0:03

The regional planning rule, I

0:05

think, is the single most

0:07

important transmission policy in

0:10

the last decade and one of the

0:12

bigger energy policies in the last decade,

0:14

certainly the biggest since the Inflation Reduction

0:17

Act. May is shaping up to be

0:19

a monumental month for transmission policy reform

0:21

in the United States. On

0:23

May 8, the Department of Energy

0:26

proposed 10 national interest electric

0:28

transmission corridors, a designation that

0:30

allows the federal government to accelerate projects

0:32

in areas where consumers are harmed

0:35

by lack of transmission. And

0:37

just days later, on the 13th, the

0:39

Federal Energy Regulatory Commission released orders 1920

0:42

and 1977. Both

0:46

of the new rules aim to

0:48

expedite the build-out of the nation's

0:50

electric grid by tackling major issues

0:52

such as cost allocation and long-term

0:54

planning. So how will

0:56

these actions from the federal government

0:58

impact transmission projects? What

1:00

are the critics of the FERC rule saying?

1:03

And why are these long-awaited

1:05

reforms happening now? This

1:11

is Columbia Energy Exchange, the weekly

1:13

podcast from the Center on Global

1:15

Energy Policy at Columbia University. I'm

1:18

Bill Loveless. Today

1:25

on the show, Rob Gramlich. Rob

1:28

is the founder and president of

1:30

Grid Strategies, a consulting firm focused

1:32

on transmission and power markets. He

1:35

has co-founded multiple organizations focused

1:38

on power systems reliability and

1:40

sustainability, including the Americans

1:42

for a Clean Energy Grid and

1:45

the Working for Advanced Transmission

1:47

Technologies Coalition. From

1:50

2001 to 2005, Rob served

1:52

as an economic advisor to

1:54

FERC chairman Pat Wood. I

1:57

talked with Rob about the history of

1:59

transmission regulation. and why the FERC

2:01

and DOE want to reform

2:03

the permitting process. We dissected

2:05

Order 1920 and Order

2:08

1977 and the impacts

2:10

they will have on current and future

2:12

transmission projects. I hope you

2:14

enjoy our conversation. Rob

2:16

Gramlich, welcome to Columbia Energy Exchange.

2:19

Thanks, Bill. Great to be here. So, Rob,

2:21

your career has been varied. Today

2:24

you run GRID Strategies. You

2:26

were the founder of that consulting group. In

2:29

addition, you founded the, or co-founder, of

2:31

the Americans for a Clean Energy Grid

2:33

and the WAT Coalition. But, you

2:36

know, before that you were an advisor to

2:38

former FERC chairman Pat Wood, an

2:40

official with the American Wind Energy Association,

2:43

as it was then called, and

2:45

a senior economist at PJM

2:47

Interconnection, also a senior associate at

2:50

the PG&E National Energy Group. All

2:53

told, you have some 25 years of

2:55

experience in electric power markets and

2:57

policy. What insight

2:59

have these different experiences given you

3:02

on energy issues today? Sure,

3:04

Bill. Well, you know, you and I

3:06

used to talk, I

3:08

think 20 years ago, in some of

3:10

that, when I was at FERC, and

3:13

you were in this electricity industry media

3:15

space, and I think we've

3:17

both seen a lot of the evolution.

3:21

There were a lot of changes back

3:23

in the late 90s with restructuring, you know,

3:25

restructuring a $200 billion a year industry was

3:27

not a small thing. And so some pretty

3:30

heavy issues, and I think we all got

3:32

some scars. We learned a lot. And

3:35

this complicated industry with our

3:37

regulatory structure, federal state, and,

3:40

you know, I think mostly just, you

3:42

know, constantly trying to figure

3:45

out solutions to solve problems,

3:48

whether it's creating competitive markets

3:50

then, or integrating clean energy

3:52

and dealing with kind of

3:54

the severe weather situations on

3:56

the grid these days. It's

3:58

just really important. work, right?

4:00

And so that many years of

4:02

working through it and developing relationships,

4:04

I think, has really been a

4:07

great experience. Yeah, of course the

4:09

issues have changed to some extent over the years,

4:11

but I think an overlying issue has been the

4:14

need for restructuring of the electric power

4:16

sector, for example, despite the

4:18

different challenges that may have been evident

4:20

at any given time. Yeah,

4:23

exactly. Well, I mean,

4:25

and you and I have been through different

4:27

partisan cycles, you know, issues kind of bounce

4:30

back and forth between parties. It

4:32

was Republicans leading all the federal

4:34

transmission initiatives back 20 years ago.

4:36

And now it seems to be

4:38

Democrats and Republicans are, I think,

4:40

for that reason pretty shy about

4:42

it. But, you

4:44

know, the more you kind of live through

4:47

these cycles, I think you're more you're able

4:49

to sort of imagine how things could be

4:51

different from the present. And, you know, we've

4:53

also, you know, learned a lot about what

4:56

can change and what is maybe what

4:58

are sort of the immobile objects in

5:01

the industry. And so, at

5:04

any rate, we live and learn. Well,

5:06

the issue today is transmission. And

5:08

for listeners who don't live in the

5:11

United States, Rob, and for some

5:13

who do, explain how

5:15

decisions on long-distance transmission are made

5:17

in this country. Sure.

5:19

Well, the place to start is

5:22

the industry that, you know, we

5:24

inherited. It was, you

5:26

know, 3,000 utilities who were focused

5:28

on serving their local

5:31

load with mostly local generation.

5:33

And then, you know, in the 70s

5:35

and 80s, after some blackouts

5:39

and things, they started

5:41

working on the connections between the utilities.

5:43

But that was really, you

5:45

know, an afterthought or, you

5:48

know, an additional layer added

5:50

on later for reliability reasons.

