Approved by states to act as local monopolists, investor-owned utilities (IOUs) promptly extended their reach by building transmission lines to neighboring utility systems. Transmission links transformed IOUs from state-sanctioned service providers to interstate system operators and wholesalers. With overriding control over transmission in their monopoly service territories, IOUs exploited nearby non-profit utilities and regionalized their dominance through collusive agreements with each other that obstructed competition and cartelized infrastructure development. From 1996 to 2011, FERC issued four orders that aimed to wrest the nation’s high-voltage electric delivery systems from IOU control and open interstate power systems to competition. FERC’s agenda has since stalled. Further action is needed to disconnect transmission expansion from IOUs’ state-granted service territories.
FERC has rejected the premise that century-old state laws that effectively provide IOUs with exclusive service territories grant these companies perpetual rights to develop the nation’s interstate electric delivery systems. While FERC has removed certain barriers to entry for non-IOU developers, it has yet to foster a development process that stimulates significant non-IOU projects. Moreover, planning processes have not spurred adoption of new technologies that can obviate the need for local transmission projects or led to the sort of large-scale transmission projects that could efficiently integrate zero-emission renewable resources. While scholars and practitioners have focused on transmission siting challenges to unlocking renewables, I focus on the transmission planning process that selects transmission projects for development through cost-of-service rates. I offer a perspective on IOU transmission ownership that suggests the status quo is incompatible with development of large-scale interregional connections designed to integrate new wind and solar and deployment of advanced technologies that can substitute for local transmission expansion. IOUs are driven to maintain the status quo, in part by capitalizing on FERC’s rules that allow them to build projects within their state-granted territories without competitive pressures and on the backs of their captive retail ratepayers. This local focus is at odds with FERC’s decades-long push for regionalization, and the IOUs’ defensive approach to transmission development has no place in a technologically dynamic industry.