September 21, 2009
It's taken five years. But the Public Service Commission of Wisconsin has given approval to American Transmission Co. to build a new 32-mile high voltage transmission line that will link two towns within the state and which will be complete by 2013. While obscure to most of the nation, the $215 million project may represent a gradual shift in how transmission is owned and permitted.
The demand for energy is expected to keep climbing and contributing value to most power facilities. In states that have restructured their electricity markets, that energy can be sold at market rates, giving well-run facilities the chance to earn superior returns. Transmission systems, however, will continue to be regulated, perhaps making the investments less attractive to certain utilities and more appealing to third party transmission owners.
"We've been successful," says Tom Finco, director of external relations and policy for American Transmission Co. in Madison, Wis. "We've built a lot of infrastructure. The most important part has been the consistency and doing what we say."
Since 2001, the independent transmission operator that does not own generation and therefore has no incentive to favor any one power supplier has invested $2 billion in infrastructure in Wisconsin and Michigan. The cost of construction is passed through to its customers, which are the local investor-owned utilities that often advocate for it at the public service commission hearings.
According to Finco, American Transmission will engage the public at least a year before it starts filing any permits. It will then maintain those open lines of communication throughout the process and before any construction would begin. The company emphasizes that its independence allows unregulated power suppliers as well as wind energy farms more opportunity to access the competitive transmission system. It has, for example, integrated 400 megawatts of wind power into its network.
It all points to the need to create innovative methods to build new transmission. That's because the North American Electric Reliability Corp. is predicting that in the next 10 years that new generation supplies could grow by 21 percent while the transmission assets would rise by only 10 percent. To even things up, the federal government is pouring billions into intelligent utility programs.
"The challenge is to develop a comprehensive strategy and program that will match President Obama's comprehensive dream," says Susan Tomasky, who heads American Electric Power's transmission organization. The larger, vertically-integrated utilities such as AEP say that they are fully equipped to help deliver this promise.
The Vision
And while Obama's vision holds promise, it must be backed by sound logistics. In the end, the development of a modern grid that is not just self-healing but is also permissive of two-way communication between utilities and their customers must be properly planned, executed and financed.
To accomplish this, AEP is advocating a greater federal role -- one that clarifies and even extends the powers granted to the Federal Energy Regulatory Commission under the 2005 Energy Act. That law has given the agency the right to push through vital transmission projects if the states fail to act within one year. But if those jurisdictions object to such construction, the courts have held that there is little FERC can do.
Therefore, the Columbus, Ohio-based utility is lobbying to have FERC given the same rights as those granted under the National Gas Act. Under that law, FERC will convene every party that has interest in the permitting of a natural gas pipeline. After hearing all arguments, it will make its decision. And while the law would then give the federal government eminent domain rights, it does not obviate the need to work with the local communities to satisfy their concerns.
In the future, successful transmission planning must be less myopic and more comprehensive. In the old days, expansion had been about connecting power plants to local distribution systems. But now it must include a national vision whereby the infrastructure can transport a wide array of energy sources as well as bolster its reliability, says Tomasky. FERC must therefore take the lead when it comes to getting essential lines built that stretch across state lines.
She points to AEP's efforts in Kansas and Oklahoma where it hopes to integrate wind resources into the grid there. That initiative will require an extra-high voltage transmission line that she says can be "overlaid" atop the current system -- an all-inclusive move that would deliver more bang for the buck than trying to accomplish the same task using a piecemeal approach.
But which entities are best able to lead this charge? The third party owners such as American Transmission Co. say that their singular focus and business objectives mean that they are well-suited to get the job done. But even such enterprises admit that there are not a lot of transmission systems up for sale right now.
Incumbent utilities, meanwhile, are reluctant to sell their transmission assets, noting that they have a duty to reliably serve their customer base. Doing so would not just mean less control over which electrons get dispatched, it would also mean losing size and scale.
Public, private and not-for-profit stakeholders must therefore work together. To accommodate the expected growth of electricity markets and particularly those for renewable energy, the nation's grid must be expanded and improved -- something that is in the mutual interest of both the independents and the incumbents.
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