Renewable energy vs. the electric grid - Solar, Wind and Land: Conflicts in Renewable Energy Development - page 158

in Montana or neighboring states rather than to California, but no one
would argue that Montanans should solely pay for the transmission system
on that ground. In fact, the additional transmission capacity provided by
the new line could ease grid operations in multiple U.S. states in addition to
Montana and California, thereby benefiting electricity users in those other
states as well. Should these other states have to help finance the line, even
though they are not directly involved in its planning or construction? A
traditional “beneficiary pays” model does not squarely answer these sorts
of inquiries.
“Beneficiary pays” funding models for interjurisdictional transmission
can also be vulnerable to their own strategic behavior problems. For
example, suppose that a law applying the model required all users of a large
interconnected grid to collectively share the costs of new transmission lines
regardless of their locations. Under such a law, some jurisdictions might
be incentivized to advocate for new transmission development within their
boundaries solely to get local economic boosts at the expense of others—the
transmission equivalent of the infamous “bridge to nowhere.” 45 To quote
an Australian official on this risk of socialization-based cost allocation
schemes:
[I]f transmission infrastructure building costs were to be recovered …
from all end users, this could distort the operation of the market by
encouraging generation connections in areas that are inefficient or more
expensive than elsewhere. 46
In an attempt to address the incessant controversy surrounding cost
allocation schemes for interstate transmission projects in the United States,
FERC issued Order 1000 in 2011. 47 This administrative order sets forth
several vague “cost allocation principles” and essentially requires that all
new major transmission projects comply with them. 48 For example, the
Order requires that cost allocations associated with any large transmission
project be “roughly commensurate” with benefits received. 49 Under the
Order, FERC purportedly has authority to step in and determine a cost
allocation method in situations when regions are unable to agree to such a
method on their own. 50
Although FERC Order 1000 has the potential to reduce conflicts
over cost allocation arrangements for interstate transmission projects,
its ultimate impact remains to be seen. Order 1000's ambiguous cost
allocation principles create significant uncertainty about how the Order
is to be applied and enforced among the various public utilities and
regional system operators that collectively oversee electric grid opera-
tions in the United States. To make matters worse, some of these
regional operators view Order 1000 as an encroachment on their
regulatory powers and have thus sought to use the judicial system to
limit the Order's effects. As of late 2013, at least one federal appeals