INTRO DUCTION
THE PROBLEM WITH THE STATUS Quo OF STATE TRANSMISSION SITING LAWS
A vertically integrated utility's infrastructure decisions, including whether and where to build transmission lines, were regulated by state and local governments. New York's "needs" determination statute is an example of the narrow historical scope of state needs determinations.
Environm ental Concerns
Developments in Wholesale Power Markets
DEP'T OF ENERGY, THE CHANGING STRUCTURE OF THE ELECTRIC POWER INDUSTRY: UPDATE available at http://tonto.eia.doe.gov/FTPROOT/. Many siting statutes instruct state regulators to focus on benefits to in-state customers and not include benefits to out-of-state customers or the wholesale supply market.' Indeed, this traditional scenario has come under great pressure due to the emergence of competitive, high-powered markets that have emphasized functional and corporate separation and a shift away from vertical integration.55 Simply put, national needs review is less relevant in the context of multi-national markets. For this reason, in areas of the United States where Regional Transmission Organizations (RTOs) are established, much transmission planning has been taken out of the hands of utilities and entrusted to the RTOs and their component processes.
57 For discussion of the argument that state officials could dispense with a traditional need determination in siting proceedings, see Brown & Rossi, supra note 15 (manuscript at 12-13). But today, given the increasing interdependence of states' energy supply and demand in many regions of the United States, and the continued importance of reliability in discussions of needs in siting procedures, it is hard to imagine siting authorities not taking into account the nature of the interconnected network. 64 For the argument that federal preemption empowers state officials to consider need aspects of the wholesale market and does not limit state officials to in-state benefits, see Jim Rossi, Transmission Siting in Deregulated Wholesale Power Markets: Re-Imagining the Role of Courts in Resolving Federal-State Siting Impasses, 15 DuKE ENVTL L.
69 In some states, the question may arise whether a company, solely by virtue of operating a transmission line, must register as a utility in a state due to the nature of its activities.
HeightenedAttention to Climate Change
About twenty-five states have RPS goals, which are intended to promote the use of renewable energy sources as an alternative to fossil fuels. The typical RPS requires a utility to certify that a certain percentage of the power it supplies to customers comes from renewable energy sources. sources.' Some states supplement this with a renewable energy credit (REC) system, in which a utility can determine compliance with a goal by purchasing credits instead of generating or purchasing power from renewable sources. 3. New Mexico has been a leader in this regard, passing the New Mexico Renewable Energy Transmission Authority Act. While this statute does not extend the power of state eminent domain beyond traditional utilities, it does establish a Renewable Energy Transmission Authority Board of Planning and gives the power of eminent domain (not as a new power, but simply as a result of being a state agency). ), the.
California has also explicitly authorized its state regulators to include its renewable energy portfolio goals in transmission planning and siting, including through the specification of competitive renewable energy zones for transmission.7 Texas has also approved the concept of competitive renewable energy zones, designed to specifically address the expansion of the renewable energy economy of the State." 8. DEP'T, HB 188: MAINTENANCE OF ENERGY TRANSMISSION AUTHORITY ACT (2007), available at http://www.emnrd.state.nm.us/ECMD/LawsRegulations. Energy Com 'n, Renewable Energy Transmission Initiative, http://www.energy.ca.gov/reti/index.htn-i (last visited Nov. detailing the interagency California Renewable Energy Transmission Initiative).
Comm'n of Tex., Competitive Renewable Energy Zones, http://www.puc.state.tx.us/rules/subrules/electric/25.174/.
THE MOVEMENT TO EXPAND FEDERAL AUTHORITY OVER
1034 ENVJRONMENTAL LA W [Vol.39:1015 Energy (DOE) to designate Energy Transmission Corridors of National Importance (NIETCs) and for FERC to exercise a type of "backstop" permitting authority over states within the NietCs.'°u Under these amendments DOE "may designate any geographic area with limitations in electric energy transmission capacity or with congestion that adversely impacts consumers as an electric transmission corridor of national importance."'1 In accordance with the Energy Policy Act of 2005, DOE completed its research into transmission congestion in August 2006, and in 2007 it published draft guidelines of the Energy Corridors of National Importance in the Mid-Atlantic and South-Western Regions. In general, DOE may consider the economic impact of inadequate or unreasonably priced electricity within the corridor and in the end markets served by the corridor. It could also consider whether "a diversification of supply is warranted," whether "the energy independence of the United States would be served by the designation," whether "the designation would be in the interest of national energy policy," and whether 'the designation would be in the interest of national energy policy', and whether the designation would enhance national defense and homeland security." ID card.
