This utility complaint could make it harder to ensure customers get the best price for grid upgrades

A group of large utilities companies operating across the South and Midwest have filed a complaint with the Federal Energy Regulatory Commission (FERC) arguing that the rapid growth of these hyperscale AI data centers requires changes to how new power lines are approved and built. The Alliance has intervened along with other consumer advocates  in the proceedings and does not support the complaint.

When we talk about building new power lines, we are often talking about transmission lines — the large, high-voltage power lines that move electricity across long distances. After the need for a transmission line has been identified and approved, part of the process of building new transmission projects (in states without ROFR laws), includes a competitive solicitation process to determine who will build the transmission lines. Potential transmission developers submit bids and the lowest bid wins the contract.

A group of large utility companies in the South and the Midwest (that operate in states from Michigan, Oklahoma, Illinois, Missouri, Wisconsin, to Texas, Arkansas, Mississippi and Louisiana) have filed a complaint with the FERC alleging the competitive solicitation process takes too long and causes delays for AI data centers and other new large load customers. To justify their claims the group alleges that in order for the U.S. to win the AI race and maintain national security, something must be done to speed up the process of building transmission assets necessary for AI data centers and other hyperscalers to quickly connect to the grid.

The complainants’ proposed solution? To suspend the competitive bid solicitation process for the next five years. While that may sound like an easy solution, it has real implications for the grid, your electric bill and your wallet. The solicitation process allows multiple transmission developers to compete for projects, helping ensure that utilities and regulators can compare proposals and select the best bid with the lowest possible project costs. It’s similar to obtaining multiple quotes before replacing your roof or renovating your home. Most people would not accept the first estimate they receive without seeing whether another qualified contractor could do the same work for less.

Suspending the bidding process makes it more difficult to ensure customers are getting the best price for major transmission investments that they will ultimately pay for through their utility bills. Which begs the question, who benefits when competition is removed? 

The complaint and request to suspend competition in the bidding process has sparked serious concern from a wide array of people and organizations ranging from state regulators and state legislators to consumer advocates, environmental advocates, and think tanks. 

Two major utilities in Louisiana, Entergy and Cleco, are part of the complainant group. Entergy’s involvement is particularly concerning given its history of antitrust law investigations. Suspending the competitive solicitation will give utilities like Entergy a guarantee to build new lucrative transmission projects while weakening a safeguard designed to ensure customers don’t overpay.  It is concerning that Entergy has signed onto this complaint to FERC for upcoming transmission projects furthering their efforts to maintain their stronghold on the electric grid development. 

Entergy has a history of anti-competitive behavior. In the 2010s the Department of Justice opened an investigation about Entergy’s anti-competitive behavior, specifically about Entergy purchasing competitor’s power plants, and their behavior related to under-investment in  transmission projects. “Entergy continues to unlawfully maintain its monopoly with a pattern of anticompetitive conduct.” In 2012, the Antitrust Division suspended that investigation without pursuing an enforcement action only because Entergy committed to two specific steps that would mitigate anticompetitive conduct (1) divesting its energy transmission business and (2) joining a Regional Transmission Organization (RTO). After more than a decade, Entergy has still not satisfied the first required mitigation action and the second mitigation action did not have the desired effect of ending Entergy’s anticompetitive conduct. Entergy continues to unlawfully preserve and protect its market power through its behavior as a transmission-owning utility in the Midcontinent Independent System Operator (MISO) and by creating other barriers to competition throughout the region known as MISO South.

We want to be clear, there are real concerns about how long it takes for transmission projects to be planned and built, but simply removing an opportunity for competition will not fix the problems brought on by the unprecedented load growth (rise in demand for energy) plaguing much of the nation’s electric grid, or the grid planning issues that existed well before the hyperscaler data center boom. 

The Alliance’s perspective: Transmission planning and expansion was necessary before the AI hyperscaler boom. The current boom in electricity demand has not suspended the need for thoughtfully planning and balancing the needs of today’s grid with the needs of the future grid. Just because AI and new large load customers have come on to the scene doesn’t mean we should suspend a mechanism that exists to keep project costs lower and reduce impacts to customers. It is our hope that the FERC dismisses this complaint and instructs utilities to work with RTOs to refine the systems currently in place to ensure that transmission expansion happens in a manner that ensures transparency, engagement opportunities, and the lowest possible cost for investments that will be a part of our collective grid system for the next 40 years.