5:52

And we never fundamentally changed

5:54

the state statutes or the Federal

5:57

Power Act to create any kind

5:59

of national grid. However,

6:03

with restructuring and

6:05

the opportunity for

6:08

competitive generation markets,

6:11

which was sort of

6:13

blessed in principle by Congress in the

6:16

1992 Energy Policy Act, I

6:19

think the industry realized, well we really

6:21

need regional

6:24

markets. I mean the only way to have a

6:26

competitive market is for generators, you know, one or

6:28

two or three states away to compete with each

6:30

other. So there was this

6:33

sort of development of regional markets

6:35

and open access transmission to enable

6:37

that type of competition. But

6:40

again, the institutions never really

6:42

changed all that much

6:45

and so we're still struggling with how do you

6:48

invest in and recover

6:50

costs for multi-state transmission

6:52

lines with, you

6:55

know, this industry of kind

6:57

of isolated utility systems that,

7:00

you know, the industry,

7:02

you know, was structured around. So

7:05

these laws, there have been laws and

7:07

regulations on the books for years, decades

7:09

even, right? Federal Power Act goes back

7:12

over a hundred years. But

7:14

they, what you're saying is they simply

7:17

are not adequate to

7:19

enable the timely

7:21

construction of infrastructure, this type of

7:23

infrastructure, for example. I guess

7:25

I'm mostly saying that it just

7:28

requires additional work to sort of

7:30

create the institutions and the processes

7:32

within this structure. I don't think

7:35

fundamental federal power act reform is

7:37

needed or possible, so I don't

7:39

have time to worry about that. But I

7:43

mean because, you know, just

7:45

in reasonable and not unduly discriminatory or

7:48

preferential, that's, you know, those, you know,

7:50

you can do

7:52

a lot within that and the courts

7:54

have been gradually affirming and not sort

7:59

of expanding, convincing. conventional interpretations of

8:01

what that means in terms of

8:03

federal jurisdiction, certainly over things like

8:05

transmission planning, which is quite broad

8:08

under court decisions over the last 10

8:10

or 15 years. So

8:14

with that authority, now we need

8:16

to do two things. We need FERC

8:18

rules, but also we really need to

8:21

develop the institutional capability to do

8:23

it. And creating that

8:26

something should happen isn't sufficient

8:28

for it to actually happen.

8:32

So that's where we are. I'm

8:34

sure we'll talk about recent FERC

8:36

rulings. And those are

8:39

generally good and strong in my opinion, but we

8:41

also have a lot of work to do to

8:43

develop these regional institutions and practices.

8:47

Yeah. Before we get to those FERC rules,

8:49

Rob, tell us

8:52

how badly is the need for new

8:54

transmission of the United States? Well,

8:56

it's very bad. The

8:58

need is great, and we're

9:01

seeing it from a lot

9:03

of different perspectives. The thing about

9:06

a huge shared network that underlies

9:08

almost everything we do in modern life

9:11

at home and at work is

9:13

that you have interests from

9:16

a variety of parts

9:18

of society and the economy who say, wow,

9:20

we really need this thing and we need

9:23

it to work well. So

9:25

for example, just starting with resilience

9:27

and severe weather, what most people

9:29

don't see or

9:31

appreciate is that when we get these,

9:33

either it's a polar vortex or a

9:35

heat dome or you name it, that

9:38

can really stress the generation

9:41

fleet and every type of generation is

9:43

vulnerable to some type of weather. Well,

9:45

what happens is we end up moving

9:47

10 or 15 gigawatts of power from

9:49

one region to the next because the

9:51

grid is bigger than the

9:53

weather. And if

9:55

we sort of make it so through interregional

9:57

transmission, then we have a much more robust

10:00

and resilient grid. So

10:02

that's the reliability need

10:04

and of course increasingly frequent

10:06

severe weather causes

10:08

that, you know, brings that to

10:10

the fore. Completely separately,

10:12

we have mostly, you

10:18

know, 50, 60 plus year old

10:20

assets in this industry. And that

10:24

one's also not widely appreciate and

10:26

it's really challenging for people

10:28

like me personally who are trying

10:30

to identify the need to expand the grid

10:33

because we need a lot of

10:35

money invested just to keep the grid in

10:37

good shape. So there's a lot of utility

10:39

spending on transmission and then consumer groups and

10:41

regulators say, wait a minute, we're already spending

10:43

all this money in our transmission. Part

10:45

of our bills going up and we

10:48

have to say yes, that's true, but also

10:50

we need to expand it. None of those

10:52

dollars are actually expanding capacity. So

10:54

that's really tough in the regulatory context.

10:57

Then thirdly, we've had over the last,

11:00

you know, five or

11:02

ten years this energy transition happening

11:04

and that's, you

11:06

know, all the new generation sources that

11:08

are mostly not located at the place

11:12

where the grid goes. So we need

11:14

a lot of connections. Moreover,

11:16

the type of resources that we have,

11:19

largely wind and solar, are

11:22

the type where they're always sort of operating

11:24

at different times. So the way to make

11:27

a reliable, affordable system is to integrate wind

11:30

and solar farms across, you know, multi

11:32

hundred mile, you know, spans of regions.

11:34

And then, you know, by doing that,

11:36

you have an overall more steady supply

11:38

of it. So we

11:40

have to, you know, for those reasons,

11:43

renewable energy and grid expansion go hand

11:45

in hand. There's no transition

11:47

without transmission. And then, fourthly,

11:50

now we have this load growth, which,

11:53

you know, six or nine months ago,

11:55

barely anybody was paying attention to, but

11:57

it's extraordinary the amount of power demand.

12:00

Yeah, oh yeah, and the numbers are staggering.

12:02

I was reading a report

12:04

from the National Renewable Energy Laboratory

12:06

that said, under moderate to high

12:08

load growth scenarios, the U.S. may

12:11

need to more than double its

12:13

transmission capacity by 2035 and potentially

12:15

triple it by

12:18

2050. That's right.

12:20

And it's an extraordinary amount

12:23

of transmission need,

12:25

but again, it is for all those

12:27

purposes. So, you know, I'm hopeful that

12:29

parties can come together from different

12:32

perspectives, different industries, different political

12:34

stripes, you know, to help

12:37

work on our shared network.

12:41

In the face of these obstacles, the

12:43

Federal Energy Regulatory Commission has approved two

12:45

rules to amend to jumpstart new transmission

12:47

in the United States. They are considered

12:50

to be the most significant actions by

12:52

the FERC on this topic in this

12:54

century. The most prominent

12:56

of the two, the

12:58

so-called Order 1920, it runs

13:01

what, over a thousand pages

13:03

long, really gets at this.

13:05

Explain in simple terms what

13:08

this rule would do, Rob.

