FALLOUT FROM THE ENERGY POLICY ACT OF 2005

Energy Department Trumps State’s Rights Part II Of A Series

by: diane m. grassi | published: 07 01, 2008

As discussed in Fallout from the Energy Policy Act of 2005 Part I of a Series, the United States federal government is taking a more and more integral role in the distribution and transmission of electricity and in the energy sector throughout the U.S. And such is the result of both federal regulations and laws mandating the deregulation of public utilities as well as the repeal of the Public Utilities Holding Company Act (PUHCA) of 1935, as mandated in the Energy Policy Act of 2005 (EPAct 2005). It will prove to have profound impacts on the future of not only the fiscal health of public utilities but the oversight of their maintenance and the future construction of transmission lines.

This Part II continuing report, on the exploration of EPAct 2005, will focus upon a section of the law which has not been clearly articulated for the American people by either the Department of Energy (DOE) or members of either the U.S. House of Representatives or the U.S. Senate. Yet, this complex and important body of law represents but an ad hoc and unilateral takeover of not only the direction of energy policy but the very delivery system which Americans rely upon in order to live.

EPAct 2005 sets forth specific mandates whose ramifications are unprecedented with respect to U.S. energy law, states’ constitutional rights and sovereignty, as well as interstate commerce. Specifically, Section 1221 of EPAct 2005 updates Section 216 of the Federal Power Act (FPA). It provides for, among other things, the requirement of a National Electric Transmission Congestion Study, first completed in August 2006, a year after enactment of EPAct 2005. Such a Congestion Study will then be repeated every 3 years thereafter.

And it is the National Transmission Congestion Study which paved the way for the mandated National Interest Electric Transmission Corridors (NIETC). According to Section 1221(a) of EPAct 2005 (Section 326 of FPA, 16 U.S.C. Section 824p) the Secretary of Energy may designate “any geographic area experiencing electric energy transmission capacity constraints or congestion that adversely affects consumers as a national interest electric transmission corridor.” And the DOE then proposed as a direct result of the study two transmission corridors which consist of the Mid-Atlantic Area National Corridor and the Southwest Area National Corridor. The draft NIETC was issued in April 2007 and finalized in October 2007 by the DOE.

Why you may not be aware of such transmission corridors and their intended purpose can be answered simply because the public and consumers of public utilities were given little or no notice of opportunities to weigh in and attend very limited public hearings, abruptly announced in May 2007 by the DOE to take place in the very same month. That gave little time for proper public notice for participation by residents, lawmakers, ratepayers and consumer advocates, to name but a few.

Even more disconcerting is that the DOE claims that EPAct 2005 does not require it to hold any public hearings regarding the NIETC. And in spite of over 2000 written comments and reports submitted to the DOE by state governors, U.S. state and federal elected representatives, consumer advocacy organizations, and environmental and historic preservation organizations, which all protested such corridors because of the lack of public input, the DOE would have none of it. Instead, the DOE made no changes or acted upon any of the recommendations it received on its draft proposal by finalizing the NIETC in October 2007, as originally drafted.

In terms of the enormous implications in the construct of the Mid-Atlantic Area National Corridor, on paper at least, there now exists an exact list of those states which are encompassed by it and will be impacted in a variety of ways; legislatively, constitutionally, economically, environmentally and historically. Following is a list of those states and counties designated in the Mid-Atlantic Area National Corridor: the entireties of New Jersey, Delaware, and Washington, D.C.; 22 of 24 counties in Maryland and all of Baltimore City, MD; 47 of 62 counties of New York; 7 of 88 counties of Ohio; 52 of 67 counties of PA; 15 of 95 counties and 7of 39 independent cities of Virginia; 42 of 55 counties of West Virginia.

By contrast, the Southwest Area National Corridor includes 7 of 58 counties of California and 3 of 15 counties of Arizona, albeit the most heavily populated areas of these states.

The NIETC lays the groundwork for transmission siting approval in the construct of High-Voltage Direct-Current (HVDC) Transmission lines above ground and throughout all NIETC designated states, and whether or not that particular state in fact has an electricity congestion problem. Initially problematic is that nearly the entirety of the U.S. power grid, as it presently exists, uses High-Voltage Alternating-Current (HVAC) Transmission lines and allows current to automatically reverse direction at regular intervals if necessary. HVDC requires an operator to reverse direction and its current flows in one direction only.

Only 2% of all electrical transmission line miles in the U.S. are presently HVDC. While the DOE insists that HVDC technology includes lower costs over long distances, in reality constructing HVDC lines costs more than construction of HVAC lines for short distances over a wide expanse of area. And according to the Government Accountability Office Report of February 1, 2008, (GAO-08-347R) with respect to HVDC, there will be “higher costs for short-distance lines due to the cost of equipment needed to convert DC into AC electricity used by residents and a lack of electricity benefits to consumers living along these lines –unless converter stations are installed at intermediate locations – because such lines are generally not connected to local electricity lines.”

The rationalization for designation corridors is not to facilitate or dictate how the states’ regions, transmission providers or electric utilities should meet their own energy challenges, according to the DOE. But truth be told, it is quite the opposite.

“The process is geared more toward expediting the approval and siting of transmission corridors than it is geared toward respecting states’ rights about their residents’ energy future and needs…and by a heavy-handed centralized one-size fits all approach..,” according to Congressman Maurice Hinchey (D-NY). And it is precisely such sentiments that have been raised to the Secretary of Energy, Samuel Bodman, by both federal and state lawmakers on both sides of the aisle in all 10 states and Washington, D.C. that will be directly impacted by NIETC.

And most crucial to note, EPAct 2005 enables eminent domain law over states by the federal government on a scale unlike the U.S. has ever seen.

In its effort to modernize the transmission lines infrastructure, EPAct 2005 provides for the DOE to assign the Federal Energy Regulatory Commission (FERC) siting authority. To review from Part I of this series, FERC is central to the regulation of energy policy both fiscally as well has been given oversight authority on the applications of new construction of transmission line sites.

Under Section 216(b) of EPAct 2005 –Back-Stop Siting Authority –FERC is given authority “to issue permits for the construction or modification of transmission facilities in a National Interest Electric Transmission Corridor if FERC finds that: (1)(A) a state in which the facilities are to be constructed is without authority to approve the siting of the facilities or to consider the interstate benefits expected to be achieved by the project; (B) the applicant for a permit is a transmitting utility that does qualify for a permit federally but does not qualify for a permit under state law because it does not serve end-use customers; or (C) the state has siting authority but (i) it has withheld approval for the later of one year after the filing of an application; or (ii) conditioned approval in such a way that the proposed construction will not significantly reduce transmission congestion or is not economically feasible.”

And to add insult to injury, Section 216(e) of EPAct 2005 on Rights-of-Way, “If a permit holder cannot obtain the necessary rights-of-way for the project, the permit holder can acquire the rights-of-way through an eminent domain proceeding in the federal district court where the property is located.” And furthermore, in Section 216(f), “A right-of-way acquired in an eminent domain proceeding is a taking of private property for which the landowner must receive just compensation, which is the fair market value on the date of exercise of eminent domain.”

Therefore, any fluctuation or rise in real estate property values during the course of the proceeding and including any period of time due to litigation arising from such a proceeding to the time of completion of the project, if finally approved, would not be taken into consideration. And the compensation or fair market value of the property to its owner would be locked in by the date of the initial date of the proceeding, which could potentially be years, as in the case of Kelo v. City of New London, CT 545 U.S. 469 (2005).

Crucial in understanding the bone of contention raised primarily by the 10 states within the Mid-Atlantic Area and Southwest Area National Corridors, is that historically, federal jurisdiction of the siting of transmission lines in states has been reserved for federal lands within respective states. It has been the state utility commissions of each given state which have otherwise been the regulators of siting permits and applications.

And it is only reasonable to understand the indignation and concerns by state governors and state representatives to learn that FERC has been granted a new breadth of authority that many believe is counter-productive to the best interests of their respective states and citizens which they believe they know best.

As discussed in Part I of this series, with the repeal of the Public Utilities Holding Company Act of 1935, (PUHCA) holding companies both foreign and domestic will now be the applicants for siting permits in both the Mid-Atlantic Area and the Southwest Area National Corridors for aboveground HVDC transmission lines which will range from 150-160 feet high. That is roughly three times the height of our present HVAC lines throughout the U.S. And they will cover thousands of total miles throughout NIETC, or these 10 states and Washington, D.C.

And in what could be the first official challenge to back-stop transmission authority given FERC, as prescribed by such EPAct 2005 mandate, has been pre-filed for consultation with FERC. A Southern California Edison (SCE) application to the Arizona Corporation Commission, (ACC) the public utility commission of Arizona, was rejected in May 2007 by ACC. SCE merely wanted to run a 230-mile transmission line from Arizona to California at a cost of $242 million to Arizona ratepayers. And the benefit to Arizona? None, as it would specifically be to serve Californians and their growing energy needs.

The ACC described SCE’s project as “a 230-mile extension cord” into Arizona’s generation supply. And likewise in his letter to Secretary Bodman in November 2007, after the NIETC was finalized, Pennsylvania Governor Ed Rendell wrote, “These transmission lines will be on our land and depreciate our property values, but they may not offer any benefit to Pennsylvania consumers. This designation and action by the federal government is a blatant abuse of states’ rights,” Governor Rendell said.

Yet, this is likely just the beginning, exemplifying a dysfunctional remedy, to “fix” the U.S. power grid and growing domestic energy needs, by way of EPAct 2005. It will essentially be a power grab for power both literally and figuratively, the sights of which the U.S. has never seen.

Part III of Fallout from the Energy Policy Act of 2005, will take a look at: the various federal and state laws which the NIETC either directly or potentially violate or conflict with; proposed or pending pieces of legislation in Congress in order to amend specific sections of EPAct 2005; and the mechanisms that the DOE and FERC either already have or expect to have in place in the future in order to maintain effective oversight of such a massive body of law and its unprecedented changes in U.S. energy policy.

Copyright ©2008 Diane M. Grassi

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