Electric Transmission Projects – A Whole New World

October 11, 2017

The Department of Energy’s (DOE) proposed groundbreaking changes to energy markets that would shift the competitive dynamic across the entire power industry may add increased uncertainty to federal regulation of the energy industry. As we explained yesterday in a customer note, if approved, this rule would effectively subsidize nuclear and coal-fired power plants, disadvantaging other power providers, disrupting the electric generating market, and introducing uncertainty in the electric generating markets. This increased uncertainty only adds to the risks faced by companies attempting to navigate the infrastructure permitting process.  

Monitoring and analysing the vagaries of the infrastructure permitting process allows for informed decision-making. Efforts to track infrastructure development are made more or less difficult by the permitting scheme which governs approval. To the extent one authority is tasked with approval across various issue areas and jurisdictions, monitoring project progress is achievable, at least for the motivated. One example of a fairly centralized review would be the FERC’s review of interstate natural gas pipelines, where the FERC is responsible for determining project need, as well as the extent to which the project’s environmental impact can be mitigated. It also is the shepherd for various state and other federal agency permits, a responsibility that comes with its own set of challenges. So, is removing the federal government from the permitting process a win for project developers seeking to flow electrons or liquids rather than gas molecules? 

The FERC’s review of liquids pipeline projects is less comprehensive, covering only the rate and tariff modifications resulting from the construction of new infrastructure that is approved by state agencies. And even more removed is the FERC’s oversight of electric transmission projects, where the FERC is responsible only for the approval of rates for wholesale sales of electricity and transmission in interstate commerce for jurisdictional utilities, power marketers, power pools, power exchanges and independent system operators. This leaves the approval of transmission projects involving the development of lines, substations and interconnections to state agencies on a state-by-state and, in some instances, even a county-by-county basis. This patchwork approval scheme often leaves those in the energy power value chain to do a lot of head scratching when it comes to obtaining any visibility into project viability, progress, or timing.

In recent years, the development of alternative energy sources has provided additional load to an already aging electric transmission system. This is particularly true in Texas and Iowa, which have led other states in the development of wind generation. For example, American Electric Power Texas Inc. (AEP Texas) is currently seeking approval for its Bonilla – Ladekidde Transmission Line Project, a development that includes the construction of 32 miles of new 345 kV transmission line and a substation – the Bonilla Substation in Cameron County, Texas. The project, filed with the Public Utility Commission of Texas (PUCT), has been under review since January and is intended to interconnect 230 MW of local wind energy being developed in the Rio Grande Valley. The project is to be built in conjunction with a second substation – the Ladekidde Substation, constructed by Magic Valley Wind Farm II, LLC, a subsidiary of E.ON, one of the world’s largest investor-owned electric utility service providers. But when is this transmission project expected to be in-service? 

AEP Texas does not intend to begin acquiring land until January 2018, begin construction until August 2019 and energize the facility until July 2020. Is leaving one year for review and approval by the PUCT sufficient? Unlike its federal counterpart, the FERC, the PUCT is not subject to the National Environmental Policy Act, and as a result, does not need to produce an environmental assessment or environmental impact statement. Generally, environmental permitting, to the extent any is necessary, is not completed by public utility commissions in their review of electric transmission projects. This suggests to those not familiar with the power industry that review is less risky, but many of the risks seen with natural gas pipelines can be worse for power developers, especially those involved with electric transmission projects. But why?

Projects like AEP Texas’s Bonilla – Ladekidde Transmission Line Project must be financed and planned years in advance of their need, and are largely dependent on the success of the wind generation facility to which they interconnect. Unlike natural gas pipeline projects approved under the Natural Gas Act, transmission development does not have the benefit of eminent domain. As a result, while risk associated with a lengthy environmental review may be limited in comparison, engagement with stakeholders can be more contentious and, perhaps, even litigious. Timing is always a major variable for power or gas pipeline projects, but the FERC has only twice denied projects — denial by public utility commissions, however, is far more common. Just ask the ambitious Clean Line Energy developers about their saga with the Missouri Public Service Commission over the 780-mile Grain Belt Express project. 

Wondering where you can obtain critical details about electric transmission projects,  stakeholders, analytics about project timing, and have a continual stream of updated intelligence otherwise unobtainable? LawIQ now offers a new product that enables you to identify and track these proceedings in critical states, such as Texas and Iowa. 

Electric Transmission Line Projects