13:11

Very simply, the 1300-page rule

13:14

will require all transmission providers,

13:18

which are utilities, specifically,

13:20

to proactively plan 20

13:23

years out for the anticipated

13:25

future resource mix

13:30

and load with the

13:32

best available information

13:35

and choose that transmission portfolio

13:37

that is

13:40

best for consumers, i.e.,

13:42

you know, maximizes net

13:44

benefits. And that's simply

13:46

what it does. Now, most people would say, wait

13:49

a minute, I thought there already were

13:51

transmission planners out there, isn't that what

13:53

they already do? And you would be

13:56

right to think so. But the reality

13:58

is for a variety of reasons. reasons,

14:00

it just hasn't been happening in

14:03

most of the country. We

14:05

did a report card on transmission planning

14:07

practices and found barely anybody was above

14:09

a C somewhere in the

14:11

F range. And

14:14

these are not rocket science

14:16

methodologies, you know, take

14:19

into account the best information that's

14:21

available on generation and load and

14:25

plan for multiple purposes like

14:27

reliability and economics and

14:30

do scenarios because you could have severe

14:32

weather or, you know, other situations where

14:34

you might have high or low load

14:36

growth. So these are

14:38

just sort of simple planning practices that you

14:41

almost if you knew nothing about transmission planning,

14:43

you might just guess that, oh,

14:45

this is sort of how one would do it. And,

14:48

you know, so they basically are common sense practices.

14:50

But the idea is they need to

14:53

do it because they haven't been doing

14:55

it. And there's, you know, there's probably

14:57

some institutional reasons

14:59

why it hasn't been done.

15:02

And there's probably some, you

15:04

know, stakeholder incentives who

15:06

are, you know, resistant to doing it. So

15:09

for whatever reason, it's very helpful for

15:11

the regulator to say, hey, this is

15:13

what you need to do. Now everybody needs

15:15

to comply with these basic common sense rules

15:17

and show us how you're doing it. What's

15:20

kept FERC from implementing these what you

15:23

call common sense rules in the past?

15:26

Well, you know, FERC does have a lot of

15:28

jobs. So, you know, we

15:30

haven't had just the alignment of all

15:33

of the information

15:35

and processes and FERC staff capability to

15:38

process this. I mean, order 1000 was

15:41

the attempt 13 years ago to

15:43

try to do this. And it took a

15:46

little time for the consensus to be, oh,

15:48

that didn't really work. And

15:51

for example, I was slow to reach that

15:53

conclusion because I was a big proponent of

15:55

most of what was in order 1000, but

15:57

it became clear. earlier

16:00

by 2018-2020 that really wasn't working. But

16:04

then, you know, it takes a while to get all

16:08

the consensus. And there was a lot

16:10

of consensus. So Chairman Glick came in,

16:12

he opened up a proceeding, hundreds

16:14

of utilities and consumer interests said,

16:16

yeah, we really need to do

16:19

this proactive planning. So there really

16:21

was broad consensus on the general

16:26

focus of it. And

16:28

of course, there are a million details and the

16:30

1300 pages and the 30,000 pages of record

16:37

evidence, all the documents filed by

16:39

various parties reflect the

16:41

complexity of all the details in

16:44

there. And so it takes a while, it

16:46

took three years to get through that full

16:49

process. Even, I mean, you could ask it

16:51

like Chairman, former Chairman Neil Chatterjee is out

16:53

saying, he would have done

16:55

this sort of had he had the time, but they

16:57

had a bunch of other stuff that was midstream on

16:59

their plate that they had to finish up. So

17:03

knowing that this is a multi-year process, he didn't

17:05

really have the time to do it. So they

17:07

did undertake it three years ago and they just

17:09

finished. Yeah, and of course,

17:11

as you know, those Chairman Glick was a Democrat,

17:13

Chatterjee was a Republican. So there's been agreement on

17:15

both sides of the political aisle on this. You

17:18

know, one of the things that makes it so complicated,

17:20

it seems to me, is just the complexity of the

17:22

grid. I mean, there really is not just a grid

17:24

in the United States, as we know, it's several

17:28

grids and then plus you have these grid

17:31

operators, right? These

17:33

sprawling operations like the 13th

17:36

state PJM interconnection based

17:39

in Pennsylvania, the

17:42

15th state midcontinent independent system

17:44

operator, the Pacific

17:46

Northwest, you have Bonneville Power Administration, which goes

17:48

back to FDR and the New Deal. And

17:52

then New York and California operate their own

17:54

networks. And finally, in the Southeast,

17:56

you have these dominant utilities that manage

17:59

both power supplies. and flow. So it's a

18:01

complicated system, if you want to call

18:03

it that, across the United States and probably makes it,

18:05

I'm sure, makes it very difficult to come up with

18:07

what, again, you refer to as sort of common sense

18:09

rules for the entire country. Very

18:12

complicated. Each region has its own

18:14

flavor. So it's always a

18:17

challenge. That's always the hard part about

18:19

FERC rules is how do

18:21

you do something that's for the benefit of all

18:23

that also makes sense in each region? I do

18:26

think there are ways. I think the commission did

18:28

a lot of work to sort of figure

18:31

out what are the common elements

18:33

here and the basic thrust

18:37

of proactive planning

18:39

for the long term, done

18:42

as much on a regional basis as possible.

18:46

And then the cost allocation, we'll probably

18:48

get into that, but that's usually the, that's

18:50

where the rubber hits the road and where

18:53

the debates and lawyers, guns and money

18:55

come out. But the

18:57

rule simply said beneficiary pays. And of course

19:00

it did because that's what the courts

19:02

have said the law of the land is.

