Hopefully we've seen the last of the transmission projects designed simply to increase profits for a vertically integrated utility that is conceived before the RTO determines a "need" for it. In this cart before the horse scenario, the RTO will create a smokescreen of need for an unneeded project and "order" it to be built. These projects usually fall apart when they are examined with any amount of sincere effort. When this happens, the RTO will cancel the project, but not before millions are spent for a transmission project that will never be built. When an RTO "orders" a project, its cost is allocated to ratepayers in the region. How much are ratepayers paying each year for cancelled projects resulting from bad planning?
But an even more serious problem is developing as a result of merchant projects proposed outside the regional planning process. These projects are never submitted into the regional planning process, therefore there is no need for them, either reliability, economic or public policy. The only review they get from regional planners looks at how their interconnection will affect reliability. These projects are not "ordered" to be built by regional planners. They are constructed at the expense and initiative of their owners, who recoup their costs through charging negotiated rates for transmission service. The only goal of merchant lines is to make money. If they aren't economically feasible, they won't be built. The choice to build them lies entirely with their owners, even after they have a permit in hand.
But a merchant project proposed outside the regional planning process is never "ordered" and must prove itself "needed" to state and federal regulators in order to receive necessary permits or eminent domain authority. In that instance, the state or federal regulator is stepping into the regional planning position to determine the need for a transmission project. State and federal regulators are ill-equipped to make such a determination because they lack the kind of expertise found at an RTO. The best a regulator can do is rely on the evidence submitted by experts in the case. Merchant transmission developers can afford any number of experts who will say whatever they're paid to say. Regulators can only afford in-house expertise, or rely on the experts hired by other parties. The decision is not based on any inherent knowledge, but on expert testimony.
So, what happens when a state finds a merchant transmission project serves some purpose and issues it a conditional permit to construct? Now we've got two competing regional transmission planners with different projects in their plan. The RTO version of the plan includes projects it has ordered that it has determined are needed for reliability, economic or public policy purposes, and these projects are being paid for by ratepayers. The state uses the same plan, but it also includes the permitted merchant project, that doesn't serve any RTO-identified need. Isn't this too much transmission?
What happens to the ordered regional plan if the merchant project is constructed? Sometimes this effect is modeled into the plan so that other "ordered" projects may not be needed after all. A permitted merchant project could cause cancellation of transmission projects in the regional plan before they are completed (but long after they start collecting their costs from ratepayers). But, remember, a merchant project that has not been "ordered" by a RTO may never be built. So, if a merchant project causes the cancellation of one or more RTO projects, it could jeopardize reliability if it is suddenly abandoned by its developers before being built.
Dilemma! Perhaps FERC should take notice of the mess it has created and find a remedy. I would suggest that projects must be part of a regional plan (whether RTO/ISO or other existing planning authority), and that unneeded merchant projects be prohibited.
Think I'm just nuts? The Illinois Commerce Commission's recent conditional approval of the Rock Island Clean Line merchant transmission project is already causing doubt about other regionally planned transmission projects that are currently before the ICC. As the Illinois Farm Bureau pointed out in its recent request for rehearing of the RICL decision, the RICL order is already having "a negative impact on consumers." The IAA says that the RICL approval is having an immediate effect on two other transmission projects currently before the ICC, a MidAmerican project and an Ameren project, where the ICC staff has suggested that RICL's approval draws into doubt whether these two projects are needed. And who pays for the other two regionally planned projects if they are cancelled by RICL? Consumers.
As multiple intervenors have pointed out in this docket that Rock Island’s failure to produce a needs analysis from PJM and/or MISO hurts all of the stakeholders, it seems like this problem could have easily been avoided. The absence of this global analysis produces increased unpredictability and either slows or jeopardizes other legitimate transmission projects. This risk to the consumers could have easily been prevented.
So, what shall it be? Should we cancel regionally planned projects that conflict with merchant plans and hope the merchant projects are eventually built? Will the lights go off if none of them get built? We simply cannot have it both ways.
Now, other potentially viable and successful transmission projects will have to wait on the sidelines to see if Rock Island can get its act together by, among other things, finding money, qualified employees, suppliers, and numerous regulatory approvals. None of this benefits Illinois consumers, the market, or the reliability of the electric system. Instead, it puts everything at greater risk.