A federal commission set out rules on paying for the nation’s sorely needed electricity transmission upgrades at a widely anticipated meeting yesterday.

The US transmission industry welcomed the new federal rule requiring grid expansion be paid for only by those who benefit from it, and guaranteeing that costs align with benefits as the country seeks to upgrade and expand its power-transmission infrastructure.

The Federal Energy Regulatory Commission issued a final rule on Thursday requiring public utility transmission providers to participate in a regional planning process that has a regional cost-allocation method, and for neighboring regions to adopt the same cost-allocation method for transmission infrastructure.

The rule also requires transmission planning to conform to FERC rules, and to consider transmission needs in the context of public policy needs established by state or federal law.

Utilities in each pair of neighboring regions will have to work together to seek the most cost-effective solutions to the transmission needs of the two regions.

The Working Group for Investment in Reliable and Economic Electric Systems (WIRES), a trade association, said the rule would encourage a bigger and more reliable national power grid.

“The rule removes one of the obstacles to developing the grid that the US needs for the 21st century – narrow cost allocation that does not recognize the way the grid operates and impedes cost recovery for grid investment,” WIRES said in a statement.

The measure “goes a long way” toward formulating the public policy that will result in robust interstate power infrastructure, the group said.

Under the rule, costs of new transmission facilities should correspond to benefits received, and no costs should be allocated outside a region unless that region agrees.

States or regions that do not benefit from grid expansion will not have to contribute to new transmission projects.

Rewarding Reliable Renewables

FERC Chairman Jon Wellinghoff said the national grid will need significant new investment to bolster reliability and meet increased power output, especially from renewable sources.

Some 60% of all new power sources to be added to the bulk power system by 2019 will come from wind and solar as states work to meet alternative energy portfolio standards, according to data from the North American Electric Reliability Corporation.

By 2019, transmission circuit miles will increase by 9%, half of which is needed for reliability, an additional 27% to integrate renewable and other sources of generation, and the remainder to integrate hydro, fossil, and nuclear sources, or to reduce congestion, according to NERC data.

“The existing transmission system was not built to accommodate this shifting transmission fleet,” Wellinghoff said in a statement accompanying the new rule. “It is critical that transmission planners seek the most efficient and cost-effective ways to meet the needs of their region.”

He said the new rule will ensure that consumers have greater access to efficient, low-cost electricity.

Standardizing State Systems

WIRES also welcomed FERC’s measures to make planning, especially for projects that cross state lines, more systematic.

“Efficient and open decision making in all regions serves the larger public interest,” the trade association said.

Paula Dupont-Kidd, a spokeswoman for northeast regional grid operator PJM Interconnect, said officials had not been able to study the FERC rule but believe it builds on existing practices.

“The FERC order reinforces the process that is already underway,” Dupont-Kidd said.