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Electricity TransmissionA PrimerNational Council on Electricity Policy

iElectricity TransmissionA PrimerByMatthew H. Brown, National Conference of State LegislaturesRichard P. Sedano, The Regulatory Assistance ProjectNational Council on Electric PolicyThe National Council on Electricity Policy is a joint venture among theNational Conference of State Legislatures (NCSL), the National Associationof Regulatory Utility Commissioners (NARUC) and the National Associationof State Energy Officials (NASEO)www.ncouncil.orgJune 2004National Council on Electricity Policy

iiElectricity TransmissionThe National Conference of State Legislatures is thebipartisan organization that serves the legislators andstaffs of the states, commonwealths and territories.NCSL provides research, technical assistance and opportunities for policymakers toexchange ideas on the most pressing state issues and is an effective and respected advocatefor the interests of the states in the American federal system. Its objectives are: To improve the quality and effectiveness of state legislatures. To promote policy innovation and communication among state legislatures. To ensure state legislatures a strong, cohesive voice in the federal system.The Conference operates from offices in Denver, Colorado, and Washington, D.C.The National Association of Regulatory Utility Commissioners(NARUC) is a nonprofit organization founded in 1889. Itsmembers include the governmental agencies that are engaged inthe regulation of utilities and carriers in the 50 states, the Districtof Columbia, Puerto Rico and the Virgin Islands. NARUC’smember agencies regulate the activities of telecommunications,energy and water utilities. NARUC’s mission is to serve the publicinterest by improving the quality and effectiveness of public utilityregulation. Under state law, NARUC’s members have the obligation to ensure theestablishment and maintenance of utility services as may be required by the publicconvenience and necessity, and to ensure that such services are provided at rates andconditions that are just, reasonable and nondiscriminatory for all consumers.The National Association of State Energy Officials(NASEO) is the only nonprofit organization whosemembership includes the Governor-designated energyofficials from each state and territory. NASEO was formedby the states and through an agreement with the NationalGovernors Association (NGA) in 1986. The organizationwas created to improve the effectiveness and quality of state energy programs and policies,provide policy input and analysis where requested, share successes among the states, andto be a repository of information on issues of particular concern to the states and all theircitizens.Cover photo by Anthony Calvo.Printed on recycled paper 2004 by the National Conference of State Legislatures. All rights reserved.ISBN 1-58024-352-5National Council on Electricity Policy

iiiCONTENTS1. Introduction . 1A Quick History . 22. Why Has Transmission Become So Important? . 8Reliability . 8Flexibility . 9Economics . 10Competition . 10Transmission Siting Process . 113. Paying for Transmission . 22The Up-Front Investment in Transmission . 22How Can Regulated Utilities Charge for Use of TheirTransmission Lines? . 24Current Issues in Financing Transmission . 274, Physical and Technical Aspects of Transmission . 29What are transmission facilities? . 29Does power move over a prespecified, contracted pathof transmission lines from a generator to a customer? . 29What is meant by transmission limits and congestion?What causes these limits? . 30What special provisions are necessary if a power line isplaced underground? . 32What happens when power buyers and sellers want to sendmore power on a line than it can handle? . 32How do grid operators react to problems on the power grid? . 33What are reserves? . 34What are ancillary services? . 34What are VARs (or Reactive Power)? . 35What limitations constrain power flow over long distances? . 35The grid is primarily an alternating current (AC) network.Is there a greater future role for direct current (DC) lines? . 37Will new technologies affect transmission grid capabilities? . 38What special issues exist regarding transmission flowsbetween the United States and Canada and Mexico? . 38National Council on Electricity Policyiii

ivElectricity Transmission5. Action Items for State Officials . 391. Assign the responsibility for transmission siting approvalto one state entity. . 402. Establish a fee structure whereby applicants pay for thecosts of the studies required in the siting process. . 413. Enable state siting authorities to collaborate withcomparable agencies in other states to review projects thatcross state lines. . 414. Set a statutory limit for the time allowed to consider atransmission siting application. . 425. Establish clear and complete filing requirements for sitingproceedings. . 436. Ensure that the siting authority’s analysis takes into accounta “what if ” analysis . 437. Consider providing intervenor funding. 448. Identify important scenic, ecological, environmental andother resources. . 449. Clarify the definition of need. . 4410. Integrate generation and transmission planning; adddemand resources. . 4411. Include transmission corridors in urban growth plans. . 4512. Define considerations that can be evaluated and discussedin a transmission line siting case. . 4613. Integrate the public into consideration of sitingproposals. . 4614. Impose retail rates that reflect actual cost differenceswithin a service territory. . 4615. Coordinate with federal agencies. . 4716. Examine the interactions between rate caps/rate freezesand investments in transmission. . 4717. Address landowner compensation for lands in a new orchanged transmission right-of-way. . 48Appendix. Who Plans, Builds and Owns Transmission? . 49Glossary . 59Notes . 69National Council on Electricity Policy

