Who builds, owns and ultimately foots the bill for building transmission lines? US policy has long maintained that whoever benefits from transmission lines must help shoulder the costs.

But some claim that a June 2010 Federal Energy Regulatory Commission (FERC) proposal, which outlined pricing mechanisms for the construction of new transmission lines, defined “benefits” too loosely and that utilities, and ultimately their customers, are unfairly paying the price.

The debate began when renewable generators began to build new transmission to support remote projects like wind turbines and offshore projects. Traditional pricing mechanisms require all power companies in a specific region to chip in for the cost of transmission, as it is assumed that all will benefit from the construction. But a set of power generators have put up a staunch fight against new FERC guidelines, even though the language has been dramatically softened to accommodate some of the concerns of incumbent power companies.

“The proposed rule would establish a closer link between transmission planning processes and cost allocation and would require cost allocation methods for intraregional and interregional transmission facilities to satisfy newly established cost allocation principles,” says the June 2010 FERC document, Transmission Planning and Cost Allocation by Transmission: Owning and Operating Public Utilities.

Instead of a blanket national rule, the FERC ruling charges power regions to develop their own cost allocation plans. But for some, this is still not enough.

A View From Old Man Sam

A group of power companies opposed to the FERC ruling is represented by the Coalition for Fair Transmission Policy, headed by Bruce Edelston. Edelston told Breaking Energy that while FERC has traditionally regulated transmission construction, the language of the most recent proposal does not protect incumbent power generators from irresponsible transmission projects proposed by newer local generation companies. Consumers, he said, will ultimately pay the extra price on their electricity bill, whether or not they support the new wind turbine construction in their region.

“FERC action on cost allocation for new transmission should ensure the lowest reasonable cost to consumers, not the largest possible subsidies to clean energy developers and transmission companies,” Edelston wrote in a recent Op-Ed in the Hill’s Congress Blog. A spokesperson for the Coalition told Breaking Energy the Op-Ed represented his group’s statement on the subject.

He claimed that Michigan consumers already experienced unfair price hikes when FERC authorized the construction of new transmission lines across 13 Midwestern states. Although the lines were built to support wind farms in other states, Michigan utilities–and ultimately their customers–will have to pay as much as 20% of the $16 billion cost.

“There is no problem that needs to be solved,” Edelson said, referring to the rule. If a renewable energy project is built by a certain company for a specific customer base, those parties–the only ones truly benefiting from it, in his view–should be the only ones responsible for its cost.

In February, Senators Ron Wyden (D-OR), Bob Corker (R-TN), Lisa Murkowski (R-AK), Richard Burr (R-NC), and Lindsey Graham (R-SC) initiated S.400 bill in Congress that would provide a replacement pricing mechanism to the FERC proposal.

“We need federal policies that promote viable domestic energy production and innovation in the fairest, most cost-effective manner possible,” Corker said at the time. “Governors and utilities from across the country have spoken out against FERC’s attempt to shift transmission costs from states that benefit to those that don’t.

The group of Senators also proposed several amendments to the Federal Power Act, which mandates all electrical pricing mechanisms. Among the amendments–which were ultimately accepted and incorporated into the bill as it currently stands–was a proposal to divvy up the larger RTO regions, such as the entire East Coasts’ PJM, Texas’ ERCOT and the West Coast’s Southwest Power Pool, which traditionally paid as a unit for transmission lines.

Young, Sprightly And Sprawling

Even supporters of the current FERC pricing proposals say that RTO regions should not be held collectively responsible for new transmission.

Joseph Kelliher served as FERC chairman from 2005 to 2009 and currently works as executive vice president of Federal Regulatory Affairs at NextEra Energy, the parent company of Florida power utility Florida Power & Light.

“Florida is a separate region,” Kelliher told Breaking Energy, and he would not support any bill that would require Florida residents to pay for a wind project in Massachusetts.

Nevertheless, every utility is part of a region, he said, and FERC’s job is to make sure those utilities plan and pay together for transmission lines. NextEra Energy was one of dozens of renewable power companies and small utilities that wrote a letter on Thursday to Congress asking, for the second time, that S.400 be opposed.

“While the sponsors are well intentioned, in seeking to restrict the way the cost of new electric transmission facilities may be allocated, S.400 adopts an unreasonable benefit standard that will have the practical effect of thwarting the construction of transmission needed to reliably deliver new sources of generation and to foster competition,” the group-letter says.

The group noted that state renewable energy standards require new generation be built and that it is unfair to lay the burden of those costs on the power generators alone.

The bill would literally stop the building of new renewable energy.

“Every time electricity supply in the US has fundamentally changed, the transmission grid has changed with it,” Kelliher said. If the grid does not upgrade for renewable power, new development would be frozen, he said.

Not all renewable power needs extensive new transmisson lines. Rooftop solar panels, for example, require almost no new transmission whereas an offshore wind farm might require miles on new lines. But, he said, those decisions must be made by local power regions. In the meantime, that doesn’t mean that a traditional power generator can have their transmission lines upgraded for free.

“Everyone would like something for nothing and people have been getting something for nothing for a long time,” Kelliher said. “I think the FERC ruling is saying that’s not tenable.”

Photo Caption: US Senate Majority Leader Sen. Harry Reid (D-NV) (2nd R) speaks as (left-right) Sen. Charles Schumer (D-NY), Senate Majority Whip Sen. Richard Durbin (D-IL), Sen. Robert Menendez (D-NJ), Sen. Max Baucus (D-MT), Sen. John Rockefeller (D-WV), Sen. Patty Murray (D-WA), and Sen. Ron Wyden (D-OR) look on during a news briefing after a Democratic Caucus meeting April 8, 2011 on Capitol Hill in Washington, DC.