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Newark NJ (SPX) Nov 12, 2012
The federal government's big-picture approach to power transmission could help New Jersey recharge its own aggressive programs to develop solar power and other forms of renewable energy, said Roy M. Palk, Senior Energy Advisor for the national law firm LeClairRyan, during an Oct. 24 presentation to the New Jersey Bar Association's Public Utilities Law Section.
"For decades, the United States lacked the underpinnings of any national policy aimed at encouraging closer coordination among users of the grid, from independent power producers and transmission owners, to decades-old, government-regulated public utilities," said the Glen Allen, Va.-based attorney.
"But thanks to a series of FERC regulations-most recently Order 1000, a final version of which was published in May-the country now appears to be taking important steps toward creating a truly national energy-transmission grid along the lines of the Interstate Highway System."
A 40-year veteran of the U.S. power industry and former president and CEO of East Kentucky Power Cooperative, Palk gave the presentation-"The Impact of Federal Regulatory Commission (FERC) Order 1000"-at LeClairRyan's office in Newark. While New Jersey is second only to California in the development of solar power, he noted, its renewable-energy program has lost some momentum, in part because the country's transmission grid continues to be so fragmented and antiquated.
"Over time, Order 1000 could help New Jersey and other states ramp up the amount of renewable energy they can move through the grid and bring to market," Palk said. "This is important, because our financial and national security infrastructure is more dependent than ever on a reliable, robust and efficient transmission grid."
During the presentation, Palk provided a contextual overview of FERC Order 1000 and its potential effects. This major policy experiment, he noted, aims to create an even playing field for transmission planning, construction and utilization, such that no single power resource ever holds another hostage.
"The intent is to promote regional and interregional coordination as never before," Palk said.
"The three primary components of the order deal with transmission-planning, cost-allocation reforms-i.e., who picks up the cost of energy transmission and under what circumstances-and the overall interplay of regulated power generators and movers. FERC Order 1000 also strongly encourages non-jurisdictional entities, whether a startup focused on renewable energy, say, or a municipal electric group, to explain how they aim to fit into the evolving grid."
Palk provided a short history of the order and its predecessors, and also discussed the current role of the nation's regional transportation organizations (RTOs), the voluntary formation of which was encouraged by FERC Order 2000. "The goal was to administer the transmission grid on a regional basis throughout North America, including Canada," Palk noted.
"Some of these RTOs are very large. Valley Forge, Pa.-based PJM, for example, serves all or part of 13 states and the District of Columbia. In other words, utilities across North America have already gained substantial experience in working together to move power across the grid."
FERC Order 1000 aims to take this collaboration to the next level. It directed public utilities to submit their plans for cost-sharing and regional coordination by Oct. 11, with plans for inter-regional planning and cost-allocation methodologies due April 11, 2013. Some utilities in the South and Midwest now have until Feb. 8 to submit their cost-sharing and regional coordination plans, thanks to a 120-day deadline extension.
Like many in the industry, Palk is cautiously optimistic about the impact of FERC Order 1000. "FERC's order to create a level playing field among the utilities could help open the transmission market, to be sure, but this can only happen if the components of accessibility are fully complied with and available to all of the utilities and the purchasers of power," he said.
"The order calls for 'fair and equitable' cost-allocation, for example, but the subjectivity here makes this fertile ground for disputes and challenges. The definition of 'fair,' after all, depends on whose ox is getting gored."
Order 1000 has generated no shortage of doubters and skeptics, particularly when it comes to these cost-sharing formulae, Palk noted.
"Will the smaller-scale grid users be forced to pay unfair rates in order to piggyback on the growing grid?" he asked. "Will the big utilities, in the end, be allowed to dictate unfavorable terms and shape the evolution of the nation's transmission infrastructure in ways that benefit their own bottom lines?"
The U.S. power industry is watching to find out whether the regulations will accomplish their aims, or if they will fizzle and fail.
"In coming months, FERC's analysts will be looking hard at the submitted filings to see whether they are the product of realism and good faith, or of a more provisional attitude in which companies are, not to put too fine a point on it, mostly 'looking out for No. 1,' " Palk said. "But I am hopeful FERC Order 1000 will be a success. After all, the stakes here could hardly be higher."
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