vContentsList of Figures and TablesTable1. New Transmission Line Voltages During Electrificationof the United States . 22. Miles of High-Voltage Transmission Lines in theUnited States . 63. Typical Capital Costs for Electric Transmission Linesby Voltage . 15Figure1. Key Elements of the Electric Power Grid . 72. Normal Electric Transfers . 123. States Where Permitting Needs Are Determined byLine Voltage . 174. States with One Agency Authorization . 185. Permitting Categories by State . 206. Key Elements of the Electric Power Grid--SAME AS FIG. 1 . 307. Electric Interconnections and Reliability Regions inNorth America . 368. North American Electric Reliability Council Regionsand Control Areas . 54National Council on Electricity Policy

viElectricity TransmissionABOUT THE AUTHORSMatthew H. Brown is the director of the National Conference of StateLegislatures’ Energy Project. He is responsible for advising state legislatorsand their staff on a wide variety of energy issues. Mr. Brown has authoredor co-authored numerous publications on electric industry issues. Hehas testified before more than 35 state legislative bodies on energy policyissues and has worked closely with many state legislatures on their ownelectricity policies. Mr. Brown holds an AB from Brown University andan MBA from New York University.Richard Sedano is a director with the Regulatory Assistance Project, wherehe writes and presents on a variety of energy topics. Before he joinedRAP in 2001, he was Commissioner of the Vermont Department of PublicService from 1991 to 2001, and was chair of the National Association ofState Energy Officials from 1998-2000. In 1997-98, he served on theElectric System Reliability Task Force for the Secretary of Energy AdvisoryBoard. He received a bachelor’s degree in engineering from BrownUniversity and master’s degree in engineering management from DrexelUniversity.viNational Council on Electricity Policy

viiACKNOWLEDGMENTSThis report was prepared with the financial assistance of a grant from theU.S. Department of Energy (DOE) Office of Electric Transmission andDistribution, Jimmy Glotfelty, director. Larry Mansueti of that programprovided helpful input, direction and review on the document.The authors are grateful for the assistance of numerous others whoprovided information for this report and reviewed its contents. KansasRepresentative Carl Holmes, Tim Kichline of the Edison Electric Institute,Maryland Delegate Carol Petzold, Terry Ross of the Center for Energyand Economic Development, Samantha Slater of the Electric PowerSupply Association and Terri Walters of the National Renewable EnergyLaboratory provided review and are members of the NCSL AdvisoryCouncil on Energy (ACE), an advisory board to the NCSL Energy Project.The authors also thank Lynn Anderson and Marsha Smith of the IdahoPublic Utilities Commission, Wilson Brown and Jennifer Brown of theUniversity of Winnipeg, Jeffrey Genzer of that National Association ofState Energy Officials, Chuck Gray of the National Association ofRegulatory Utility Commissioners (NARUC), Cathy Iverson of the U.S.Department of Energy, Jim McCluskey and Bill Keese of the CaliforniaEnergy Commission, Kevin Porter of Exeter Associates and the ExecutiveDirector of the National Council on Electricity Policy, Christie Rewey ofthe National Conference of State Legislatures, Kansas Representative TomSloan, Andrew Spahn of NARUC, and Connie White of the Utah PublicService Commission.Leann Stelzer provided the invaluable copy editing and formatting forthis book. Alise Garcia gave invaluable assistance to production of thispublication.National Council on Electricity Policyvii

viiiElectricity TransmissionThe authors are grateful to the members of the National Council onElectricity Policy Steering Committee for their support on this project.National Council Steering Committee MembersSenator Clifton Below, New HampshireCommissioner Nora Mead Brownell, Federal Energy RegulatoryCommissionJoe Bryson, Senior Energy Analyst, Environmental Protection AgencyChairman Michel Dworkin, Vermont Public Service BoardCommissioner Jeanne Fox, Chair, New Jersey Board of Public Utilities,National Council ChairSenator Beverly Gard, IndianaRepresentative Carl Holmes, KansasWilliam Keese, Chairman, California Energy CommissionLarry Mansueti, U.S. Department of EnergyPatrick Meier, Director, Wisconsin Energy BureauRepresentative Hermina Morita, HawaiiCommissioner Phyllis Reha, Minnesota Public Utilities CommissionCommissioner Marsha H. Smith, Idaho Public Utilities CommissionPeter Smith, President, NYSERDAWilliam “Dub” Taylor, Texas State Energy Conservation OfficeCommissioner Constance White, Utah Public ServiceCommissionThe National Council is funded by the U.S. Department of Energy andthe U.S. Environmental Protection Agency.The views and opinions expressed herein are strictly those of the authorsand may not necessarily agree with the positions of the National Council,its steering committee members or the organizations they represent, theNational Council funders, or those who commented on the paper duringits drafting.National Council on Electricity Policy