19:04

So it's just, each region sort of

19:08

has to do that. And

19:10

FERC did the, which should be

19:12

the non-controversial thing of saying,

19:15

well, in those benefits are just reliability

19:17

and economic benefits. We're not saying clean

19:20

energy climate, renewable, other things like that maybe

19:22

could have or should have, but they

19:25

didn't. So it should have sort of been

19:27

received as sort of right down the fairway,

19:30

middle of the road, nonpartisan. And

19:32

of course this is 2024, so

19:34

nothing's ever, that doesn't tend

19:37

to happen. Yeah. I mean,

19:39

that's been one of the biggest sticking

19:41

points, right? Is how to pay for

19:43

this transmission. Huge disputes occur amongst

19:46

states, among utilities over exactly where

19:49

those costs should fall. That's

19:51

always the hardest part in my opinion, the

19:55

three barriers to

19:58

transmission I generally. describe

20:00

as the three P's, planning, permitting, and

20:02

paying. The paying part

20:04

is the cost allocation, and that's really

20:07

the hardest one because we're

20:09

talking about a shared public

20:11

good that benefits everybody. Let's

20:14

say you did a whole region-wide plan

20:16

for the Western Interconnect, built

20:22

out some probably long lines

20:24

from the interior west

20:27

Western Plains to the coast,

20:29

as well as north-south for all the

20:31

resource sharing that they could

20:33

do or expand on.

20:37

There are beneficiaries across the whole region, but

20:41

that's always hard to do. With

20:44

a public good, the incentive is

20:46

always for individuals to try to

20:48

say, no, I shouldn't pay that much,

20:50

somebody else should pay more. So

20:52

it's like if you had the option

20:54

on your tax return to say, no,

20:56

I would like to not spend my

20:58

tax money on national defense this year.

21:01

Please take half of my, charge

21:05

me only half as much for taxes. Everybody

21:08

would do that even if they're like

21:11

strong pro-military families, because that's

21:13

just your incentive is to let somebody else pay

21:15

for the public good. So same way in transmission,

21:18

everybody's incentive is to try to have somebody else

21:20

pay for it, but that's why we have economic

21:22

regulators, that's a core function of FERC, and so

21:25

it's good to see that they're acting. Yeah.

21:27

Well, I mean, the complaint is often

21:29

if the lines are crossing over above

21:31

my head, across my state to

21:35

bring power to another region, I'm not really getting

21:37

much in the way of benefits for that, so

21:39

why should I support it? Well,

21:41

right, but that can be measured, right? So

21:43

you can determine who's getting the benefit. There

21:52

are also these negotiation processes set

21:54

up in the rule for states

21:56

to work together to come to

21:59

an agreement. So,

22:02

you know, there are certainly

22:04

instances where transmission line

22:06

we get planned

22:09

and it might be optimal for the region,

22:11

but one state doesn't get any lower

22:13

cost power out of it. And

22:16

so, you know, that's the type of thing

22:19

that, you know, reliability and economic benefits are

22:21

supposed to account for. Yeah. And

22:23

you think they may? Well,

22:25

I mean, that's now the

22:27

rule. That's what Order 1920 says. And

22:32

I also think, again, this was

22:34

such a straight down the fairway

22:37

determination of reliability and economic benefits,

22:39

again, as opposed to sort of

22:42

the triggering and controversial,

22:45

you know, climate, clean energy benefits that,

22:48

you know, there

22:50

shouldn't be that much argument in principle. In

22:52

fact, I don't even think there's all that

22:54

much for people to do in terms of,

22:56

okay, what's our, you know, region

22:59

X cost allocation policy? Well, I

23:01

mean, the policy is beneficiary pays

23:04

and the benefits are these reliability

23:06

and economic benefits. So just, you

23:08

know, basically you should just comply with folks

23:11

saying, yep, that's what we're doing. Now,

23:14

when you get to the actual plan, you

23:16

have to develop a transmission plan, you

23:19

know, then you have to do this quantification and

23:21

the measurement and

23:23

it might find that, you know, four out

23:25

of the, let's say you did one for

23:28

New England, you might find that, you know,

23:30

four out of the six states get significant

23:32

benefit and two don't. Well, I mean, the

23:34

policy allows for the

23:37

cost allocation to reflect that it could

23:39

be different. Now they might also just

23:41

say, well, we're not going

23:43

to get that, you know,

23:46

fine grained in our policy. We're

23:48

just going to sort of spread it around because,

23:50

you know, one state will win in one plan

23:52

and the next state will win in the next

23:54

plan. You know, they're sort of allowed

23:57

to do that as long as it's sort of

23:59

roughly commensurate with beneficiary. So,

24:01

again, I don't see why there should

24:03

be much debate in principle in like

24:05

what's Region X's cost allocation plan, but

24:08

there's always going to be devil in

24:10

the details of a given plan and

24:12

the analysis. You know, our

24:14

modeling tools are not perfect, for example, so,

24:17

you know, everybody's going to always, I'm sure,

24:19

argue about the details, and then, you know,

24:21

you'll probably have a fork proceeding to sort

24:23

that out. That's, again, what regulators do. There

24:26

was debate at the Commission over this rule.

24:28

The order passed on a 2-1 vote of

24:31

the Commission with the two Democrats, Willie

24:33

Phillips and Alison Clements, approving it, and

24:36

the panel's one Republican, Mark Christie, turning it

24:38

down. You know, Christie

24:40

called it a, quote, pretext to

24:42

enact thorough or through administrative action

24:44

a sweeping legislative and policy agenda that Congress

24:47

never passed. I mean, we've heard those sorts

24:49

of arguments that go to the past by

24:52

opponents of regulations proposed by

24:54

the Biden administration, and before that,

24:56

the Obama administration. What sort

24:58

of signals does that send out

25:00

to the market, to the grid operators?

25:03

Yeah, it's unfortunate that it had

25:05

to be a non-inanimous and

25:08

also, you know,

25:11

happened to be that it

25:13

was party-lined. The

25:16

individuals have party affiliations

25:18

attached to their name, but I

25:20

don't think that reflects

25:22

party differences. And the

25:24

thing about regulatory policy, when you have

25:28

five-member commissions, especially when there's actually only

25:30

three at a given time, is that

25:32

it's really just, you

25:34

know, whatever happens to be the individual

25:37

views of those three individuals, in

25:40

great contrast to say, when

25:42

a law passes and you

25:44

have 535 members of Congress,

25:46

no individual's fingerprints are on it

25:48

too much. So I think what happened

25:50

is each of the three

25:53

commissioners are very well-qualified, very smart,

25:55

very, you know, very high integrity,

25:57

and they're sticking to their print.

26:00

I just think

26:02

there happened to be a difference,

26:04

a core difference of opinion between

26:06

the majority and

26:09

the minority here. Commissioner

26:11

Christie's view is that one state should be able

26:13

to say no, have kind of an opt-out

26:17

approach to say, no, I don't like this plan.

