Rhetoric or reality at FERC


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FERC is picking winners and losers, unilaterally deciding that national policy demands consumers subsidize wind farms located on the Great Plains and build the expensive transmission lines needed to bring the electricity east. These projects can only be built if the costs are spread widely and benefits defined broadly. Consumers get stuck with the costs, and the benefits go to energy and transmission developers unable to compete in the marketplace.


FERC’s new transmission rule gave non-governmental “planning regions” too much power and too little accountability over the allocation of transmission costs. This approach improperly delegated FERC’s authority under the Federal Power Act to these regions without meaningful review by the Commission to ensure the transmission costs passed on to rate payers are just and reasonable or related to the benefits received.





Finally, FERC declined to define benefits, allowing costs to be imposed for claimed benefits, regardless of whether they are proportionate or needed. In fact, the rule seemingly requires only a showing that the benefits are not “trivial” no matter the imposed costs, and then forces states and consumers to prove this cost methodology is unfair.


FERC can rectify the situation later this week. A coalition of Michigan leaders has asked FERC to reconsider a controversial December 2010 order approving a cost allocation formula that forces Michigan to pay 20 percent of $16 billion for transmission lines across 13 Midwestern states that deliver virtually no benefits to Michigan consumers.


If FERC refuses to budge, its order will have a devastating impact on Michigan’s struggling economy. Michigan businesses will be hit with unfair and unwarranted rate increases, restricting growth and destroying jobs. Every major auto company’s electricity bill could skyrocket by more than $10 million a year.



Each major university in Michigan will pay an extra $2 million, and municipalities such as Ann Arbor, Grand Rapids and Lansing will pay hundreds of thousands of dollars extra for their power.  Should Michigan be forced to subsidize wind developers in South Dakota and pay for transmission lines that deliver little electricity to its homes and factories?


No, say Michigan’s governor, legislature, attorney general, Democrats and Republicans in the congressional delegation as well as the state chamber of commerce, environmental and labor leaders. They want FERC to change its order. If FERC flatly rejects their request, FERC statements about aligning costs and benefits will be meaningless.


Fortunately, Congress is watching FERC. A bipartisan group of U.S. senators earlier this year introduced legislation to protect consumers from unfair electricity costs. At a House hearing last week, lawmakers emphasized concerns about subsidies for transmission operators and FERC orders that pass the costs of the new power lines to consumers receiving no benefits.



The message is clear: Watch what FERC does, not what it says.


Steven A. Transeth is a former member of the Michigan Public Service
 Commission who is the founder and president of Transeth & Associates,
PLLC, which represents the MISO Northeast Transmission Customer
Coalition.