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FERC, Electricity Transmission, and Clean Energy: Even Without New Legislation, Plenty to Do

Climate Justice Climate Energy Environmental Justice

This commentary was originally published as part of “The Debate,” a feature of the Environmental Law Institute’s Environmental Forum (November/December 2023 issue). It is reprinted with permission. You can read the original version and the full Debate section on the Federal Energy Regulatory Commission (FERC), the clean energy transition, and energy justice by clicking here.

Under the Federal Power Act, FERC has an obligation to maintain national grid reliability and to ensure “just and reasonable” rates for wholesale electricity sales and transmission. Notably, Congress has not granted FERC authority over the siting and permitting of most interstate transmission lines, as it has with interstate natural gas pipelines, leaving that authority over power lines primarily with the states. Even in the absence of congressional action, however, FERC has powerful tools using its existing statutory authority over rates and reliability to incentivize regulated transmission owners and grid planners to build the large-scale regional “macro-grid” the country needs. This transformation is critical to incorporate the increasing amounts of low-cost wind, solar, and battery resources rapidly being financed and built across the country to replace aging fossil-fuel generation.

To date, FERC has failed to direct regional transmission organizations and regulated utilities to engage in the type of planning needed to support the electric grid of the future, despite its efforts to encourage such actions in Order 1000 in 2011. Integrating new carbon-free resources into the grid and maintaining both reliability and just and reasonable rates falls squarely within FERC’s jurisdiction and is even more urgent than it was in 2011 — because of the increasing number of blackouts and brownouts nationwide due to aging grid infrastructure and severe weather events arising from climate change.

Importantly, clean energy is currently the lowest-cost electricity resource even without federal financial support. The massive new influx of funding for carbon-free energy resources and grid expansion under new federal laws only make these resources more financially desirable, prompting utilities across the country to retire coal plants in favor of new wind, solar, and battery resources.

To date, however, two of the four FERC commissioners continue to ignore the reality of today’s energy mix based on arguments that not all states have enacted clean energy policies and thus should not pay for transmission infrastructure to support other states’ policies. Such arguments ignore the fact that renewable power resources are being built not only in states with clean energy standards like California, Minnesota, and New York, but at an even faster pace in states that often proclaim as a policy matter that they oppose a clean energy transition, like Texas, Florida, Iowa, and Oklahoma — which are the top states nationally for installed capacity of wind and/or solar energy. Indeed, during the summer heat waves of 2023, the Texas grid maintained reliability in large part because of the private-sector investment in solar resources and batteries. The grid does not stop and start at state boundaries. FERC is responsible for ensuring a reliable grid nationwide that supports the significant changes to the generation mix across the country.

Beyond its fraught efforts to reach agreement on regional and inter-regional transmission-planning reforms, there are additional actions FERC can take to support a modern and reliable electric grid using existing statutory authority.

FERC can use its authority over return on equity to encourage transmission owners to build regional and inter-regional lines. Setting a higher ROE for such lines will counteract transmission owners’ desire to build local lines that they can include in their rate base and that are exempt from competitive bidding from merchant transmission line companies.

The commission can require regulated utilities and regional transmission organizations to offer expanded demand-response programs. Transmission planning, permitting, and construction can take over a decade to complete, which is too long to keep pace with the hundreds of billions of dollars of investments that must, under federal law, be spent sooner than that, and will rapidly electrify the nation’s building and transportation systems. Demand response is a low-cost bridge solution that FERC can implement now.

FERC should engage with states, regional transmission organizations, and transmission owners to support co-locating transmission lines with other types of existing infrastructure, like the SOO Green line—an underground high-voltage line along railroad rights-of-way to transmit wind power to where it is needed. This is the type of large-scale inter-regional project that must be replicated. But the project has faced obstacles from regional transmission organizations’ interconnection and cost-recovery requirements that were not designed with projects like these in mind.

Using the revived backstop siting authority Congress granted in 2021, FERC can approve important but embattled transmission projects like the New England Clean Energy Connect in Maine and other regional or interregional projects. Doing so will create a template for similar projects and demonstrate to states that FERC is serious about using its enhanced authority.

Finally, FERC needs to recognize energy justice concerns as part of its obligation to ensure just and reasonable rates. Order 1000 requires planning processes that consider needs driven by state or federal requirements. State legislatures and public utility commissions are increasingly recognizing the need to incorporate energy justice into rates and policies. When underserved communities pay more for less reliable electric service, such rates—which include wholesale energy costs within FERC’s jurisdiction—are not just and reasonable.

Climate Justice Climate Energy Environmental Justice

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