Navigant Research Blog

Transmission Projects Overcome Regulatory and Financial Hurdles

— December 11, 2013

In early December, Northeast Utilities subsidiaries Connecticut Light & Power and Western Massachusetts Electric announced the completion of the Greater Springfield Reliability high-voltage transmission project.  The upgraded 39-mile transmission line is now serving customers across the two states, increasing previous capacity of 115 kV to 345 kV.  The construction of the line, one of four transmission lines, included in the New England East-West Solution (NEEWS), reportedly came in about $40 million under its original budget of $718 million – a relief to electric customers across New England financing the project through rate increases.

Events such as the 2003 blackout in New York City and Tropical Cyclone Sandy have highlighted the need to improve transmission infrastructure in the Northeast as a means for increasing reliability across the Eastern Interconnect Grid.  In addition, growing interest in renewables has raised concern in a region where renewable generation assets, in particular wind, are often located far from demand.  Last month, ISO New England Inc. released its 2013 Regional System Plan with details through 2022, citing reliability and efficiency as the primary challenges to New England’s grid, and calling upon transmission improvements as a necessary solution to these problems.

Cost Benefit Analysis

Despite the clear need to upgrade transmission lines in the Northeast (and across the nation), the issue of cost allocation (i.e.,  who foots the bill) has delayed the process of approving new projects and upgrades.  Order 1000, issued by the Federal Energy Regulatory Commission (FERC) in 2011 and intended to promote inter-regional transmission planning through increased regional collaboration and more uniform regional cost allocation, is currently being challenged by influential parties, such as the American Public Power Association, in the U.S. Court of Appeals – D.C. Circuit.  The problem is that state and local regulators do not want utility customers to subsidize transmission facilities that don’t directly serve them, or that produce highly disproportionate costs compared to reliability benefits.

In addition, other risks associated with transmission investment, such as long lead times and high potential for litigation surrounding siting and permitting, block potential (and needed) projects.  The FERC has struggled to negotiate these financing and cost allocation challenges during the past decade.  With Order 1000, the Commission is pushing states to move toward regional markets and planning, which would provide more certainty to investors on the recouping of costs.  As projects such as Greater Springfield and NEEWS are completed, the assessment of system-wide benefits will certainly provide key data to support — or deter regionally planned (and paid for) transmission upgrades.


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