In August 2020, a storm equivalent to a 40-mile wide tornado touched down in Iowa and the ITC Midwest service territory and stayed on the ground for a 200-mile stretch. The scope of damage it left was estimated by the National Oceanic and Atmospheric Administration to cost more than $11 billion, making it the most expensive thunderstorm in U.S. history. On the ITC system, 145 transmission lines spanning 2,100 miles in 26 counties were out of service. While devastating, things could have been far worse. Since acquiring the ITC Midwest system in 2007, ITC invested approximately $4.1 billion to repair and upgrade the system’s reliability and resiliency, which helped our team restore power quickly after last year’s derecho. As an industry we continue to share best practices and further develop our ability to recover the transmission system when extreme events occur. But what steps can policymakers take to further ensure the resilience and reliability of the grid?
Last month, I participated in a technical conference convened by the Federal Energy Regulatory Commission (FERC) to explore system reliability in these extreme circumstances. I discussed several areas in which policies must be improved:
Regional planning processes do not actively consider and value resilience as a planning driver. This must change. Even when a transmission project addresses clearly understood planning criteria, it undergoes a great deal of scrutiny in the planning process and approval is not guaranteed. While there is building consensus that a resilient grid is necessary for the economies of today and tomorrow, the appropriate level of investment in resilience is subject to stakeholders’ perspectives, further challenging resilience-related investment in the planning process. Therefore, it is critical for the regional planning processes to affirmatively set forth a path for investments in resilience.
The solicitation processes under FERC’s Order 1000 are incompatible with investments in grid resilience. The processes appear to have an outsized focus on cost rather than long-term project benefits, discounting the value to customers from more reliable and resilient infrastructure. Moreover, the processes add time to administer to an already lengthy transmission build cycle. This is time we cannot afford to waste when addressing emerging threats to the transmission system.
Resilient solutions are best developed by transmission owners who have vast experience in the local footprint. Customers receive the most value when transmission solutions are cost-effectively developed to address region-specific resilience concerns—concerns best understood by the local transmission owner.
FERC can and should modernize its regulations so we can ensure a reliable, resilient grid for customers as weather patterns change. However, there is one policy that has helped regions cost-effectively increase their flexibility in extreme conditions and should be maintained: FERC’s historic support for transmission owner membership in Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs). The Midcontinent Independent System Operator (MISO), of which ITC Midwest is a member, estimates it provides on an annual basis $288-313 million in improved reliability benefits, among the other benefits it provides.[1] MISO consists of a large, diverse, multi-state footprint which bolsters resilience in various ways, including markets for generation reserves and dispatch optimization.[2] RTOs enable a wider, regional view of reliability and needed investments; this regional approach is foundational to cost-effectively bolstering grid resilience in the face of extreme weather.
Last year, FERC issued a Notice of Proposed Rulemaking (NOPR) proposing to double its incentive for transmission owners to participate in RTOs and ISOs like MISO. Given the wide range of customer benefits provided by RTOs and ISOs, including increased reliability and resilience, this was an appropriate action to balance the burdens membership in RTOs and ISOs place on transmission owners. But then in an act of regulatory whiplash, FERC supplemented the NOPR in April 2021 and now proposes to eliminate the incentive altogether after three years of RTO/ISO membership.
The Commission should shift its focus from dismantling supportive policies (like the RTO incentive) to reforming the outdated policies (like Order 1000) that constrain our ability to effectively address reliability and resilience as weather events become more extreme. Last month, FERC took a step in the right direction when it released an Advance NOPR presenting potential reforms to transmission planning, cost allocation, and generator interconnection. This proceeding provides an opening for FERC to advance the federal policy changes needed to promote resilience: namely, meaningful regional and interregional planning that considers resilience as a planning driver and gets resilience-improving projects built.
We can certainly hope that the future doesn’t bring another storm as devastating as the August 2020 derecho. But the prudent path for policymakers is to support the investments needed to prepare the nation’s transmission system when the inevitable next storm strikes.
