Association of Regulatory Utility Commissioners: opposed to federal preemption & reaffirm primary jurisdiction of states for siting; support voluntary regional organizations that have siting authority with federal “backstop” authority to resolve regional conflicts


Conclusion and Conclusion and RecommendationsRecommendations

At minimum, states need to decide whether status quo is sufficient

If it is not, decide what to do even if desired solution is not to give FERC siting authority

Need to reach closure and implementation as swiftly as possible on whatever is decided

Spirit of Cooperative Federalism must prevail


The Gee The Gee Strategies GroupStrategies Group

Robert W. GeeRobert W. GeePrincipalPrincipal

1954 N. Cleveland St.1954 N. Cleveland St.Arlington, VA 22201Arlington, VA 22201

(703) 465-9181 (voice and (703) 465-9181 (voice and fax)fax)

(703) 593-0116 (mobile)(703) 593-0116 (mobile)Email: Email:

[email protected]@ix.netcom.com

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Is a Showdown Inevitable? THE GEE STRATEGIES GROUP Robert W. Gee Principal NATIONAL CONFERENCE OF STATE LEGISLATURES ANNUAL MEETING ENERGY & TRANSPORTATION