26:20

I don't like this cost allocation, so I should

26:22

be able to not pay. And

26:25

I mean, my opinion is that's

26:27

fundamentally irreconcilable with a meaningful transmission

26:29

planning rule. How could you ever pay

26:31

for infrastructure if

26:33

individuals get to

26:36

opt-out of the whole thing? And

26:39

I think the majority agreed with

26:42

the idea that I just said and

26:44

said, well, we have to proceed

26:48

with a meaningful rule

26:50

here. This is too great a

26:52

need. It's a reliability imperative

26:57

and an affordability imperative, as

26:59

Chairman Phillips said. So

27:01

that core issue I

27:03

think was irreconcilable between the

27:05

majority and the minority, unfortunately.

27:08

And then once there's not going to

27:10

be agreement on that, I think there's plenty of

27:12

other details that

27:15

the minority sort of opt-out

27:17

of participating in the rule and then

27:19

probably doesn't get the rest of what

27:22

they want. I mean, I'm only observing

27:24

from the outside, but that's

27:26

how legislation works. If

27:28

you want to be part of the coalition to

27:31

develop a bill, then you get your imprint

27:33

on it. If you beg off from

27:35

the start, then you don't. So

27:38

I think probably the other

27:40

issues added up in terms of what

27:42

he didn't get and came out

27:45

with that. And there's probably

27:48

some frustration there, which leads

27:50

to the length of the concurrence

27:52

amid the dissent. Right, right.

27:55

It's difficult to get a unanimous opinion or

27:57

anything close to a unanimous opinion in Washington.

28:00

these days. Rob, then

28:02

there's the second rule approved

28:04

by the FERC, the so-called

28:06

Order 1977, which

28:09

while it was overshadowed by the bigger rule

28:11

is still very significant. Why is that so?

28:14

Yeah, well Bill, this is interesting because you and

28:16

I used to talk about this and we were

28:18

involved in the, you know, around

28:21

the Energy Policy Act of 2005 when

28:23

that federal backstop siting

28:26

came in and that was

28:29

quite controversial then, as

28:32

you remember, because having

28:36

a federal backstop over the siting

28:38

of transmission that had always been

28:40

really just a state function with

28:43

no federal oversight, that

28:46

was a big step. You're

28:48

right, it didn't get a lot of attention. You

28:52

know, I think, I think

28:54

there's sort of a number one,

28:56

a recognition that, you know,

28:58

that bottle was fought and

29:00

won by the proponents

29:02

of that backstop siting back in 2005 and then again

29:04

a couple years ago in the IIJA

29:10

or Bipartisan Infrastructure Law,

29:12

which strengthened that provision.

29:14

It has not

29:17

been the case in the last

29:19

few years that any FERC commissioner was

29:21

sort of actively promoting

29:24

that or trying to grab

29:27

authority there or advocate

29:29

for that authority and I think even

29:31

Chairman Glick said a word about it

29:33

during that legislative process. So

29:35

it's not like FERC is asking for this,

29:38

they're just doing what they're obligated to do,

29:40

which is implement what Congress passed. So for

29:42

that reason, moreover, on

29:44

the one thing that was somewhat controversial in

29:47

that rule, which is the proposal

29:50

that there

29:52

should be, in the proposed rule, they said

29:54

we should have concurrent FERC work while the

29:56

states are doing their part of it. rule

30:00

said in response to

30:02

significant state pushback that,

30:05

okay, we'll let the states finish and then

30:07

we'll start. So instead of the simultaneous,

30:10

they went with a sequential approach,

30:13

so the states were happy about that. And I

30:16

think that's why this one was

30:18

a three-vote, unanimous

30:21

vote on implementation of that. And again,

30:23

you know, Commissioner Christie and the other

30:26

Phillips and Clement, I don't think any of them ever

30:29

took a position that this authority should

30:31

exist or should not exist. It's just

30:33

that they're just implementing the

30:36

modification to the law. Tell me if I'm wrong here,

30:38

but as I understand it, that Order 1977 clarifies that

30:40

the FERC has

30:44

the authority to issue permits to construct

30:46

or modify electric transmission

30:48

facilities in so-called national

30:50

interest corridors if a state

30:52

has denied a siting application.

30:55

Right. So that's what it does. But again, that's what

30:57

the law says and what the IIJA you

31:01

know strengthened and clarified. There were a

31:03

couple of court decisions from I think

31:06

2007 and 2009 that really fundamentally

31:10

weakened that provision to the point

31:12

of making it almost meaningless. And

31:16

then and so for

31:18

a number of years, you

31:20

know, Congress has been considering well, you

31:22

know, what did we originally intend and

31:25

maybe those court decisions really blow up

31:27

our intention here. And

31:29

so the law essentially undid those

31:31

court decisions to make it actually

31:33

a, you know, meaningful provision and

31:35

FERC, well, both DOE and FERC

31:37

have now acted recently to kind

31:39

of implement their pieces of that.

