Transmitting Electricity in an Increasingly Complex Energy Market: A Legislative Update
Updated April 2011
The United States’ transmission infrastructure will need significant upgrades in the coming 2 decades. While population growth and new consumer devices are increasing electricity demand, distributed energy and smart grid technologies are drastically changing how electricity is delivered. A recent study conducted by The Brattle Group estimates that, by 2030, industry needs to invest $1.5 trillion to $2 trillion in total infrastructure, including about $298 billion for transmission and $582 billion for distribution.
Transmission upgrades will need to account for the increasingly important role of renewable energy in many states, since the best renewable resources are often located far from cities where the electricity is needed. Siting, regional coordination, and cost-recovery challenges often hinder transmission development. Many states are working to address these issues through a variety of policies.
States are responsible for siting electric transmission lines and in most, utilities must demonstrate need for new lines while state and local governments must agree on line placement. Complex and burdensome siting processes, cost issues, and coordination can significantly delay transmission projects. The following state summaries explore state efforts to address these and other transmission challenges.
A pending bill in Colorado, SB 45, concerns a streamlined process for securing governmental approval for electric transmission facility siting. Similarly, Senate Bill 630 in Connecticut would create a more efficient process for siting electric facilities to ease the current supply burden and high energy costs, whereas HB 6250 directly concerns the siting council. In 2010, Michigan enacted HB 5654 which provides for expedited transmission line siting certificates. In Arizona, a few pending bills (SB 1403, HB 2008 and HB 2538) relate to the transmission line siting committee and provide that any certificate of environmental compatibility that is granted cannot be conditioned on the applicant negotiating with or working with a trade association that represents union workers.
Underground Power Lines
Virginia enacted SB 645 in 2010, prohibiting approval of an agreement between a local governing body and an electrical utility for the underground installation of a transmission line if a feasible overhead alternative exists. An exception is if all localities in which the line passes request that installation be underground.
Financing Transmission Projects: Incentives and Cost-Recovery
Securing resources to fund transmission projects is often an obstacle, and states are seeking financing options to alleviate the economic burden. Since 2009, at least 10 states—Alaska, Arizona, California, Hawaii, Illinois, Massachusetts, Michigan, New Mexico, New York and Oregon—considered legislation providing for bonds, tax credits, or tax exemptions, typically for clean energy projects but including transmission improvements associated with the projects.
Illinois and Michigan enacted legislation. While one bill in Illinois authorized bonds for clean coal projects and related transmission, SB 1923 granted tax exemptions for wind power facility projects that include construction of new transmission facilities or upgrades for existing facilities. Michigan enacted SB 777 and HB 5469 in 2009, which provide tax credits for a percentage of the capital invested in constructing a facility producing large scale batteries, including capital allocated towards advanced transmission and distribution technologies.
States can enable utilities to recover transmission project costs. For instance, Hawaii’s HB 1176 and SB 368, relating to a renewable energy transmission cable, would allow cost-recovery. In Oklahoma, pending SB 662 would presume costs incurred by an electric utility for transmission upgrades recoverable by the utility. Two pending bills in Maryland (SB 715 and HB 1123) allow the Commission to require an investor-owned electric company to consider construction of transmission facilities necessary to connect a new generating facility to the grid subject to appropriate cost-recovery. New Mexico’s SB 57 would allow utilities to recover new transmission infrastructure costs. Rhode Island enacted six bills addressing contracting standards for renewable energy which allow transmission costs to be recovered.
Interstate Transmission Lines
Planning, siting and financing transmission lines that cross state borders is complex and proposes challenges that delay, and often discourage, interstate transmission line development. Since the electric grid is made up of independently-owned and operated plants and transmission lines, allocating cost responsibilities between developers, customers and investors is controversial. At least three states are considering legislation that addresses interstate transmission challenges.
In Arizona, SB 1237 would allow the governor to appoint a member to the Energy Authority of Arizona representing electrical transmission planning organizations that promote both inter- and intrastate transmission. Maryland is considering two bills (HB 1204 and SB 914) that would authorize a county to impose a tax on electricity transmission that uses specified long distance lines.
Transmission to Encourage Renewable Energy
Since 2009, 21 states have considered legislation that addresses renewable energy transmission problems. Most bills provide for a more robust transmission system to increase energy reliability or encourage renewable energy generation potential.
Illinois passed three bills (SB 1906, HB 852 and SB 390) in 2009 which address financing transmission lines associated with clean coal or energy efficiency projects. Michigan enacted legislation (SB 777 in 2009, SB 1343 and HB 5469 in 2010) allowing tax credits for businesses. In Rhode Island, two bills (HB 8083 and SB 2819 of 2010) allowed a company to enter into an agreement with an offshore wind developer to purchase energy, finding that it is in the public interest for the state to facilitate construction of a small-scale offshore wind demonstration project, including an undersea transmission cable.
A modernized smart grid would help integrate increased electricity generation from renewables. It has the potential to increase reliability and efficiency, and reduce utility bills. However, many are hesitant that the smart grid could be vulnerable to cyber attacks and privacy would be threatened. At least six states have considered smart grid legislation since 2009:
- Pending in California, AB 37 relates to smart grid deployment.
- In Colorado, SB 131 (pending) concerns the creation of a smart energy grid in the state and implements the recommendations of a Colorado smart grid task force.
- Hawaii’s pending HB 1518 and SB 1456 would establish the Hawaii Electricity Reliability Council to develop and implement grid reliability and interconnection standards.
- House Bill 6154 failed to pass in Illinois, but it would have provided for the Commerce Commission to adopt minimum standards for smart grid technology by rule and require electric utilities to comply.
- In New Jersey, AB 912 would limit electric utility cost recovery to equipment or software that is compatible with a smart grid system, and AB 913 would establish a Smart Grid Pilot Program.
- Legislation in New York (AB 6954) would have established a smart grid system, but it failed to pass. Assembly Bill 11414 and SB 8356, which also failed to pass, related to emerging technologies, specifically the smart grid. Still pending, AB 1656 would establish a smart grid system.
The U.S. Department of Energy (DOE) recognizes that modernizing the nation’s electricity infrastructure is a priority to ensure reliability and avoid higher electricity costs. Research areas focus on real time grid reliability management; load as a resource; reliability technology issues and needs assessment; and reliability and markets. The federal government is also working to address significant barriers to building new transmission, including cost-allocation and siting. To learn more about the federal government’s role in transmission reliability, please visit the Office of Electricity Delivery & Energy Reliability’s website.
Note: For a detailed discussion of transmission policy and challenges, see Meeting the Energy Challenges of the Future: A Guide for Policymakers and Integrating Wind Power Into the Electric Grid: Perspectives for Policymakers.