DOE Designates "National Interest Electric Transmission Corridor" in New York After Critical Hearing

The Energy Policy Act of 2005
Under Section 1221 of the Energy Policy Act of 2005, the federal government was given new power to site certain transmission lines, traditionally a state function. New York, for example, has more than 11,000 miles of transmission lines constructed by investor owned utilities and the State Power Authority, under the supervision of the New York State Public Service Commission which reviews proposed transmission projects under Article VII of the New York Public Service Law.

The new federal power to issue permits for construction of transmission lines and to grant federal eminent domain power to acquire property needed for the lines is limited to situations where

• The Department of Energy (DOE), in consultation with states, identifies "critical" transmission needs in a "congestion" study, and then designates a "National Interest Electric Transmission Corridor" within the area identified as "congested," and
  
• A state has withheld approval of a proposed transmission project in such a corridor for more than one year.

Then, FERC would have power to grant a permit to build the project and to give the developer federal eminent domain power to acquire land rights for that purpose.

"Congestion" Confusion
The concept of transmission "congestion" suggests a physical or reliability issue. This notion was suggested in a recent article discussing the National Corridors which states: "congestion of existing power lines makes the electricity grid unreliable and subject to blackouts.”

Actually, the transmission system is designed to always run within reliability limits consistent with its capabilities. The major blackouts in recent decades were due to misoperation and poor maintenance of the interconnected high voltage grid components. Testimony of a leading power transmission engineer after the 2003 blackout to the New York legislature emphasized that making the alternating current grid ever larger or putting more transmission lines up does not necessarily equate with greater reliability:

Reliability and commercial use of the bulk power transmission system are two entirely different things. Reliability is a function of the reliability standards (or criteria) used, not the amount of wire in the air. A weak system with more stringent standards will be more reliable than a strong system with weak criteria – or any system where even stringent standards are not followed. Adding transmission in and of itself will not improve reliability, if the same reliability standards are used. In fact, it might actually make the system less reliable. That’s because adding transmission makes the bulk power system electrically tighter -– geo-electrically smaller. Thus a severe disturbance is likely to cause a blackout in a much larger area. It isn’t an accident that the 2003 blackout affected a larger area, and far more people, than the 1965 blackout.

Much of the drive to build more transmission lines comes from pressures to enable the physical grid to mirror economic transactions in the selling and trading of electricity. Electricity flows are governed by the laws of physics and do not follow contract paths. One cannot, say, buy electricity from a seller hundreds of miles away, and expect that when the distant power plant generates more power it will correspondingly excite the electrons at the buyer's location. Rather, many adjustments in the grid at numerous locations may be necessary.

In some instances, reliability rules limit transfer capacity to prevent an area from becoming too dependent on a single link in the system. These rules typically require that a sudden unexpected failure of the largest line or generator can be absorbed without destabilizing the alternating current grid; in the downstate New York area, the rules require the system to be run so as to be able to withstand two simultaneous outages. Thus, a desired economic transaction -- even if within the physical capacity of the existing lines -- cannot be scheduled consistent with sound operating principles.

Congestion, according to the DOE definition, is mainly an indicator of economic transactions frustrated by reliability rules:

[Congestion] occurs when actual or scheduled flows of electricity on a transmission line or a related piece of equipment are restricted below desired levels— either by the physical or electrical capacity of the line, or by operational restrictions created and enforced to protect the security and reliability of the grid.

The DOE definition includes situations where, for example, sellers and traders "desire" to "schedule" the sale of coal-fired generation to buyers at a distant location where the price is high but actual transfer capability is limited.

DOE rejected comments of the New York PSC that it should not include such "economic" congestion in its definition. As a result, the DOE map of "critical" congestion areas reflects mainly economic issues, which may shift with time depending on market developments and changes in local generation capacity.

Winners and Losers
There may often appear to be economic "winners" on one end of a transmission line and "losers" on the other. If the cost of electricity in the area of supply becomes more valuable when, due to a new line, it can be sold into a distant, more expensive market area, consumers in the supply area may see higher prices. Conversely, consumers in areas served by a new transmission line are perceived to be winners.