31:42

Yeah. So you think, do you think

31:44

now the FERC will in fact take

31:46

advantage of this authority and

31:50

act if a state doesn't on a

31:52

transmission line, one of these national critical

31:54

corridors? Well, I do

31:56

think the authority existing matters and

31:59

the program being set up at

32:01

DOE and FERC matter and it's likely

32:05

to help out in

32:07

the field. It's always an option

32:09

to go through the process at

32:11

DOE and FERC for this. The

32:14

way these things often work is

32:16

just having that ability to get the

32:18

issue resolved sort of

32:21

enables agreements on the ground. There's not

32:23

like a single landowner that could block

32:26

a 500 mile line and extract

32:28

whatever they

32:35

want out of the process. So

32:38

I expect landowners will

32:40

get due compensation. There's

32:42

a lot of farmers and ranchers. It's

32:44

the main sort of scenario we're talking

32:46

about out in mostly rural parts

32:49

of the country. In

32:51

most cases there are multiple routes that the developer

32:53

can say, okay, well, they don't want it here,

32:56

but these other landowners are thrilled to take this

32:58

generous payment and

33:00

also access these various DOE

33:03

funds now available to support

33:05

communities and host

33:09

transmission lines. But

33:11

at the end of the day,

33:13

this veto power from any single

33:15

landowner can sort of be resolved

33:17

now through DOE and FERC and

33:19

that's helpful. It's

33:21

also of great interest, I think,

33:23

to transmission developers and investors who say,

33:26

well, that risk is

33:28

now mitigated because again, if

33:30

you're investing a

33:33

few hundred million dollars

33:35

in the development of a

33:37

transmission line, not

33:40

the full cost of a line, but

33:42

just the development and the permitting and all

33:44

of that and the landowner lease agreements. That's

33:48

a big investment to lay down and if you have that

33:50

risk, well, now that risk is somewhat

33:53

mitigated. So we discussed this authority

33:56

from FERC, a clarification of it recently

33:59

and now. in

34:01

these actions that have been taken. Speaking

34:03

of national interest corridors, the US

34:05

Department of Energy has offered a

34:07

proposal for areas where new transmission

34:10

lines are critical, right? As

34:13

I understand it, it hasn't specifically identified them yet,

34:15

but it's sort of provided a

34:17

broad outline. Yeah, it

34:19

did release, I

34:22

think they're called preliminary corridors. There's

34:26

lines on maps now that you can go see

34:29

on the Department of Energy website. But

34:33

I think there's sort of an

34:35

iterative process here of kind of

34:37

macro studies from the labs about

34:40

important paths and corridors

34:42

and regional needs,

34:47

as well as sort of more ground up

34:49

getting information from parties on the ground about

34:51

where a particular corridor may

34:55

need the help and assistance

34:57

from this program. And

35:00

remember, there's another

35:02

aspect on

35:04

the National Interest Electric Transmission Corridor

35:06

designation by the Department of Energy,

35:08

which is all of their financing

35:11

tools. I wish they had more money, but

35:13

they do have some money to

35:15

spend on various things, loans, grants,

35:19

and not just to the project, but to

35:21

the communities. And so

35:23

when a project gets that NHTSE

35:27

designation, National

35:29

Interest Electric Transmission Corridor, some

35:32

of those financing tools are opened

35:34

up. So there's been reason for some of the

35:37

local interests and

35:41

project developers to really

35:44

propose specifics to DOE. And

35:48

if kind of the local on the

35:50

ground information matches up with the regional,

35:53

inter-regional macro needs assessment,

35:55

then those seem

35:58

to be candidates for does it? It's

36:01

not a final designation, again, it's preliminary,

36:03

so now these particular proposed

36:06

exit designations are out for comment and

36:09

parties can give comments to

36:11

DOE. Yeah, so

36:13

it sounds like this could take time for DOE

36:15

to complete this action, and

36:17

it would seem therefore that it sort

36:20

of postpones the effective

36:22

impacts of

36:25

the order, you know, the order 1977 that the

36:27

FERC just approved. Yeah,

36:30

it will take time, I think that's right. I

36:34

don't expect, you know, final

36:36

designations real

36:39

soon, and then again there's the

36:41

state process and then the FERC

36:43

process, so I haven't

36:45

done the math, but it's got to

36:47

be a couple of years before the

36:49

earliest FERC action would happen. I was

36:51

going to ask you, will these actions

36:53

by these new rules from the FERC

36:55

plus what DOE is working

36:57

on result in approval

37:00

of badly needed new long-distance

37:02

transmission lines soon, but I

37:04

think the answer is probably not,

37:07

right? I think that's right. I

37:09

mean, look, again, I think

37:11

we can do, build a lot

37:13

of transmission without

37:16

ever having to get a

37:18

FERC permit, and that

37:21

doesn't mean that that provision is unimportant

37:23

because just the existence of that authority

37:26

in order to resolve

37:29

an issue

37:31

helps just having that

37:33

authority exist and the programs exist, but

37:36

I think, I don't know,

37:39

90 plus percent of large long-distance

37:41

transmission that we build, if we're successful

37:43

in doing that, I think will be

37:45

done without a FERC permit. So,

37:47

you think there's enough incentive, additional incentive

37:49

provided by the first of the bigger

37:52

FERC action, 1920, to help

37:55

move things forward for long-distance transmission even in

37:57

the absence of some final

37:59

action soon? on these critical national

38:01

corridors? Yeah, I think

38:03

that's right. The regional planning rule,

38:05

I think, is the single

38:08

most important transmission policy in

38:11

the last decade and one of

38:13

the bigger energy policies in the

38:15

last decade, certainly the biggest since

38:17

the Inflation and Reduction Act. Now,

38:20

of course, it's only intra-regional,

38:22

not inter-regional, so there's action

38:24

that remains on inter-regional and

38:28

there are other issues that are important for

38:30

Congress to consider in the planning,

38:33

permitting, and paying space, particularly the

38:35

permitting space and

38:38

in the inter-regional space, since again,

38:40

FERC hasn't done that yet. So

38:43

the job certainly

38:46

isn't done, but the nitsy

38:49

actions by DOE and FERC in Congress

38:52

to sort of strengthen and put that

38:54

program back in place are

38:56

important additions to the NEX here, and

38:59

the FERC planning rule is a huge

39:01

addition to the NEX. In

39:03

practical terms, Rob, can you sort of point to

39:06

someplace in the country where

39:08

there are proposals for long-distance

39:11

transmission that stand

39:14

a chance now of really moving

39:16

forward thanks to these regulatory

39:18

changes? Yeah, well, it's

39:20

not so much that there's like a proposal

39:22

because again, the plan hasn't been done. So

39:25

the FERC Order 1920 is, okay, now do

39:27

the plan. Now,

39:29

there's a lot of, you know, if you go

39:31

and pull people in the, let's say, the Northwest

39:34

or Southwest and

39:37

just kind of say, hey, off the top of your head,

39:39

where would the best, you know,

39:41

new pathway be or,

39:43

you know, grid expansion be, you

39:46

tend to get pretty close to

39:48

