Benefits of Transmission Competition Remain Elusive
Expanded Study from Concentric Energy Advisors Provides Update on Previous Findings
NOVI, Mich., April 17, 2024 /PRNewswire/ — Members of the Developers Advocating Transmission Advancements (DATA) Coalition, including ITC Holdings Corp., are highlighting new findings in an expanded study from Concentric Energy Advisors that reinforces conclusions from its 2022 study that found an absence of benefits being delivered by competitive transmission solicitations mandated by Federal Energy Regulatory Commission’s (FERC) Order 1000. The expanded analysis reveals a continued lack of evidence to support the claims of cost savings from non-incumbent competitive projects and raises concerns regarding alleged cost containment measures intended to protect customers.
The new study, “An Updated Examination of FERC Order No. 1000 Projects” expands on previous evidence and finds that the benefits of competitive solicitation processes remain unsupported by the totality of the evidence. Notable findings include:
The expected cost savings from competitive transmission remain unsupported by the evidence. For example, customers in California will likely pay nearly $300 million more than an agreed to unadjusted cost cap that was part of a non-incumbent competitive developer bid for the right to build and own a transmission project. Furthermore, the benefits from the project have been delayed for four years.
Cost cap mechanisms, in practice, are often structured with extensive exclusions and other features that significantly limit customer protections and fail to meaningfully shift risk to developers. In one instance, customers in New York are facing considerably higher costs in rates due to exclusions included in the winning bidder’s cost cap. Specifically, costs included in the formula rate are more than double the unadjusted cap.
Order 1000 competitive processes create incentives for competitive developers to submit aggressive bids, which include cost caps, to win projects only to later exceed those cost caps and rely on extensive exceptions. Moreover, implementation of cost caps and other cost containment measures often suffer from transparency challenges that make it difficult to assess how the mechanisms were implemented and reflected in customer rates.
Case studies demonstrate high levels of cost and schedule adherence by incumbent transmission developers when constructing complex regional transmission projects. Specifically, three of four projects undertaken by incumbent transmission developers have been completed at or below cost estimates (with the fourth in process but expected to be completed on budget), and three came in on schedule, with the major elements of the fourth project being completed in substantial part on schedule.
“It is overwhelmingly clear competition has not resulted in savings for customers,” said Purvi Patel, Vice President of Regulatory Strategy at ITC Holdings Corp. and a DATA Coalition member. “Transmission investment is desperately needed to ensure reliability as the transition to renewable energy sources continues to rapidly accelerate. We can’t afford to fall further behind schedule by desperately hoping a failed decade-long experiment will finally work.”
The Concentric Energy Advisors study was prepared on behalf of the DATA Coalition, a group of transmission-owning utilities consisting of Ameren Services, Eversource Energy, Exelon Corp., ITC Holdings Corp., National Grid USA, Public Service Electric and Gas Company, and Xcel Energy.
Concentric Energy Advisors is a recognized leader in management consulting services to the North American energy and water industries.
Read the complete report here: https://ceadvisors.com/publication/an-updated-examination-of-ferc-order-no-1000-projects/
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SOURCE ITC Holdings Corp.