Towards a National Transmission Planning Authority
Abstract
This Article explains why U.S. electric utilities are overinvesting in small, local transmission projects and underinvesting in high-voltage regional and interregional lines that would reduce congestion, improve reliability, and support state and federal decarbonization goals. The first problem is that state and federal policies create financial incentives for utilities to avoid investing in regional and interregional projects, as small lines are often exempt from rules that otherwise require competitive procurements, protect the market power of vertically integrated utilities’ generation assets, and are subject to little, if any, regulatory review. The second problem is that federal regulations put utilities in a position to direct investment towards projects that protect their own interests but do not promote the general welfare. Utilities influence investment decisions both by developing the criteria to determine whether certain projects-especially reliability projects-should be constructed, and by using their governance rights to shape regional transmission policy. The result is a regulatory environment that outsources-perhaps inadvertently-responsibility for transmission planning to utilities that have both the incentive and the ability to channel investment towards projects that avoid competition, protect their generators’ market power, and evade regulatory oversight. We conclude by proposing solutions that state and federal regulators could implement under current legal authority and others that would require new legislation.