consensus. You know, the lines, you

39:50

know, if you independently asked a

39:52

dozen utility people in the West

39:54

to, you know, here's a magic

39:57

marker in a map, where would

39:59

you like, they tend to... fairly

40:01

similar, but the point is they

40:03

haven't actually done that regional analysis

40:06

with, you know, the things like

40:08

the load diversity is a huge factor. Just,

40:10

well, your load's high when mine's low and

40:12

vice versa, and then the generation

40:14

output diversity with, you know,

40:16

renewables and, you know, you

40:19

can send, you know, in

40:21

the deepest cold spells in Montana

40:23

with its negative 30 degrees. You

40:25

can get solar power from Los

40:27

Angeles, east of LA, to

40:30

serve people in Montana, but

40:33

that's a complicated analysis to put

40:36

all that together. So the idea is for

40:39

each region to really do that analysis,

40:42

look at the load and generation

40:44

patterns, and then figure out the

40:46

optimal configuration. Do you

40:48

think there's still likely to be much disagreement

40:50

among states over

40:53

proposed new transmission lines? You know,

40:55

I read a statement in

40:58

E&E News from, by Rich

41:00

Click, the former FERC chairman, that

41:03

he doesn't think there's such a

41:05

divide among states these days. He said

41:07

that, quote, the old notion that some regions

41:09

want more transmission and others don't is really

41:11

a thing of the past. Would you agree

41:13

with that? I agree with

41:15

that. I think the consensus has been

41:17

growing and growing across states. If

41:21

there is any governor in

41:23

the country who has not heard

41:25

from a major business that

41:28

is considering coming to their state

41:31

but is concerned about their grid capacity,

41:35

I would be very surprised. I expect all

41:37

50 governors, well, I don't know about Hawaii

41:39

and Alaska, and of course Texas is separate

41:41

from these rules, but

41:43

the other 47 states, I would bet every one of

41:45

the 47 governors has heard about

41:47

this issue from people

41:49

who could be bringing a lot of tax base and

41:51

jobs to their state, and that's why

41:55

it's been great, for example, that the

41:57

governors have spoken up on this, the

41:59

Midwest governors. have written letters

42:01

saying we need to build out our

42:03

regional transmission grid and LISO get busy

42:05

on it. And the New England

42:07

governors, for years

42:09

and years they weren't doing anything on transmission

42:11

in New England, but the

42:14

six governors together said,

42:16

I assume New England get busy on this.

42:19

We've got these economic development

42:21

and clean energy and

42:24

climate and various policy needs,

42:26

so get going. And now through

42:28

NESCO, the New England State

42:30

Committee group, they are actively

42:33

working on and sort of directing

42:36

the ISO to get busy on

42:38

the plans and have reached some

42:40

agreements on

42:43

cost allocation. So governors

42:47

are really important here because of course they

42:49

care a lot about economic development. Some

42:52

of them view that as job number

42:54

one, maybe some safety

42:57

and security, but job development, they

42:59

spent a lot of time on that,

43:02

which is a little bit of a different

43:04

mindset from the average economic regulator who's focused

43:07

on low rates only, but

43:09

you can be very short-sighted about

43:11

low rates and ignore the economic

43:13

development and economic benefits

43:16

to your state. So it's

43:18

been great. I think we've had a lot

43:21

more states speaking up and saying we actually

43:23

need this. And if you've been watching recent

43:25

congressional hearings like in the Senate, there were

43:27

Republican members as well as Democratic members

43:29

saying, we want some

43:32

of these activities here. We want to

43:34

be manufacturing semiconductors in

43:37

this country as opposed to other countries. And

43:40

it ain't going to happen without transmission. So

43:45

those same members of Congress and senators

43:47

might not have been saying

43:49

that just on the basis of wind

43:51

and solar power integration. But

43:54

the point is, again, there's multiple

43:56

reasons to support expansion

43:58

of the grid, and we're hearing that. from

44:00

a lot of different parts

44:02

of the country and different political strikes. Yeah.

44:05

Well, why you may be hearing that when

44:08

it comes to transmission among governors, Republican

44:10

and Democrat, we know that it's

44:13

often Republican-controlled states that challenge

44:15

regulations in Washington, particularly ones

44:17

that we see at the

44:19

environmental protection agencies. You're not

44:21

a lawyer, but I know you talk to lawyers. These

44:25

rules likely to face court

44:27

challenges, and they're likely

44:30

to withstand any such challenge. Most

44:34

significant FERC rules are challenged, so

44:36

it's just far from the course.

44:41

FERC has a solicitor's office, and they go,

44:43

and it's what they do. They go and

44:46

work on these if and when they get

44:48

challenged. So I'd be amazed if

44:50

they were challenged by somebody. And

44:54

then to me, as a bit

44:56

of a layperson on this, it

44:58

seems completely arbitrary and

45:01

random, which judges end up

45:03

having it before them. And

45:06

then so there's a bit of a crapshoot

45:09

aspect to any significant

45:11

FERC rule these days based on the arbitrary

45:14

views of whatever judge winds up with

45:16

it. But aside

45:19

from that complete random chance, I

45:22

think these are pretty bulletproof rules. And

45:24

it matters to me, so I do

45:26

talk to legal experts, law professors and

45:28

others. And

45:31

what I am hearing from all of

45:33

them is these are as bulletproof as

45:35

they could have been. So

45:40

it's really just up to that remaining

45:42

random chance of whatever judge might

45:44

want to make a name for themselves

45:46

by challenging a federal agency, which is

45:48

not unheard of these days. The

45:51

utility industry doesn't appear

45:53

pleased with the FERC order. Utility

45:57

trade group Edison Electric Institute said... The

46:00

measure failed to provide regional

46:02

flexibility for evaluating project benefits,

46:06

adding that it may actually slow development

46:08

of transmission lines. Is there any validity

46:10

to that statement? Well,

46:12

the utilities were by and

46:14

large focused primarily

46:16

on this issue of the

46:19

rate of first refusal, and they were hoping to get

46:21

a change to what Order 1000 did on

46:23

that. And

46:28

most of us didn't know until

46:31

the issue came out whether FERC would

46:33

take that up or not. They

46:36

chose to mainly punt

46:39

it and say, we'll consider that in

46:41

some other future proceeding. And so I

46:43

think the initial reaction out of the

46:46

gate from most investor

46:48

on utilities was some

46:50

disappointment about that. They

46:52

probably weren't betting a lot on the change, but they

46:54

were hoping for it. So it

46:57

wasn't surprising to see a little

47:00

bit of disappointment from the utility sector. However,

47:03

going back to the basic

47:05

idea of proactive long-term planning for the

47:07

future needs, et cetera, the core elements

47:09

of the rule, a couple

47:14

of hundred utilities supported

47:16

that general principle in the

47:18

docket, and I think it is

47:20

the consensus of the utility industry

47:22

that that should be done. I

47:26

think there's plenty of regional flexibility

47:28

here for them to work with.

