Discussion Paper

Prepared by Johannes Pfeifenberger, Judy Chang, and Akarsh Sheilendranath

Executive Summary

Competitive transmission planning processes in ISOs/RTOs, the most controversial aspect of FERC Order 1000, have shown potential for significant customer savings:

  • While the scope of competition has been limited to only 2% of total U.S. transmission investments over the last 5 years, competitive processes led to innovations in proposed solutions, low bids, cost caps, cost control measures, and innovative financial structuring
  • Winning bids average 40% below initial cost estimates while non-competitive projects are completed at 34% above initial estimates, offering 55% of potential cost savings
  • Long-term savings likely less than the currently-observed 55% cost differences, but real prospect of significant customer benefits and innovation nevertheless
  • Even if long-term savings were only half the 55% difference, if the scope of competition could be expanded from 2% to 33% of total transmission investments, estimated customer benefits would be approximately $8 billion over just five years
  • Lower costs will also make transmission more cost-effective to address market efficiency and public policy needs (e.g., relative to more local and distributed generation)

Recommendations:

  • Reduce qualification thresholds for competitive process and develop consistent criteria, drawing from best practices from least-restrictive RTOs to expand scope of competition
  • Establish and implement consistent minimum reporting requirements to facilitate better tracking of project costs across all regions
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