Growth in Transmission Investment

Growth in Transmission Investment

May 24 - Electric Perspectives

Some commissioners on the Federal Energy Regulatory Commission (FERC) wonder whether electric companies are building enough transmission facilities. Part of FERC's concern is that a lack of transmission investment might constitute an exercise of vertical market power-electric companies might use lack of investment as a way to protect their generation. If FERC determined this, then market-based rates for some transmission-owning companies would be at risk.

But statistics about transmission planning are surprisingly difficult to get: Many companies look on their five-year plans as competitive information. Still, a March study of shareholder-owned electric utilities shows that investment has grown and will continue to grow. (The response rate to the study-conducted by Edison Electric Institute-was 90 percent.) From 1999 to 2003, annual transmission investment by shareholder-owned utilities increased 12 percent annually and totaled $17 billion. (See Figure 1.) From 2004- 08, the responding utilities have invested or are planning to invest $29 billion, more than a 60-percent increase over the earlier period. Combined actual and planned investment over the entire period increases 10 percent annually.

FIGURE 1

ACTUAL AND PLANNED TRANSMISSION INVESTMENT BY SHAREHOLDER-OWNED ELECTRIC COMPANIES

Also, planned investment in 2004 was about 10 percent of net book value of all transmission assets.