Ruling forces Vermont to share cost of adding regional transmission

Vermont electric customers could be on the hook for the cost of out-of-state transmission projects as the result of a federal court decision Friday.

The U.S. Court of Appeals – D.C. Circuit upheld an order by federal energy regulators requiring regional planning for transmission projects designed to connect renewable power to the grid.

Federal Energy Regulatory Commission Order 1000 would force states to coordinate transmission planning and share the cost of projects. Vermont shares its electric grid with the five other New England states.

How the cost of the transmission projects will be shared among the states is yet to be decided. But Vermont utilities want to ensure that the state pays only its fair share of the cost.

Regulators have not decided how to divide the cost of transmission projects among the regional partners.

One proposal would spread 70 percent of the costs among the region and the state hosting the project would pay 30 percent. Another proposal would share 30 percent among the region and the host state would pay 70 percent.

Vermont is advocating for the latter. Under the cost allocation proposal, Vermont would pay 4 percent of the 30 percent it owes toward the out-of-state projects. The state consumes about 4 percent of New England’s electricity load.

Part of the July 2011 order is a proposal to “socialize” the cost of transmission projects designed to integrate more renewable power into the grid. Southern New England states with rising energy demands want generate and import more renewable power. The policy initiative aims to reduce greenhouse gas emissions by burning less fossil fuel.

Johnson said there are about $5 billion in additional reliability transmission projects in the queue to be built in the region. He said the cost associated with public policy projects under the proposed FERC order remains unknown.

VELCO vice president Kerrick Johnson testified before the House Commerce and Economic Development Committee on Friday to discuss regional transmission development. Photo by John Herrick/VTDigger

VELCO vice president Kerrick Johnson testified before the House Commerce and Economic Development Committee on Friday to discuss regional transmission development. Photo by John Herrick/VTDigger
Kerrick Johnson, the vice president of Vermont Electric Power Corp., or VELCO, the state’s transmission utility, said the state must remain vigilant and engaged in the planning process. He wants to ensure that efficiency and other non-transmission alternatives are considered if the rule moves forward.

Johnson said VELCO will advocate at the regional level to ensure that the cost of the transmission projects are not needlessly high. This would include asking developers to provide a detailed analysis of project costs and set up a filing schedule so project cost estimates are filed on time.

“We are looking to make that process more transparent, more timely, and more accountable,” he said.

Utilities and renewable energy groups alike say Vermont should therefore continue to shave its load down from 4 percent by building more renewable generation projects “behind the meter,” such as small-scale solar and wind. These projects would therefore reduce the amount of money ratepayers must provide to the regional projects.

David Hallquist, CEO of Vermont Electric Cooperative, said Vermont would pay less for these projects if it cut its load by building out more distributed generation projects in state and increasing efficiency.

“Our strategy in Vermont really needs to be how to build as much local generation as possible,” he said.

The state must find a way to balance variable renewable energy generation with more consistent forms of energy or storage, he said. Among other challenges, Hallquist said as Vermont puts more solar power on line utilities have to deal with accommodating evening peak use when solar is unavailable.

Annette Smith, executive director of Vermonters for a Clean Environment, said reducing Vermont’s load will do little to avoid additional costs.

“We’re a small fish a big pool and this order provides Vermont with less protection, not more protection, against costs to serve to population centers in New England,” she said.

Renewable energy advocates support the decision because they say it makes it easier to develop renewable energy projects.

Gabrielle Stebbins is executive director or Renewable Energy Vermont, a trade group representing the industry. She said a regionally coordinated approach to dealing with electric transmission issues gives developers more certainty.

“The more piecemeal you make the marketplace, the more challenging it is for that marketplace to move to more efficiency,” she said.

State utilities say the ruling will make it more economically viable to develop renewable power generators in remote areas of the grid where upgrades are needed to bring that power to consumers.

Hallquist said connecting power to the grid in remote areas of the state can cost significant amounts of money.

His utility co-developed the Kingdom Community Wind Farm with Green Mountain Power. He said it cost the utilities about $20 million to connect the $160 million, 63-megawatt wind farm on Lowell Mountain to the grid and build a synchronous condenser.

For other similar projects, he said this cost could be significant.

“But if that’s shared, it will make it easier and more lucrative for those projects to be built,” he said.

Green Mountain Power, the state’s largest utility, applauded the decision.

“We welcome the requirement for grid operators to consider important public policy needs, such as renewable generation and energy efficiency measures. There are still a lot of details to be worked out that we will be following closely to ensure our customers and the environment benefit,” the company said in an email.