Remember Transmission? Thought Not...

"Fortress California?" With statements like that, how can you possibly eschew politics? We received an e-mail recently from an avid industry watcher complete with cartoon showing some jack-booted "electron police" at a remote desert outpost arresting Reddy Kilowatt as he rode in over a high-voltage line.

Anyway, we find it curious that in all the statements and in all the stories we've followed about the CA debacle, little lip service has been given to one of the core problems of this marketplace: transmission planning. In fact, throughout this mess, the only mention of the grid at all was a statement by the state treasurer suggesting the government should take over the transmission assets of the big ailing utilities in the state. He proposed issuing up to $10 billion in bonds toward acquiring these assets.

"I'm not sure where that particular idea is headed, but I can say I've not heard any sunset clause, no exit strategy for such a state move," says PwC's Elliot Roseman, a transmission expert in the firm's securities practice in Washington, DC. "Would such a new state entity operate in perpetuity? I don't think so."

But, for the sake of argument, how might such a state acquisition play out? Let's look at facts: The state's IOUs own about 75 percent of the transmission in the state. The rest is owned by munis, coops and so on, many of which have entitlements to power from the Northwest, from Bonneville, etc. They also have access and rights to high-voltage DC lines from the Northwest. The federal government owns some transmission assets. Under new state ownership, it could be argued that many such entitlement and access deals would have to be unwound. And all of this in our lifetime.

Regardless of how we think the state of California might operate its own grid, the fact is the market has generally done a lousy job itself. For all the attention and investment that new generation around the country has received, Roseman tells us there has been an almost "de-investment" in transmission. A recent NERC report cites extremely low projections for new transmission. In the next 10 years the figures look like about a 3.5 percent increase to transmission capacity.

"What is needed to create a more efficient marketplace? That's a moving target. It's going to be a different answer on a region-by-region basis. These transmission planning reports are, after all, given to the NERC by utilities. The utilities have been relatively frozen in their approach to...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT