BPU Wants Utilities to Pay More Attention to Costs on Transmission Projects

Tom Johnson | June 29, 2016 | Energy & Environment
New Jersey joins other state regulators, federal agency to raise concerns about economic impact of transmission costs on consumers

transmission towers
State regulators are urging a federal agency and others to focus more closely on cost impact to consumers when reviewing and developing projects to build high-voltage transmission lines.

In a conference held Monday by the Federal Energy Regulatory Commission, state utility commissioners, including the president of the New Jersey Board of Public Utilities, expressed concerns about the economic effect of those projects.

The concerns come at a time when electric utilities around the United States are under pressure to modernize the country’s power grid to make it more resilient to extreme weather. They’re also being pushed to adapt to a new energy infrastructure that relies more on local power systems, such as solar panels, fuel cells, and smaller power-generating units.

The issue is especially important in New Jersey where the state’s four electric utilities have ramped up spending on transmission projects, in part due to directives from PJM Interconnection, the operator of the nation’s biggest power grid.

The increased investments in such projects are not subject to scrutiny by state regulators in areas where the electricity market has been deregulated, which means officials have very little, if any, control over costs to ratepayers. At the same time, the cost of maintaining the transmission lines have grown to be a bigger part of a customer’s bill.

For example, the state’s biggest utility, Public Service Electric & Gas, has embarked on such an aggressive building program on its transmission system, that this portion of the bill now accounts for roughly 40 percent of the cost. Utilities earn a higher rate of return, and, in some cases, incur fewer risks for transmission projects when compared with investments in distribution upgrades.

In speaking at the conference, BPU President Richard Mroz said in prepared remarks “I am concerned that issues of cost are not sufficiently focused upon –whether in the planning, scoping, engineering, procurement, or delivery.

“For us all — whether state or federal regulators or developers or the RTOs (regional transmission organizations, such as PJM) that administer the process — there needs to be a sense of cost-consciousness,.’’ Mroz said.

Travis Kavulia of Montana, president of the National Association of Regulatory Utility Commissioners, echoed his views, noting questions continue to be raised whether transmission is being planned in an economically efficient manner.

“State utility commissioners are increasingly asking whether those responsible for selecting transmission projects are relying to the degree necessary on measures that discipline costs and apportion risk to those responsible for the development of transmission facilities,’’ Kavulia said.

The questions raised at the conference are not surprising, according to Paul Patterson, an energy analyst at Glenrock Associates in New York City.

“This isn’t the first time they have raised these concerns,’’ Patterson said. “These investments cost money and they are rising.’’

New Jersey, in particular, is taking a more active role in the issue at the federal level, Patterson said, because congestion on the power grid has led to higher energy costs for consumers. The new projects are designed to alleviate those costs to some degree, he added, noting a recent auction held by PJM resulted in much lower prices for power producers.