By Andy Kowalczyk
As New Orleanians sat in the dark for days or evacuated our homes, it seemed like everyone was asking one question: how did the grid fail so dramatically in our city and throughout Louisiana? And how did the grid go down not only this summer during Hurricane Ida, but also in February during Winter Storm Uri?
The sad fact is that our electric utility Entergy's behavior, and the attitudes of many consultants and regulators in Southern states, has followed a standard of profit-seeking and neglect for the transmission system.
Nearly a decade ago, Entergy Corporation -- along with its subsidiary companies throughout Arkansas, Louisiana, Texas and Mississippi -- began an experiment. The premise was to incorporate a company with vast market power, to join an organization whose priority is to plan a more affordable and reliable energy system, called the Midcontinent Independent System Operator (MISO). The plan looked good on paper, given that Entergy was under U.S. Department of Justice antitrust investigation. The DOJ had voiced serious concerns about the utility’s anticompetitive business practices, and suggested that Entergy join a Regional Transmission Organization, that could encourage greater cooperation with other utilities, power generation owners, and stakeholders throughout the South and the Midwest. But without following through on a recommendation from the DOJ for Entergy to sell off its transmission business to a transmission-only company, it remained to be seen whether the grid would continue to be run for profit, or public good.
In the years since Entergy joined MISO, the utility has engaged in the organization’s annual transmission planning efforts, often opposing or obstructing investments in certain types of targeted projects that expand the transmission system to make it more efficient and cost competitive.
MISO calls their process the MISO Transmission Expansion Plan (MTEP), and they do their level best through this process to provide an independent analysis of the grid to ensure affordability, reliability, and efficiency while approving projects that help the grid adapt to new power sources. For example, before Entergy joined them in 2013, MISO approved 17 Multi-Value Projects (MVP) through this process, which led to the deployment of transmission infrastructure which integrated 14,000 MWs of wind energy to power homes, businesses and industry in the North, all while providing a huge return of $3 for every $1 spent by customers on those transmission projects. As far as reliability, during the February 2021 storm, the aptly named “MVP's” saved Northern cities from power outages like those experienced in the South, in addition to saving roughly $18 billion in avoided outages and high energy costs. The MVP projects are referred to as 'regional transmission projects' in the industry lingo and they can provide a lot of value for bolstering the reliability and affordability of energy for transmission organizations.
To keep prices down, regional transmission projects go through a competitive bidding process which allows 'transmission only' companies which specialize in building transmission to bid on them and construct the projects. Two transmission-only companies which have built projects in MISO are LS Power and ITC Holdings, but there are many firms that specialize in transmission, rather than the entire power system, which have built projects throughout other regional transmission organizations.
Some states, like Michigan, have passed state legislation requiring the unbundling of transmission and generation. Public Act 141 (PA 141), which made requirements like those set forth in the DOJ investigation of Entergy, have been a part of the state’s law since 2000. Although they are given the option to either join a wholesale market like MISO, or divest their transmission business, large investor-owned utilities in Michigan like Detroit Edison and Consumers Energy have largely divested their transmission businesses, in addition to joining MISO due to state legislation PA 141 / Sec. 10w.
Without similar legislation, what’s been built across Entergy territory are smaller project types that do not provide regional benefits. These projects are identified in MISO as 'Baseline Reliability Projects' or vaguely titled 'Other' projects. Since Entergy joined MISO in 2013, these project types have dominated their transmission planning process, creating a race to the bottom. Unfortunately, the profit-motivated approach to building small local transmission projects has gained the favor of state and local regulators, while undermining the value proposition of MISO. In 2016, for instance, roughly 60% of the proposed BRP and ‘Other’ investments in MISO were in the South, with a price tag of just over $900 million. Most of these projects were targeted for an ‘in service date’ of 2019-20.
Source: MISO MTEP16 Report
Regionally beneficial MISO project types — like the MVPs or the Market Efficiency Projects (MEPs) — on the other hand, are maligned as a waste of money by many incumbent utilities, while power plants instead are offered as a way to provide a stable grid. The recently launched Long Range Transmission Planning Process through MISO has faced stiff headwinds from Entergy and some of their regulators in MISO South.
What we’ve learned from Hurricane Ida, is that no matter how many gas and nuclear power plants you build, the power system is nothing without a robust transmission and distribution network.
When regulators of the grid become less focused on a grid designed for the public good, and more focused on the profit motives of electric utilities, reliability, affordability and the climate all suffer. Ida reminds us that we are threatened by challenges to the power grid that require planning for the worst-case scenario. We not only need a stronger, more comprehensive transmission system designed for the regular folks who rely on the grid; but we also need access to affordable renewable energy at the local and regional level, so our energy system is not fueling larger and larger climate-catastrophes for our grid to endure.
As long as Entergy owns a transmission business as well as power plants, they are incentivized to oppose regional transmission projects. Transmission lines that could expand the electric grid’s network, accessing more competitive power plants throughout MISO, could reduce their bottom line. This incentive has put market power and corporate gain above the pursuit of a grid that serves the public’s needs. To this day, there have never been any regional transmission projects built in Entergy territory that would receive competitive bids.
In their final statement in 2012 the DOJ suggested for Entergy to divest their transmission business and join an organization like MISO. Perhaps because both conditions weren’t met, the desired effect of a more competitive and efficient energy grid never materialized in MISO South.
Regardless, it’s incumbent on regulators to consider whether or not we should be completely dependent on one company to provide reliable power across the transmission, distribution and generation system. The status quo may have worked in the past, but Ida might reckon otherwise.
Cover Photo Source: Gerald Herbert, Opelika Auburn News
About the Author