Bill Threatens FERC’s Cost-Allocation Proposal

Michael Bates
Written by Michael Bates
on February 18, 2011 No Comments
Categories : Policy Watch

A group of U.S. senators has introduced legislation that adds a new voice to the ongoing dialogue among the Federal Energy Regulatory Commission (FERC) and other stakeholders related to transmission cost allocation.

The Electric Transmission Customer Protection Act is intended to prevent FERC from applying cost-recovery mechanisms for interstate transmission projects beyond where the upgrades will have an immediate, direct benefit.

This position is at odds with a current proposed rule in FERC's docket that seeks to implement a methodology that spreads infrastructure costs regionally among a wide range of consumers. The senators claim the commission's rule would inequitably ‘spread the associated costs to customers outside of the area immediately serviced by the new transmission lines.’

‘The principle that the costs ratepayers pay should be directly related to the benefits they receive from a transmission project needs to be absolutely clear in FERC's regulations,’ Sen. Ron Wyden, D-Ore., said in a press release. ‘Right now, it isn't.’

The act – put forth by Wyden and U.S. Sens. Bob Corker, R-Tenn.; Lisa Murkowski, R-Alaska; Richard Burr, R-N.C.; and Lindsey Graham, R-S.C. – would ‘protect consumers from footing the bill for energy projects that serve no benefit for their state or region,’ the sponsors said.

The proposed measure drew swift reaction from the industry.

‘The beneficiaries of investments in transmission should bear its costs, and those customers who do not benefit should not be liable for transmission costs,’ says Jim Hoecker, counsel to industry trade group WIRES and a former FERC chairman. ‘That's fair.’

However, he notes that the legislation that has been proposed is unnecessary, saying that promoting a fair methodology is ‘exactly what FERC is doing.’

WIRES maintains that although the bill is ‘ostensibly intended to protect consumers from unwarranted energy and infrastructure costs,’ the end result will ‘thwart needed investment in the high-voltage grid and curtail the nation's ability to develop domestic energy resources.’

The group adds that the act would place an ‘unprecedented’ limitation on FERC's authority to appropriately allocate transmission costs – a function the commission has handled for nearly eight decades.

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