WIRES, an international non-profit trade association that promotes investment in the North American high voltage electric transmission grid, submitted comments today in response to FERC’s Notice of Proposed Rulemaking for Electric Transmission Incentives Policy Under Section 219 of the Federal Power Act (Docket No. RM20-10-000).
Comments from Larry Gasteiger, Executive Director of WIRES
“As the Commission recognized in the Incentives NOPR, there are numerous drivers underlying the need for new transmission infrastructure, including the evolving resource mix, an increasing number of new resources seeking transmission service, shifts in load patterns, implementation of reformed transmission planning processes, and new challenges to maintaining the reliability of transmission infrastructure. Investment in transmission needs to be encouraged to not only address these issues, but to also offer the US economy much needed economic stimulus and job expansion.
WIRES supports FERC’s proposed changes to its incentives policy and recommends certain modifications. In particular, the final rule should include FERC’s proposed RTO Participation Incentive and Transmission Technology Incentive adders. There are numerous benefits that flow through to consumers via the RTO/ISO model, most importantly access to large competitive markets that lower power costs and improve reliability. However, participation in RTOs and ISOs, introduce numerous risks and complexities for transmission operators as they cede control and manage myriad requirements and complexities. Similarly, consumers benefit from the widespread adoption of advanced transmission technologies through reduced costs and improved productivity and quality of electric service. The risks transmission operators are exposed to in the deployment of advanced technologies weigh in favor of a higher rate of return in the form of an ROE adder.
Investment in transmission is a long-term proposition, and investors require certainty that they will recover their investment and earn a reasonable return. The unstable economic climate and uncertain regulatory environment, difficulties with siting and permitting, long-lead times for construction of transmission infrastructure, and long depreciable life of transmission assets necessitate policies from FERC that clearly and unambiguously incentivize investment in transmission above and beyond normal ratemaking processes.
In a new whitepaper, London Economics International offers additional evidence that supports these two incentives adders, concluding ‘Ultimately the additional compensation offered through these two incentives should stimulate transmission investment and attract diverse capital to the sector, and facilitate the deployment of transmission projects that advance technological innovation.’”