FERC Proposal Would Subsidize Long-Distance Transmission Projects, Costing Consumers Billions of Dollars, Says CFTP Op-Ed in The Hill

WASHINGTON, July 19, 2011 /PRNewswire-USNewswire/ -- In a recent op-ed, Bruce Edelston, executive director of the Coalition for Fair Transmission Policy, warned that  electricity prices could become the next flashpoint in the nation's capital if the Federal Energy Regulatory Commission proceeds on July 21 with a transmission proposal that burdens consumers with the costs of new electric facilities from which they receive little or no benefits.

"FERC action on cost allocation for new transmission should ensure the lowest reasonable cost to consumers, not the largest possible subsidies to clean energy developers and transmission companies," stated the op-ed in The Hill newspaper, a prominent print and online Washington publication for and about Congress.  

An earlier FERC order provoked concerns about commission policy. In December, FERC issued an order that socializes the cost of certain new transmission lines across 13 Midwestern states. "Michigan consumers may be the first to experience FERC-approved sticker shock -- a $500 million a year surtax on their utility bills," Edelston wrote. As a result of the order, "Michigan could be forced to pay 20 percent of at least $16 billion for new wind farms in other states that will provide virtually no benefits to Michigan consumers," the op-ed stated.  

FERC could expand this Midwest model to the rest of the country when the commission finalizes a rulemaking on transmission planning and cost allocation this week. "FERC's proposal would allow regions to adopt a very broad definition of how 'benefits' are defined -- and thus how costs are allocated -- with the possible result being an unduly expensive transformation of the nation's electricity grid," Edelston wrote.

One result, he added, would be "an unfair and inefficient advantage for distant renewable resources over those available locally. Consumers in many states could be forced to pay billions of dollars to subsidize too-big-to-fail transmission projects that connect remote wind and solar projects to big-city markets."

In competitive wholesale markets, generators compete for sales to other utilities, based on total delivered costs of electricity. Defining benefits broadly and spreading costs widely will work against free competition in these markets, as those making the decisions of which generation resources to purchase will not face the true costs of those decisions. Transmission costs will be subsidized by others, and the total costs of providing electricity will increase, the op-ed stated.

"The market should determine what generation and transmission should be built. Instead, under its proposed rules, FERC would pick winners and losers, favoring remote renewable projects that require a transmission build out costing hundreds of billions of dollars over cheaper and possibly greener energy projects built closer to home," the op-ed said.  

Edelston wrote that doubts about the fairness of FERC's proposed approach have prompted appropriate calls for Congress to protect consumers from unfair electricity costs. A bipartisan group of law makers who support renewable energy and new transmission have introduced legislation that would amend the Federal Power Act by prohibiting FERC from finding any electricity rate "just and reasonable" unless the cost allocation among consumers is "reasonably proportionate to measureable economic or reliability benefits."

The Coalition's eight members are CMS Energy Corporation, Consolidated Edison, Inc., DTE Energy Company, Progress Energy Inc., Public Service Enterprise Group, SCANA Corporation, Southern Company and United Illuminating Company. More than 28 percent of U.S. electric customers, representing 26 states, are served by utilities and companies which are either formal members of the Coalition or are on record supporting the group's goals. For more information, visit the Coalition's web site, www.fairtransmission.org.

SOURCE Coalition for Fair Transmission Policy