Section 824p(a)(4) also allows the Secretary to consider whether "economic growth in the corridor, or the end markets served by the corridor, may be jeopardized by dependence on limited energy sources, and [or] diversification of supply, energy independence, national energy policy, national defense and homeland security are served.” Id, (emphasis added). First, FERC may override the state if the "State in which the transmission facilities are to be constructed or modified does not have authority to approve the location of facilities," or does not "the interstate benefits anticipated by the proposed achievement will not take into account. construction or modification of transmission facilities in the state."'09 Second, FERC may ignore the state if "the applicant is not eligible to apply for a permit or location approval. Specifically, the facilities must be used for the transmission of electrical energy in interstate commerce;"4 the intended construction must be.
34;consistent with the public interest”;.5 it should be expected to “significantly reduce transmission congestion in interstate commerce and protect[] or benefit[] consumers”; 16.
Prop osed R eform s
THE TROJAN HORSE OF TRANSMISSION LINE SITING AUTHORITY
Policy makers today recognize that the assessment of the costs and benefits of a new transmission line must go beyond the population of any individual country.5. This configuration costs consumers money, but also reduces emissions of carbon dioxide, which causes climate change. If the grid is expanded without attention to how economic decisions are made in allocating transmission capacity, there is no guarantee that it will be used by new sources of power generation as opposed to existing plants.
The result can be underinvestment in some areas of the country, which does not allow sufficient incentives for the expansion of the network, even if the problem of the location authority is addressed. In other areas of the country, overinvestment in transmission can result, causing some of the problems highlighted above. At a broad level, if a significant part of the transmission network is to be preserved for renewable sources of electric power, there are two possible solutions to this pricing problem.
Pricing mechanisms will need to include reserve margins for different fuel sources that are neutral to the carbon content of the fuel used to generate electricity. In addition to state legal barriers, there are broader governance barriers – at the federal and regional levels of government – to the evolving public interest to accommodate new transmission pricing issues. A purely state-led approach to coordination, such as the Regional Greenhouse Gas Initiative (RGGI) in the Eastern United States,171 may provide a model.
Weakening Political Accountability
Undermining Climate Change Goals
Overreliance on Transmnission
The Need for Carbon Neutral Transmission Pricing
One solution is for Congress to link any expansion of transmission authority to the adoption of a cap-and-trade program that fully internalizes the social costs of climate change in the cost of CO2 emission allowances, if the cost of electricity in the wholesale power plant market reflects the full carbon costs associated with its generation, grid allocation decisions will take this into account, even if it is not reflected in actual transmission prices. While transmission prices must incorporate efficiency targets to avoid overcapacity, transmission prices may also need to incorporate climate change targets and preferences for different generation technologies, including renewable sources, in different regions of the country. This is probably best achieved through a reserve subsidy built into the price mechanism, although whether this is paid by federal regulators, state regulators or regional bodies will depend on the form of the institutional price-setting authority.
Steven Ferrey discussed that the implementation of the RGGI presents a host of potential constitutional and legal barriers. Going forward, the costs of future investments in the national smart grid for clean energy will need to be distributed differently, reflecting the broad-based environmental and economic benefits these projects will bring to our country.” Because the primary beneficiaries are not located entirely within the state where many transmission facilities will be built, the state rate setting process alone will likely prove insufficient as a mechanism to facilitate such cost sharing.
Although under current institutions this may not be an adequate solution in some areas of the country, such as within the Western Interconnection or in Florida, independent system operators (ISOs) and regional transmission organizations (RTOs) hold promise as a model for cost sharing in other parts of the country.184 Even their cost sharing mechanisms proved problematic.' According to the Center for American Progress, "[elfs in RTOs and ISOs with cost allocation mechanisms and benefit analysis, cost allocation decisions are often protracted and contentious."186 An RTO or an ISO may be inadequate as a mechanism for cost sharing where the benefits are more if the RTO or ISO accrues to a wider set of beneficiaries.
CONCLUSION
