When Congress returns after Labor Day, lawmakers will take up pending energy legislation that already contains five key provisions (see below) needed to bolster U.S. electric transmission capacity and help ensure power system reliability, EEI President Thomas Kuhn noted in a statement on August 19.

“In the wake of the multi-state power outages, people are naturally asking what can be done to upgrade and improve our transmission systems,” Kuhn said. “There are elements within the bills that House and Senate conferees will address in September that can go a long way toward achieving that goal.”

Those elements include provisions on mandatory reliability standards, changes in the tax code to stimulate investment in transmission facilities, and improvements in the process that governs siting of transmission lines.

EEI's Recommendations

• An electric reliability organization, with Federal Energy Regulatory Commission (FERC) oversight, should be created to develop and enforce mandatory reliability rules and standards that are binding on all electric companies and market participants. Currently, the North American Electric Reliability Council (NERC) develops standards, guidelines, and criteria for assuring transmission system security and reliability. Electric company compliance with NERC standards, however, is voluntary and is not subject to government oversight. Reliability provisions already are included in both the House and Senate versions of the pending energy legislation.

• The U.S. tax code should be amended to provide enhanced accelerated depreciation (from 20 to 15 years) for electric transmission assets, similar to the tax treatment governing other major capital assets. Currently, transmission assets receive less favorable tax treatment than other critical infrastructure and technologies. In addition, Congress should ensure that electric companies that sell or otherwise dispose of their transmission assets into a FERC-approved regional transmission organization (RTO) or independent transmission company (ITC) do not suffer tax penalties. Accelerated depreciation provisions already are included in the House version of the pending energy legislation; both the House and Senate versions of the bill address transmission sales or dispositions.

• FERC and the states should utilize innovative transmission pricing incentives, including higher rates of return, to attract capital to fund needed investments in transmission. While FERC is taking steps to increase the rate of return, the amount of money that FERC allows investors to earn on transmission facilities still is not in line with what they can earn on other investments. The House version of the pending energy legislation includes FERC pricing provisions.

• FERC should be given backstop transmission siting authority to help site transmission lines in “interstate congestion areas” designated by the Department of Energy (DOE), if states have been unable to agree or move forward. Unlike the strong federal authority that FERC has to site natural gas pipelines, individual states currently have sole jurisdiction over where to build new transmission lines, a process that often delays transmission building. The House version of the pending energy legislation includes this provision.

• The transmission permitting process on federal lands should be reformed and simplified by designating DOE as the lead agency to coordinate and set deadlines for the federal environmental and permitting process. To further facilitate siting, deadlines for the designation of transmission corridors across federal lands should be established. The House version of the pending energy legislation includes these provisions.