47:33

And so I suspect most of

47:35

them are going to come around

47:38

and say to their colleagues, let's

47:40

get busy and do this. The

47:42

best way to avoid any conflict

47:45

now is to just follow the rules

47:47

and do this. And if there are

47:51

some specific tweaks

47:53

or changes for a given region,

47:55

again, based on the

47:57

different ownership and culture and

47:59

practice. of a region that

48:01

I'm sure FERP, you know, there's always

48:03

some ability of FERP to accommodate that

48:06

as long as the ultimate

48:09

objective is being achieved, and

48:11

you know, which is, you

48:13

know, by which I mean, you know,

48:16

the right type of planning. It doesn't mean it's always

48:18

going to have to, FERP is not

48:20

saying you need to come up with a plan that

48:22

results in a certain amount of investment because, you know,

48:24

if we do this right, they'll build

48:27

a lot in some places and other times go

48:29

through the process and find out we actually have

48:31

enough for now at this time in this region.

48:34

So, again, it's about doing the

48:36

process right and the evaluation right

48:38

with the ultimate, you know, consumer

48:40

interest in mind of just and

48:42

reasonable rates. Well, Rob,

48:45

here's the million dollar, or perhaps I should say

48:48

billion, I don't know, ultimately

48:50

trillion dollar question, and that is,

48:53

do these actions by the FERP and

48:55

DOE make the need

48:58

for new

49:00

law on reforming

49:04

the entire siting process in

49:06

the United States any less urgent? No,

49:10

I still think congressional action is

49:12

needed, and that

49:15

is an interesting question because that was

49:17

the very question the Senate Energy Committee

49:20

was discussing just earlier this

49:22

week. There,

49:24

you know, there are some areas where,

49:27

you know, some of these lines, really valuable

49:30

lines have been taking over 15 years, and

49:33

that's just not going to work. So

49:36

I'm hopeful there's a way for parties to

49:38

come together and get that, you know, you

49:41

have a lot of real climate

49:43

hawks in Congress who are saying, hey, we

49:45

need to, you know, err on the side

49:47

of building infrastructure because almost all the new

49:49

infrastructure is going to be clean infrastructure to

49:51

replace the dirty infrastructure. And

49:54

so I see a lot of environmental

49:56

groups shifting to that mindset. Now, of

49:58

course, none of the environmental groups or

50:00

progressive members of Congress want to get

50:03

rid of NEPA or fundamentally change it or

50:05

gut it, but I think there are ways

50:07

to change some of these

50:09

laws and regulations. Moreover,

50:13

again, nobody has really enacted

50:15

on interregional transmission, and there's

50:17

been a lot of discussion

50:19

and awareness in

50:21

Congress on both sides of the

50:23

aisle about the reliability and resilience

50:25

benefits of interregional transmission, discussion of

50:27

a minimum transfer requirement, kind of

50:29

like they have in Europe where

50:32

each neighboring system has to have

50:34

a minimum amount of capacity between

50:36

it just for reliability kind of

50:38

insurance value. It's

50:40

kind of hard to exactly measure the benefit

50:42

of that insurance, just like it

50:45

is normally the case with insurance policies. So

50:47

kind of having that just minimum, whatever the

50:49

optimal is, leave that to FERC, but maybe

50:52

there's just a minimum protection we could get,

50:54

so there's discussion about that. So

50:56

I do hope Congress

50:58

continues to really try

51:00

to hammer through permitting

51:03

legislation, and there's a chance it could get

51:05

final passage in lame duck. I don't think

51:07

before the election is super likely in an

51:09

election year, but there is an opportunity

51:12

if the committees do their work to

51:14

get something done later. So

51:16

the permitting law, I guess, what is

51:19

it that a permitting reform, an act

51:21

passed by Congress could accomplish that

51:23

these FERC, new FERC regulations cannot?

51:26

You're saying it would particularly help

51:28

for sort of longer interregional lines

51:30

that may not necessarily benefit from

51:33

what FERC has done so far?

51:35

That's right, and some of the

51:38

provisions might not necessarily be even

51:40

permitting specifically. It could be transmission-specific

51:42

requirements like that minimum transfer, which

51:45

is not permanent per se, but it's

51:47

closely related. So that

51:49

in addition to some

51:52

of the details of the permitting

51:54

laws and regulations could be helpful,

51:57

and there are a lot of

51:59

details about that. the whole process

52:01

of NEPA implementation that

52:04

could be tweaked to different places. And

52:06

as we've been discussing this National Interest

52:08

Electric Transmission Corridor for Corridor

52:10

1977, remember, you have to go

52:13

through NEPA and an Energy or

52:16

Environmental Impact Statement at the DOE

52:18

designation stage and then also at

52:21

the later for permit stage. So you

52:23

have to do NEPA and EIS twice

52:25

on the same line. So that's

52:28

an example of just really unnecessarily

52:31

clunky and slow processes

52:33

that could be cleaned up by

52:36

legislation. Yeah, yeah. Those NEPA

52:38

or National Environmental Policy Act considerations are

52:41

certainly important and are getting a lot

52:43

of consideration in Congress these days. As

52:45

you say, perhaps we'll see some action

52:48

on it at some point. Those

52:51

who watch this have been waiting for that

52:53

for some time. Well, Rob, thank you so

52:55

much for taking the time to discuss these

52:57

important actions taken at the FERC in recent

52:59

days. And it'll be interesting to see now

53:02

the impact that they have going forward. Thanks, Bill.

53:04

It was great to be with you. That's

53:11

it for this week's episode of Columbia

53:13

Energy Exchange. Thank you again,

53:15

Rob Gramlich, and thank you for listening. The

53:18

show is brought to you by the

53:20

Center on Global Energy Policy at Columbia

53:22

University's School of International and Public Affairs.

53:25

The show is hosted by Jason Bordoff

53:27

and me, Bill Loveless. The

53:30

show is produced by Aaron Hardick

53:32

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