After years of little to modest growth in transmission investment, the United States is experiencing an increase in investment in new transmission facilities. The Brattle Group reports that transmission investment in 2008 is quadruple that of average transmission investment levels in the 1990s, and projects annual transmission investment levels of $10 billion going forward. The North American Electric Reliability Corporation (NERC) expects that transmission lines 100 kV and above will increase by 31,400 circuit miles, or about 8% by 2018.2 In addition, the Brattle Group found that there is more than $120 billion worth of planned and conceptual transmission projects, although some are duplicative, and some of these will not go forward because of permitting and financing difficulties, among other reasons.

Transmission cost allocation is commonly cited as a key issue in determining whether new transmission is built or not. Transmission cost allocation can be particularly contentious for multi-state transmission projects that cross more than one state, as the benefits of the proposed project may accrue unevenly to market participants. The difficulties in assigning transmission costs over a multi-state region were highlighted by the U.S. Seventh Circuit Court of Appeals decision in 2009 that remanded to the Federal Energy Regulatory Commission (FERC) the order that authorized PJM to recover the costs of new transmission facilities over 500 kV from all transmission customers in PJM. The case originated in part by the Illinois and Ohio state utility regulatory commissions objecting to paying for transmission facilities that are likely to be of more benefit to customers in eastern PJM. The Court stated that FERC had to better document how all transmission customers would benefit from the new transmission if all customers had to share in the cost....(read more...)