Bruce Lee once said, “[i]f you spend too much time thinking about a thing, you’ll never get it done.” While the Dragon may not have had the power grid in mind, his words capture the state of electric transmission policy in the United States today. The way we build out the grid has become too difficult because we are asking regulatory frameworks and planning processes to advance controversial agendas that go well beyond our immediate infrastructure needs.

Not since rural electrification under the New Deal has this nation had such an historic opportunity to promote American jobs and economic growth through infrastructure development. Unlike the New Deal era, private capital markets, utilities and large electricity users across the country stand ready and willing — today — to invest in the energy infrastructure our country needs to secure America’s global competitiveness.

So, what’s the hold up? RMI, echoed in a recent complaint by the Industrial Energy Consumers of America at the Federal Energy Regulatory Commission, claims existing transmission planning processes are selecting the wrong transmission projects, with inadequate focus on larger, regional transmission lines. Even if examples can be found to support this charge, the explanation offered by these organizations doesn’t add up.

America’s transmission-owning utilities know how to build needed electric infrastructure. Indeed, that’s their job; it’s how they get paid. And it’s this truth that makes it impossible to accept charges that building regional transmission is somehow not in a utility’s self-interest. It doesn’t make sense for a utility with a business model predicated on making large capital investments, and a legacy in developing a continent-spanning high voltage network, to just stop making these kinds of investments. Instead of looking for nefarious motives, a more obvious and convincing explanation is found in the unintended consequences that characterize FERC’s unnecessarily complicated transmission planning policies promulgated over the past 25 years.

Admittedly, the difficulties in permitting and siting large greenfield transmission have increased over time and that problem can’t be ascribed to FERC alone. But consider the following major FERC policies over this period that have replaced a workable regulatory framework with rules that disregard the laws of economics and misalign natural incentives of transmission-owning utilities:

First, when independent system operators were originally formed under Orders 888 and 2000, transmission owners were asked to largely cede the job of transmission planning to the ISO. It would enhance competition in generation, so it was thought, if transmission owners with affiliated generation didn’t make calls on where and when to build transmission. While this partition, which detached planning from the entities that finance, construct, own and maintain the assets, may have advanced the cause of generation competition, it challenged transmission development.

And it continues to create an unnatural order where the essential collaboration and information sharing that must occur between asset owners and asset planners is viewed with suspicion. This leads to charges that transmission planning decisions result from a cabal of transmission utilities and ISO planners who meet behind closed doors and dictate self-serving planning outcomes. In response, regulators trying to promote “transparency” have “democratized” the planning process by giving all ISO stakeholders a seat at the planning table and a vote (or at least explicit influence) on planning decisions. System planning, which by name and nature is “central planning,” has become a decentralized group project in ISOs, where diverse interests — including rate-paying customers, environmental and land use interests and incumbent generation — now compromise what is in essence highly technical design activity involving critical infrastructure needed to meet broad national interests. The result is quintessential planning by committee (which, by the way, would only be exacerbated with IECA’s proposal to stand up an “independent transmission planner” reporting to FERC in some ill-defined quasi-governmental role.)

Second, is FERC’s Order 1000, which tries to introduce competition to the development of large, regional transmission projects. To be clear, Order 1000 does not envision competition in a traditional sense. Under Order 1000, so-called “competitive transmission providers” are not merchants; instead, the costs of all transmission, regardless of who builds it, are set by rate regulators, and risks borne by ratepayers.

This is so because transmission remains innately an “essential facility” and natural monopoly subject to a regulatory franchise. So, the kind of competition that Order 1000 introduces is one where transmission developers compete for the franchise to develop transmission. Here, FERC finds itself on unstable jurisdictional ground. The power to grant a utility franchise and all that it entails — like the power of eminent domain — is vested in the states. FERC’s intrusion in this area has unsurprisingly precipitated state legislative and legal actions, raising thorny questions around “rights of first refusal.”

What this means for regional transmission is obvious. The top-down encroachment, tension and introduction of out-of-state actors, not to mention the complexity, uncertainty and added time associated with bidding and evaluation, has led to endless legal and regulatory delays. It has also led to inferior planning outcomes, producing narrowly scoped, low-tech solutions rather than the kind of holistically planned infrastructure that will serve our national interest for many decades. The overall result is a colossal procedural hurdle and source of regulatory uncertainty for transmission-owning utilities who would otherwise jump at the chance to pursue large-scale transmission projects.

So, where have these two policy choices left us?

Paradoxically, what was designed to promote “competition” in the electricity industry, is hampering our broader competitiveness in the global economy. Policies have deadened utilities’ intrinsic ability to do what they do best: plan and build infrastructure.

If the imperative today is to promote planning and building regional transmission, we must:

• codify a regime that restores planning agency to transmission owners and accepts them as equal partners alongside an ISO whose role is to foster regional collaboration among those transmission owners;
• require from planners transparency and opportunity for customer input, but confine actual planning decision-making to transmission owners and their ISO partners rather than entertaining requests, in the name of “independence” to further expand the transmission planning tent; and,
• repeal FERC Order 1000.

Other work must be done (notably, permitting reform). But these three actions are within FERC’s purview and would go a long way to move us from thinking and talking, and toward developing and energizing the transmission infrastructure needed to meet today’s moment. Enter the Dragon!