Utah asks FERC to reconsider new transmission rule — is the rule bad policy?

Power transmission lines near the Lake Side natural gas power plant in Vineyard are pictured on Sunday, Feb. 4, 2024. (Photo by Spenser Heaps for Utah News Dispatch)

A Federal Energy Regulatory Commission rule that requires transmission providers to conduct and periodically update long-term regional transmission planning is being contested by Utah’s Public Service Commission. 

FERC’s Order No. 1920, scheduled to become effective on Aug. 12, requires operators to plan ahead for at least 20 years, refreshing the plan every five years and including a financial plan to build needed lines, with customers only paying for the project from which they benefit.

When planning new facilities, providers should consider benefits to ensure the transmission plans are efficient and cost effective.

The final rule, Utah’s Public Service Commission said in its request, is a “clear overreach of FERC’s limited statutory authority,” and it strips states of their power to determine their own energy generation mix. It would also result in “unreasonable rates.”

Utah also criticized the length of the rule, arguing that the commission’s small staff “cannot reasonably provide a thorough and exhaustive discussion of the Order’s myriad shortcomings within the short window allowed for filing this Request for Rehearing.”

While the rule “obscures” its purpose, the Utah commission wrote, FERC had described its intentions to build transmission planning to allow the implementation of systems that could accommodate “extensive” and “more expensive” transmission facilities for renewables. 

As blue states have been moving away from coal, supporting decarbonization plans, some red states like Utah have passed legislation to hold onto the resource for longer, arguing a transition to cleaner energy needs more time to fully become effective and affordable.

“The Final Rule effectively rigs the planning and cost allocation process to ensure FERC’s preferred stakeholders’ projects are selected in the planning process and these preferred stakeholders are not required to bear the full costs associated with their choices,” the request reads. 

But, for Sen. Nate Blouin, D-Millcreek — who has advocated for Grid Enhancing Technologies and the development of renewable energy in the state — that isn’t necessarily the case. 

The rule preserves rights to dispute the costs and planning of the lines, so it doesn’t take any authority away from the state, Blouin said. In his view, this creates a better process with the potential to open up new transmission opportunities, “a nonpartisan thing to discuss; everyone kind of acknowledges that we need new transmission.”

“This is all about reliability and all about providing lower cost energy across the entire region. If we can build a bigger grid, we can better share resources, better access the cheapest resources, and that’s going to be good for everyone,” Blouin said. “I’m disappointed that the Utah Public Service Commission has chosen to dispute this rule.”

Blouin also refuted the argument that FERC would claim the authority from states to determine their energy mix. If decisions ever favor renewables, he said, it would be because of the market. 

“They are arguing that by doing that, the state is losing some authority over the generation mix because if we build more wind and solar, then it’s cheaper and so the market is going to move us in a direction that is less friendly to coal and more friendly to renewables,” he said. “To me, that’s a market-driven decision.”

If the rule doesn’t get implemented it would leave the country at the status quo, the lawmaker said. Some western states won’t have enough lines to share resources, and utilities would be in charge of doing their own planning, which “doesn’t lead to them building the most cost effective lines, it leads to them building the most profitable lines for their shareholders,” Blouin said.

A ‘misperception’

Rob Gramlich, president of Grid Strategies, a consultancy firm focused on transmission and power markets, described as a “misperception” the notion that states without clean energy policies will need to pay for transmission for the states that have prioritized cleaner resources.

All of the benefits that the Order No. 1920 asks providers to consider are related to reliability and affordability, he said. None of them mention climate or clean energy policy. There aren’t any requirements to pay for lines that don’t meet those benefits, but states would be allowed to voluntarily pay for transmission systems that only meet their own public policy vision.

“I think the rule is a recognition that we’re doing transmission in the most expensive way possible right now,” he said, “and the rule tries to fix that and put in place much more sensible, forward-looking planning.”

Ratepayers wouldn’t bear an additional brunt on their bills either, Gramlich said, as planning the regional grid collaboratively would throw the most efficient transmission line and expansion options into the mix, reducing rates in most western states. 

“In contrast to how we do things today, which is very much reactive and in response to individual generators or customers coming to the utility,” Gramlich added.

Though the rule doesn’t directly mention renewables, building a stronger transmission system would certainly help exchange resources when needed. Technologies, such as wind, solar, geothermal, and hydro, which can be used intermittently, can be shared when certain utilities don’t need them.

There are already similar coordinating efforts in the west, Gramlich said. This would just reinforce those initiatives. 

And, in Utah’s efforts to sell energy generated by fossil fuels, the task of building lines to other states who may take coal-fueled power is a tougher case to make. 

“Most coal plants in the east are closing down based on their economics. I don’t see much of a market for coal power,” Gramlich said. “Moreover, much of the demand growth is from data center companies and other companies like that, that have carbon commitments. So all of the new demand is for carbon-free power. There’s not really any new demand for coal power.”

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