May 8, 2002 — Secretary of Energy Spencer Abraham on Wednesday recommended ways to facilitate investment in the Nation’s transmission infrastructure to improve reliability and reduce electricity costs to consumers.

The recommendations contained in the National Transmission Grid Study were developed in response to the President’s National Energy Policy directive to Secretary Abraham to study the Nation’s transmission system, identify transmission bottlenecks and identify measures to eliminate those bottlenecks.

“Our objective is simple: to provide our citizens with a reliable supply of electricity at the lowest possible cost,” Secretary Abraham said in remarks before the Secretary of Energy Advisory Board (SEAB) public meeting on Wednesday afternoon. “We will work to unleash innovation and strengthen our markets to allow entrepreneurs to develop a more advanced and robust transmission system that meets growing energy demand in the years ahead.”

Over the past 10 years, competition has been introduced into wholesale electricity markets with the goal of reducing costs to consumers. Today, wholesale electricity sales save consumers nearly $13 billion annually. However, the Nation’s outdated transmission system was not designed to support today’s regional, competitive electricity markets. Investment in the transmission system has not kept pace with the growth in generation and the increasing demand for electricity. Transmission bottlenecks threaten reliability and cost consumers hundreds of millions of dollars each year.

The National Transmission Grid Study contains 51 specific recommendations including:

* In an open public process, DOE will assess the nation’s electricity system every two years to identify national-interest transmission bottlenecks.

* Regional Transmission Organizations (RTOs) should be responsible for maintaining the reliability of the grid and ensuring that transmission bottlenecks are addressed.

* DOE will work with the Federal Energy Regulatory Commission (FERC) and stakeholders to develop objective standards for evaluating the performance of RTOs and will collect the information necessary for this assessment.

* DOE will work with National Governors Association (NGA), regional governors’ associations, National Association of Regulatory Utility Commissioners (NARUC), and other appropriate state-based organizations to promote innovative methods for recovering the costs of new transmission-related investments. These methods should consider situations where rate freezes are in effect and also examine incentive regulation approaches that reward transmission investments in proportion to the improvements they provide to the system.

* Entrepreneurial efforts to build merchant transmission lines that pose no financial risk to ratepayers and that provide overall system benefits should be encouraged.

* DOE, working with FERC, will continue to research and test market-based approaches for transmission operations, including congestion management and pricing of transmission losses and other transmission services.

* DOE will continue to work with NGA, regional governors’ associations, and NARUC to remove regulatory barriers to voluntary customer load-reduction programs, and targeted energy-efficiency and distributed-generation programs that address transmission bottlenecks and lower costs to consumers.

* Federal legislation should make compliance with reliability standards mandatory.

* Penalties for noncompliance with reliability rules should be commensurate with the costs and risks imposed on the transmission system, generators, and end users by noncompliance. Penalties collected should be used to reduce rates for consumers.

* DOE will work with FERC, state Public Utility Commission (PUC), and industry to ensure the routine collection of consistent data on the frequency, duration, extent (number of customers and amount of load affected), and costs of reliability and power quality events, to better assess the value of reliability to the nation’s consumers.

* FERC and DOE should work with states, pertinent federal agencies, and Native American tribes to form cooperative regional transmission siting forums to develop regional siting protocols.

* DOE will work with NGA, regional governors’ associations, NARUC, and other appropriate state-based organizations to develop a list of “best practices” for transmission siting.

* All federal agencies with land management responsibilities or responsibilities for oversight of non-federal lands should assist FERC-approved RTOs in the development of transmission plans.

* Congress should grant FERC limited federal siting authority that could only be used when national-interest transmission bottlenecks are in jeopardy of not being addressed and where regional bodies have determined that a transmission facility is preferred among all possible alternatives.

* DOE will work with industry to develop innovative programs that fund transmission-related research and development, with special attention to technologies that are critical to addressing transmission bottlenecks.

* DOE and the national laboratories will continue to develop cost-effective technologies that improve the security of, protect against, mitigate the impacts of, and improve the ability to recover from disruptive incidents within the energy infrastructure.

* DOE will continue to provide training in critical infrastructure protection matters and energy emergency operations to state government agencies and private industry.

* DOE will create an Office of Electric Transmission and Distribution.

The National Transmission Grid Study Report and Issue Papers can be found on the Department of Energy NTFS Web site