The Magazine of American Municipal Power, Inc. and its Member Communities

Of Member Concern

Update on Transmission Issues

Marc Gerken, PE

Former President/CEO

Update on Transmission Issues

3 min read



Transmission costs are on the rise as a result of aging infrastructure, renewables, microgrids, distributed energy resources (DER) and investor-owned utility (IOU) investment strategies. We want to get control of the costs that are negatively impacting AMP and our members, and scale back on the excessive rates of return on equity for the IOUs.

About three years ago the AMP Board of Trustees decided to become more proactive on this front. Since then, we’ve added transmission experts to the AMP staff in an effort to influence decisions that are being made and establish a voice that is heard and respected.

As the traditional utilities move from trying to make profits from investments in competitive wholesale generation to regulated transmission, we need to have a seat at the table to make sure a cost-effective and efficient system is being built. This needs to be the transmission system for the future, not simply replacing aging infrastructure or old wires.

AMP and others are trying to make sure that regional transmission operators (RTOs) and IOUs are transparent in what constitutes “end of life” for infrastructure. Unnecessary upgrades increase costs, so we would like to see some justification to help protect our members. Upgrades should be reasonable and benefit the system as a whole. It’s possible that with the rise of DER we may not need the level of robust transmission the RTOs and transmission owners are planning.

AMP has developed a number of strategies in tackling transmission costs. We are becoming more involved in the RTO transmission planning processes and more active in individual transmission owner processes; we are scrutinizing the annual transmission revenue requirement updates of the transmission owners with formulary rates to ensure the costs are reasonable; and we are also going to be involved in Federal Energy Regulatory Commission (FERC) rate cases to ensure appropriate return on equity and rate structure. Staff continues to look for opportunities to potentially own transmission, and we’re going to be actively involved in formula rate annual transmission revenue requirement assessments/evaluations. It’s important the proposed billions of dollars of supplemental transmission projects that fall between federal and state approval processes be justified and audited.

We need our members’ help to raise awareness of these problems with elected state and federal officials. This will put pressure on RTOs, IOUs and FERC to help ensure rates are reasonable. It’s also important for our members to educate their customers and AMP is developing resources to help with this effort.

Transmission bills will continue to rise as it’s a guaranteed revenue stream for IOUs. Return of equity is ranging from more than 10 percent for the MISO Transmission Owners to nearly 12 percent in the PPL zone.

While they are operating within their rights of the regulations, we need to speak out against their unfair excessive rate of return on equity. AMP would ultimately like to see more transparency and other investors more easily allowed into transmission ownership.

The new Administration increases the level of uncertainty as to how regulators and legislators will act on key issues that are currently before them, especially in light of the focus on infrastructure builds. This uncertainty also provides an opportunity for those who want to try to control their future by collaborating with nontraditional partners.

In addition to fighting in the stakeholder process, we are also tackling transmission costs by building solar behind the meter, energy efficiency and shedding load.

AMP and its Board are extremely focused on addressing transmission concerns. We’re trying to make our utility industry competitive, but right now it’s like putting a square peg in a round hole – we have to come up with outcomes to address transmission costs. We’ll continue to keep members up to date on our progress.

To learn more about AMP’s study of transmission prices, visit the supplemental transmission page of the AMP website.