Regulatory Incentives for Electricity Transmissions-Issues and Cost Concerns [October 28, 2011] [open pdf - 450KB]
"Following the August 14, 2003, electric grid blackout which affected large portions of the Northeast United States and Ontario, Canada, Congress acted to promote investment in the nation's electrical grid to increase the system's capacity and efficiency. Inadequacies of an antiquated transmission system were blamed for the 2003 blackout. The Energy Policy Act of 2005 (P.L. 109-58) (EPACT) directed the Federal Energy Regulatory Commission (FERC) to hold a rulemaking on incentive rates for construction of critical electric transmission infrastructure 'for the purpose of benefitting consumers by ensuring reliability and reducing the cost of delivered power by reducing transmission congestion.' The Final Rule was issued in July 2006 with FERC Order No. 679, 'Promoting Transmission Investment through Pricing Reform.' EPACT Section 219 stipulates that 'all rates, charges, terms, and conditions be just and reasonable, and not unduly discriminatory or preferential.' […] FERC may or may not revisit this decision as a result of its consideration of comments submitted to the NOI [Notice of Inquiry]. Expectations have been raised as to the large dollar investment possible over the next two decades in transmission systems alone, with one estimate from the electricity industry suggesting $298 billion will be required to meet future electricity demand. However, with the concerns raised over the effects of transmission incentives on consumer rates (especially incentives granting higher ROE [return-on-equity] incentives to applicants), implications of related federal policies on the electric power sector, additional FERC regulatory policies for transmission, and the aging of electricity infrastructure among key issues, the need for continuing transmission incentives may be a matter for Congress to consider."
CRS Report for Congress, R42068