Federal Energy Regulatory Commission

Over the past two decades Federal Energy Regulatory Commission (FERC) policy has sought to promote a robust transmission network in response to the advent of competition in the wholesale marketplace. Its policy has primarily relied on regional transmission organization (RTO) development and merchant transmission to build up the grid and minimize intraregional (seams) problems. These efforts have been largely ineffective to date, however. This article reviews the problems facing interregional transmission projects, and FERC transmission policy, particularly as it relates to interregional transmission expansion. It then suggests principles that the Commission ought to consider to foster such projects. In particular, it suggests that the Commission seek to tie transmission incentives to verifiable measures of reliability improvements and congestion reduction. Further, it outlines a “regional cost recovery tariff ” for financing interregional lines. It concludes that FERC policy needs to establish tighter links between performance and incentives, and it should more carefully evaluate the obstacles facing transmission siting