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As the United States races to achieve AI dominance, expanding the electric grid has become essential. While there is broad agreement that more transmission lines are needed, the process for identifying projects and allocating costs has become increasingly complicated. The problem may not be that there needs to be more federal rules for transmission planning, but rather there are already too many. The “need for speed” requires cutting regulatory red tape from Washington and pairing back the authority of quasi-governmental agencies that operate and plan the grid.
For the past 30 years, the Federal Energy Regulatory Commission has attempted to overlay market principles on the electric grid. When reform started in the 1990s, the premise was that electricity was like any other commodity and therefore should be subject to competition, with the predicted benefit of reducing costs and risks to ratepayers. Beginning with Order 888, FERC required that utility-owned transmission lines provide open access to merchant generators and also required that generation and transmission planning be performed by separate entities with strict rules limiting how they could coordinate with each other.
When open access alone did not deliver the expected benefits, FERC issued a series of orders demanding more transparency. When transparency was not enough, FERC issued Order 1000, which imposed regional transmission planning requirements in hope of expanding grid access, accommodating state policy goals, and infusing competition into transmission planning and ownership. FERC also promoted regional transmission organizations through Order 2000, and RTOs became the primary bodies for regional planning in much of the country. But after a decade plus of experience, the consensus was clear: Order 1000’s promises had not materialized.
In 2024, once again hoping to accelerate transmission planning, expansion, and construction, FERC adopted Order 1920. This order mandates that grid planners identify various types of transmission needs under three scenarios, determine benefits, and allocate costs “commensurate with the benefits.” It sounds rational, but its application is extraordinarily complex and disconnects those who are driving the need for selected transmission from those who pay for it (note that almost all transmission provides some benefits, but it does not mean that a particular transmission line is needed). Moreover, many planning regions are still working on compliance filings to implement the new rules, further delaying the promised benefits of the reforms.
Even once fully implemented, Order 1920 is unlikely to result in quick construction of new transmission lines. Why? Because it is a classic example of Washington policymakers constructing processes that may be intellectually elegant but are too complex to achieve real-world results. By mandating integrated study requirements, ex ante cost allocation, extensive stakeholder participation, reviews of lower-voltage lines, and competitive solicitations for non-utility developers, the process invites delays, confusion, legal challenges, and misallocation of resources. Moreover, by not directly assigning the costs of transmission to those driving the need for a project, many local landowners and States will object to transmission lines crossing their land to serve those in other States and being required to pay a portion of those costs (despite the efforts to enhance state participation Order 1920-A). FERC’s mandates are likely causing the very delays in building transmission that they were designed to solve—while delaying needed infrastructure and likely driving up the costs to customers.
Before Order 888 and the rise of RTOs, state-authorized utilities used to plan their systems as a whole. Using integrated resource planning, they would project load growth over fifteen to twenty years, determine the generation sources needed to operate the grid around the clock and regardless of weather, and identify the transmission needed to connect new generation to new load—all at the least reasonable cost. These proposals were submitted to state public utility commissions for review, with an opportunity for the public and regulators to challenge them. This process, though not perfect, provided more confidence to customers that the projects that were impacting them—and for which they were paying—were necessary. Furthermore, the actual need and costs of such transmission would be reviewed by the state regulator, helping ensure that the utility costs were reasonable and prudent.
One aspect of the current debate in transmission policy under the FERC rubric is the balance of local projects versus larger regional projects. Many merchant generators and merchant transmission developers argue that utilities overbuild local projects at the expense of regional ones. They claim that utilities build projects for their own benefit, discriminate against independent providers, and drive-up overall transmission costs. But the interests pushing for regional projects are not necessarily concerned about serving end-use customers or reducing customer costs; merchant generators want to increase grid access to sell power in RTO markets and merchant transmission also wants to make money—all to benefit their shareholders. So though local utilities also seek to benefit their shareholders, they also have an obligation to serve customers and can be held accountable by state regulators. Merchant generators and merchant transmission developers do not have the same obligation to customers, and there is almost no accountability to state regulators and local elected officials.
There is little disagreement that the country needs more transmission; but recognizing the need does not necessarily lead to the conclusion that there needs to be more centralized planning under federal regulation. After 30 years of ever-expanding federal directives that keep trying to fix a problem that federal action may have initially caused, it is time to consider simplifying the process by returning responsibility for most transmission planning decisions to local utilities and subject to state review. This shift does not mean that there may not be some extraordinary regional reliability projects that require federal intervention, perhaps through a reformed National Interest Electric Transmission Corridor process, but it does mean that we need to focus on results, not slogans and hope.
What America needs to ensure reliability, contain costs, and win the AI race are the right transmission projects—and they need to be built quickly. There is too much process—and not enough progress.
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