On February 17, 2011, a bipartisan group of senators introduced the Electric Transmission Customer Protection Act that seeks to amend the Federal Power Act to ensure rates for power are assessed in proportion to measured reliability or economic benefit. The bill was introduced by Senators Corker (R-TN), Wyden (D-OR), Murkowski (R-AK), Burr (R-NC), and Graham (R-SC), and the proposed legislation addressees a Federal Energy Regulatory Committee (“FERC” or the “Commission”) Notice of Proposed Rulemaking (“NOPR”) on transmission cost allocation released on June 12, 2010 (see June 18, 2010 edition of the WER).
The FERC NOPR requires that regions to develop transmission plans that consider the benefits of adding new transmission, and the NOPR broadly defines “benefits” to include meeting public policy goals, reliability, economics, and compliance with state or federal regulations. With the NOPR expected to finalize this Spring, and the recent Commission approval of the Midwest ISO cost allocation methodology (see December 17, 2010 edition of the WER), there has been a great deal of controversy regarding customers in one part of the country being assessed costs associated with transmission projects that may be located in another state or region. The cost allocation issue has proven divisive, with transmission build out proponents pointing out the need for new grid investments for a variety of reasons, including the need to access renewables, enhance market access, and enhance regional reliability. Generally, some have argued that socializing costs widely across regions is a way to spread the costs of new facilities to all customers who truly benefit from additions to the interconnected grid. On the other hand, some customers and fellow utilities have raised objections arguing that the new facilities will not provide tangible benefits, and a robust benefits showing is appropriate where cost allocation is concerned.
The introduced legislation would make it impossible for FERC to approve any rates as just and reasonable without a showing of direct and measurable benefit to the consumer paying the rate. The proposed bill states that this will preserve the Commission’s traditional cost allocation methodology which assigns just and reasonable costs according to cost causation principles.
The introduction of the bill is significant in that it represents an expansion of the battle over the contentious cost allocation issue. With the Hill weighing legislative action while FERC’s rulemaking remains pending, there is even greater uncertainty surrounding the issue.
A copy of the proposed bill is available here.