The Huffington Post reports that Texas State Senators are concerned that a sustained drought could lead to brownouts, impact grid reliability, and diminish economic growth. While officials are working to add extra sources of power, including additional wind, and planning to build transmission lines, there is no short-term solution.

State utility authorities said “part of the problem is that energy is currently so inexpensive to produce in Texas that there is little incentive to improve infrastructure and make energy generation more efficient to guard against shortfalls sparked by water shortages.”

One State Senator advocated for Texas determining a contingency plan for coping with future energy needs similar to the long-term water plan it produces every five years.

To read the full Huffington Post story, please click here.

The study, The Future of the Electric Grid, identifies two major challenges to the next evolution of the grid – the lack of a national electricity policy and the patchwork of “regulatory regimes” that currently govern this vital infrastructure.

However, ensuring the reliability and maximum efficiency of the system can be achieved through a range of common sense regulatory reforms, including full utilization of the interregional and intraregional directives related to planning and cost allocation found in FERC’s new Order 1000.

A copy of the full MIT report can be found here, and a summary version  here.

Wellinghoff said that a recent FERC cost allocation and planning order “would allow for regional flexibility, gives states a role to play in planning and ensures that the cost of transmission lines would be allocated to beneficiaries of those projects,” reports Esther Whieldon of Platts.

He also asserted during his testimony that FERC would receive criticism for its rule regardless of the outcome, so FERC “had to take a balanced approach to ensure it did not go too far in either direction,” he said.

Other witnesses testifying at today’s hearing included:

• Lauren Azar, Senior Advisor, Office of the Secretary, U.S. Department of Energy
• Greg White, Commissioner, Michigan Public Service Commission
• Philip B. Jones, Commissioner, Washington Utilities & Transportation Commission
• John DiStasio, General Manager & CEO, Sacramento Municipal Utility District, on behalf of the Large Public Power Council
• Steven A. Transeth, Principal, Transeth & Associates, PLLC on behalf of the Coalition for Fair Transmission Policy 
• Nicholas Brown, President & CEO, Southwest Power Pool, Inc.
• Joseph Welch, Chairman, President & CEO, ITC Holdings Corp.

Read the full Platts article here.

Spitzer explained, “In some regions of the country it’s entirely possible that along lines to bringing resources, whether they’re fossil resources or renewable resources, to load to the benefit of ratepayers will provide for a broader cost allocation. In other regions perhaps you’d reach a different result, but we created a fair, transparent planning process that all the stakeholders will be able to provide input. It will vary by regions and I think that’s a benefit for the ratepayers.”

Click here to view the interview and read the transcript.

The state’s high-voltage transmission lines, in part, have allowed Kansas to develop and capitalize on its wind energy potential and move it effectively to market.

Huslig explains that the Southwest Power Pool (SPP), which oversees transmission development in Kansas and the surrounding region, is building transmission to modernize the grid at a faster pace because stakeholders came to broad agreement on how to plan and finance modernization projects.

Read the full story here.

Kansas Gov. Sam Brownback and FERC member Marc Spitzer headlined the event as the speakers and attendees addressed the environmental
 and
 economic
 benefits
 to the region and the nation of
 an 
expanded
 transmission
 grid
.

Read more coverage

See the agenda and watch the webcast of the event

Responding to a quote from FERC Chairman Jon Wellinghoff on the need for investment in transmission to meet the shifting generation fleet, Bready agreed and highlighted how regional systems are the key:

“Building more regional systems will make sure we are accommodating the reliability and interconnection needs for wide scale generation across multiple markets and allow power to move more freely across markets.”

On FERC’s new rule outlining how regions pay for transmission expansion, Bready explained that the general principles make sense:

“The general principles from FERC are that those who benefit from the expansion of transmission should bear some of the costs.  After all, you’re asking people who are going to benefit on a broad scale basis from improving reliability and allowing access to lower cost generation costs to pay some of the costs associated with the improvements.”

Watch the entire interview.

According to Wald, it has been clear “that the existing transmission lines will not allow for a free market in electricity in which generators can compete across vast distances to supply customers, or for meeting state renewable energy goals.”

The new rule addresses this problem with general guidelines that mandates that the costs of any new line should be taken care of by those who benefit.

Grid modernization supports favor the rule and its promise to help remove barriers to building projects that our country’s grid so badly needs.

“Now, if a transmission line has broad impact, costs are likely to be assigned more broadly,” said Nina Plaushin, vice president for federal affairs of ITC Holdings.

Read full article

Included in the rule are six cost allocation principles intended to provide regions with guidance on developing methodologies that meet their needs.  The principles also ensure that no transmission benefits are excluded from consideration and that strategic development costs are allocated at just and reasonable rates.

At the public meeting, the commissioners weighed in with their support for the rule:

FERC Chairman Jon Wellinghoff: “This rule is an important step forward, building on FERC’s successful market reforms over the past 15 years. Our action today promotes efficient and cost-effective transmission planning and the fair allocation of costs for new transmission facilities.  These changes will provide consumers with greater access to efficient, low-cost electricity.”

Commissioner Marc Spitzer: “Today’s Rule adopts a framework through which regions, with open participation from all stakeholders, determine what best fits their needs.  The Rule does not mandate a uniform approach nationwide.  In other words, the Rule does not require interconnection-wide planning or cost allocation.  Instead, the Rule allows for regional differences in transmission planning and cost allocation.  The Rule provides a sound basis for financial and public support for electricity infrastructure.”

Commissioner Cheryl A. LaFleur: “The reforms required by the Final Rule are also consistent with cost causation principles and judicial precedent, including the requirement that beneficiaries are only allocated costs that are at least roughly commensurate with benefits.”

Read the full press release here

Read the rule fact sheet here

“Cost allocation — the formulas that decide how ratepayers share the costs of these large investments in our infrastructure — has traditionally been simple and straightforward: Everyone pays according to how much they benefit. FERC’s new rule will not change that; it will simply help regions account for all the benefits that transmission provides — including, for the first time, the benefits of meeting state clean energy standards.”

“That is exactly the right approach. Any other path would discourage investment in the grid and with it the resource development, jobs, and access to cleaner and cheaper forms of power it would support.”

The editorial also objected to opponents of the new cost allocation rule, highlighting the misguided intentions of a small but powerful group of utilities that are determined to protect their own generation capacity to competition.

“It’s a familiar — and unpleasant — tactic to scare consumers and businesses into believing they can’t afford a better, cleaner, and cheaper energy system, but it’s a tactic that in this case has absolutely no basis in reality. Transmission is the smallest component of any electricity bill — equaling about 7 percent on average. No matter what state you live in, transmission makes up a sliver of the total cost of electricity.”

Read the editorial.