January 14, 2008
Ken Silverstein
EnergyBiz Insider
Editor-in-Chief
Transmission developers may be in for a jolt. A proposed project to supply power throughout the East has come under fierce opposition. As it stands now, the 240-mile, 500 kilovolt line will get rejected by at least the West Virginia Public Service Commission, which will have jurisdiction over 114 miles of it.
It's a prickly ordeal. PJM Interconnection, which operates the transmission grid for much of the East Coast, says that the proposed Allegheny Energy power line is necessary to accommodate an annual growth in electricity consumption there of 1.6 percent over the next decade. But West Virginia's citizen activists and environmentalists are arguing that property values will drop while pristine surroundings will get ruined -- and all for the benefit of those in other states.
The public service commission's staff recommended voting against the project. In the end, West Virginia commissioners will deem whether the line provides an "acceptable balance" between economic and environmental positions. If they reject it, proponents would then have the right to appeal their case to the Federal Energy Regulatory Commission (FERC), which under the Energy Policy Act of 2005 now has the right to break those "logjams" that are considered to be in the national interest.
"I think it's becoming increasingly clear that, even if there is a need for strengthening of the transmission line, the public simply isn't going to accept the taking of additional rights-of-way for the transmission lines," says Bill Jack Gregg, head of the consumer advocate division, as reported by the media. "We're going to have to reuse what we already have." Allegheny's 240-mile line is supposed to be operational by 2011.
The case there illustrates the dilemma that transmission investors face. Transmission investment had declined in real terms -- adjusted for inflation -- from 1975 to 1998. While there have been increases since 1998, FERC says that the level is still less than what was invested in 1975. Over the same time period, however, the demand for electricity has doubled. That has resulted in a significant decrease in transmission capacity, requiring new lines get built.
Facilitating the development of new transmission has been heralded by the utility industry as one of the key accomplishments of the 2005 energy law. Specifically, the U.S. Secretary of Energy can designate national interest electric corridors in those areas that have capacity constraints or congestion. The states still have first crack at the process. But, FERC will step in if state law precludes consideration of interstate benefits and if the state takes longer than one year to act after an application is filed.
While the intent of the energy law is to ease transmission development and to ensure more reliability, it is not known if it will achieve that goal. A lawsuit is now pending in the U.S. 4th Circuit Court of Appeals to try and get some resolution as to exactly what backstop authority FERC now has. Fifteen states are part of the suit.
No Blank Check
The commission does not have a blank check. A proposal to build or expand electric transmission facilities brought before it must be used for interstate commerce, be consistent with the public interest, significantly reduce transmission congestion in interstate commerce and maximize the use of existing towers and structures. Under all circumstances, the review process is to be extensive and the public is to remain involved.
Allegheny says that the lawsuit pending in a federal appeals court will have no affect on whether the public service commissions in West Virginia, Pennsylvania and Virginia ultimately grant approval to its project. Its outreach program involves open house meetings in all three areas to explain the fact that the PJM Interconnection says that the line will also help alleviate blackouts and voltage disruptions in every state along the East Coast. Beyond that, it says that local residents, particularly in West Virginia, will benefit from hundreds of new construction jobs.
"Our nation's top energy experts have called for new transmission lines to be built to prevent looming power reliability problems," says David Flitman, president of Allegheny Power and Trans-Allegheny Interstate Line Co. "The U.S. Department of Energy, the North American Electric Reliability Corporation and PJM all agree -- something must be done now."
Critics say that the project can be built along existing rights-of-way and that there is no need to clear out a broad swath to make room for looming towers. They add that current lines can also be upgraded so that more electrons can flow over them, thereby negating the reason to build entirely new ones. West Virginia Public Service Commission staff economist, Michael Ileo, testified before the West Virginia commission that the power line would cost state residents $41.5 million in reduced property values.
Others, meanwhile, question the thinking of basing transmission lines near coal mines. While such a decision would unquestionably provide new markets for the state's coal product, others say that it would only prolong the use of dirtier fossil fuels at a time when federal regulation is likely coming to curb carbon dioxide emissions. The line, they add, would run through sensitive habitat and watersheds, all to provide cheap power to those who live outside West Virginia.
"The transmission line is a bad investment, and would increase emission of greenhouse gases indefinitely," says Frank Young, with the West Virginia Sierra Club. "Virtually all of Allegheny's electricity generation is from coal-fired power plants. This electricity would displace generation of new and cleaner but more expensive plants."
West Virginia's regulatory battle may end up being resolved in the state public commission's chambers. For now, though, the debate appears ripe to become one of the first cases to test FERC's new backstop permitting authority. No matter the venue used to decide the matter, Allegheny must demonstrate beyond any doubt that its proposed power line promotes economic gain without significantly degrading local habitats.
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