11. INTRODUCTIONFlip on the lights, and you’re completing a circuit that connects yourlight bulb to the wires that serve your house, to the larger wires that serveyour neighborhood and, ultimately, to a network of high capacity wiresthat deliver power over great distances. This network—the powertransmission system—is complex, costly and critical to the nation’seconomy and way of life. Many of those who influence the electricindustry, however, lack a good understanding of the transmission system.This primer on electric transmission is intended to help policymakersunderstand the physics of the transmission system, the economics oftransmission, and the policies that government can and does use toinfluence and govern the transmission system.This book is divided into the following chapters and an appendix: Why has transmission become so important?What is the process for building a transmission line?Paying for transmission.Physical and technical characteristics of transmission.Action items for state officials.Appendix: Who plans, builds and owns transmission?Electricity Transmission: A Primer is designed for those who are new totransmission issues. It focuses on state policy and on how statepolicymakers can influence transmission policy. To understand whatstates can do about transmission, it is important to understand a broadercontext of transmission technology, planning, and the interactions ofstate and federal policies. Thus, part of this primer provides backgroundon these broader issues. The primer concludes with a more detailedNational Council on Electricity Policy1

2Electricity Transmissiondiscussion of state transmission policies. Because so many of these policiesrelate to permitting and siting transmission facilities, much of the policydiscussion focuses on transmission siting.A Quick HistoryGrowth of the Transmission SystemThe 19th century inventors who first began to harness electricity to usefulpurposes did so by putting their small generators right next to the machinesthat used electricity. The earliest distribution system surrounded ThomasEdison’s 1882 Pearl Street Station in lower Manhattan, and another thatEdison built in Menlo Park, New Jersey. These, like most of the systemsconstructed during the next few years, distributed power over copperlines, using direct current. This method of distribution was so inefficientthat most power plants had to be located within a mile of the place usingthe power, known as the “load.” It appeared at the time that the powerindustry would develop into a system of many small power plants servingnearby loads. All the early power systems were what most people nowrefer to as distributed generation systems: generators were located closeto the machines that used electricity.By the 1890s, other inventors, many of whom were former partners oremployees of Edison, further developed this system of power distribution.The most important development was high-voltage power transmissionlines using alternating current (AC). Alternating current allowed powerlines to transmit power overTable 1. New Transmission Line Voltagesmuch longer distances than theDuring Electrification of the United Statesdirect current system thatEdison preferred. In 1896,DateTypical VoltageGeorge Westinghouse built an189611,00011,000 volt AC line to connect190060,000a hydroelectric generating1912150,000station at Niagara Falls to1930240,000Buffalo, 20 miles away. FromSource: Smithsonian Institution, 2002.then on, the voltage of typicalnew transmission lines grew rapidly, as table 1 illustrates.This more capable power transmission system further spurred the industryto build larger generators to serve ever-larger loads and populations. Theeconomics of the industry began to favor larger companies instead of theNational Council on Electricity Policy

3Introductionmultiple small power plants and local distribution systems that had beenestablished in the 1880s to 1890s. Chicago’s Samuel Insull builtCommonwealth Edison by acquiring and consolidating many of thesesmall companies; by 1907, when he formally incorporatedCommonwealth Edison, he had consolidated 20 different powercompanies. Other cities saw the same types of consolidation and creationof the early electric monopolies, a trend that continued for the first quarterof the 20th century.State governments reacted by extending the jurisdiction of their regulatorycommissions, originally designed to regulate railroads, to electriccompanies. New York and Wisconsin set the trend in 1907, when theirlegislatures passed laws setting up a state regulatory system. By 1914, 43states had regulatory commissions with oversight over electric utilities.Under this structure, the electric system continued to grow at a tremendouspace. The electrical output from utility companies exploded from 5.9million kilowatt-hours (kWh) in 1907 to 75.4 million kWh in 1927.During that same period, the real price of electricity declined by 55percent, although many people still viewed it as a luxury; adjusted forinflation, a kilowatt hour of electricity in 1907 cost 1.56, declined to55 cents by 1927, and continued its steady decline thereafter. The electricindustry continued its path toward greater consolidation, and by 1932,eight large holding companies controlled about three-quarters of theinvestor-owned utility business. Because these holding companies crossedstate lines, they generally were exempt from state commission jurisdiction.Many people felt federal regulation was necessary.This first major federal regulation of the electric power industry occurredin 1935, when President Roosevelt signed the Public Utility HoldingCompany Act (PUHCA). PUHCA limits the geographical scope of utilityholding companies and the corporate structure of the holding companies.The act of created vertically integrated utilities (owning both power plantsand power lines) in monopoly service areas. The Federal Power Act gavethe Federal Power Commission jurisdiction over wholesale power salesan

Electricity Transmission . discussion of state transmission policies. Because so many of these policies relate to permitting and siting transmission facilities, much of the policy discussion focuses on transmission siting. A Quick History . Growth of the Transmission System . The 19. th. century inventors who first began to harness electricity .

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