But the notion of "winning" lower cost electricity may prove illusory. In assuming prices will go down with new transmission, it assumes competitiveness in markets noted for their ease of manipulation and withholding strategies to maintain prices. It also assumes that high costs due to local market power concentration might be avoided by purchasing energy from other producers through more long distance transmission -- even as the power industry enters into a phase of increased consolidation through mergers that is sure to reduce the number of producers.

The 2006 DOE Congestion Study
In August 2006 DOE issued a congestion study, designating parts of Maine, New Hampshire, and wide swaths from New York to Virginia as critical congestion areas. According to affected states, DOE did not, however, fulfill the state consultation requirement of the statute before it issued the report. For example, in comments to DOE on the report the Maine Public Utilities Commission stated:

DOE never contacted or met with any Maine regulator or government representative in the process of conducting the study. * * * * In addition to violating the law by not consulting with Maine, the congestion study is an inferior product as a result of the failure. Consultation with the affected state, as required by statute, would have quickly revealed flaws in the DOE’s conclusions.

A number of states are concerned that the DOE designated critical congestion zones are environmentally sensitive areas where transmission lines are not suitable. Also, some are concerned that new federally authorized lines in the national corridors may be disruptive to orderly state and regional energy planning, because comprehensive planning must take into account solutions and priorities other than more transmission lines, such as generation located nearer to load, demand reduction, and increased use of renewable resources such as wind, water and sun.

FERC Asserts Power to Override State Denials of Transmission Lines
FERC issued new rules for issuing permits and granting federal eminent domain authority for transmission projects in DOE designated national corridors in November 2006. See our prior PULP Network article, FERC Adopts Electricity Transmission Siting Rules: Says it Can Override State Denials.

In the order adopting the rules, FERC stated its belief that it now has power to override a state denial of a transmission project in a national corridor, a decision that drew the dissent of FERC Commissioner Kelly. She said the statute gives FERC transmission siting authority only when a state has failed to act on a transmission line application within a year.

The New York Public Service Commission and others have petitioned FERC to grant a rehearing on this issue, stating:

The Commission's interpretation of Section 21 6(b)(l)(C)(i) is improper and an error of law. It allows the Commission to preempt all state authority in the siting of electric transmission facilities when Congress specifically listed the circumstances where FERC could preempt state siting authority and did not include denial of a permit within the listed circumstances.

House Oversight Committee Hearings
NASUCA filed testimony on April 25, 2007 with the House of Representatives Committee on Oversight and Government Reform, Subcommittee on Domestic Policy, identifying situations where DOE failed to consult with affected states before designating areas in which national corridor transmission lines can be built, and supporting Commissioner Kelly's position regarding the limits on FERC's power to grant permits for construction of transmission lines. Other testimony at the hearing, generally opposing the DOE process for identifying critical congestion areas, is available at the House Oversight Committee website.

DOE Designates National Corridors
DOE issued draft designations of two "National Corridors" the day after hearings criticizing the process by which areas for corridors were identified. The mid Atlantic corridor includes areas of New York in which a controversial "NYRI" transmission project has been proposed to run through many communities on an old railroad easement. These designations can be finalized after a 60 day comment period. Then, no matter what the New York Public Service Commission decides on the pending NYRI application, FERC is empowered to issue a permit and grant federal eminent domain power to the developer, under FERC's broad interpretation of its powers described above. For more information see PULP's web page on the NYRI project

Will National Corridors Increase Reliability?
While National Corridors may increase commerce over transmission lines, it is not clear that this will increase reliability. Indeed, the joint U.S. - Canada Task Force on the 2003 blackout recommended an independent study to determine the extent to which deregulatory measures that allow more energy trading had contributed to the root causes of the blackout. DOE held a conference, and received white papers on the topic, but no study was ever performed. See What Happened to the "Independent Study" of the Effects of Electric Industry Restructuring on Reliability?