- The Washington Times - Tuesday, September 16, 2003

The facts surrounding the massive blackout that struck parts of the Northeastern United States and the Canadian Province of Ontario will take time to pinpoint and analyze.However, one key fact was evident before this colossal meltdown: The need for new investment and infrastructure improvements in the transmission of electricity is long overdue.If we continue to neglect our electric transmission system, such blackouts will be more commonplace and the efficient movement of electricity across the system will continue to be impaired.

Both the Clinton and the Bush administrations cited the need to attract new investment in the transmission sector as an integral componentofmodernizingour electricity delivery system.The evolution of our system demands an electricity grid that is reliable, secure and robust — all qualities which are essential in a 21st century economy.However, our electricity transmission system today remains overburdened, outdated and underfunded.

While investment in the generation sector has resulted in the construction of new power plants, these gains in supply are negated by a substandard electricity transmission system.According to industry observer Eric Hurst, transmission investment over the past 25 years has declined at a rate of $115 million per year. As a result, the transmission system is woefully inadequate.Mr. Hurst further indicates that there needs to be an investment of at least $56 billion in the transmission sector to upgrade existing lines and add additional capacity in order to meet existing peek electricity demands over the course of the next decade.It is currently projected, however, that the industry will only spend an average of $3 billion each year during the decade on upgrades and new transmission lines.

Why isn’t Wall Street promoting the transmission sector as a worthy investment?Simply put, it is not particularly profitable to invest in transmission today because it takes more than 30 years to realize gains on transmission investments.Even in today’s sluggish economy, people can invest in other places and realize greater profits and quicker returns on their investment.Thus, regulators must implement policies that ensure quicker and more attractive returns on investment in transmission.



In March, we introduced “The Interstate Transmission Act of 2003,” which would require the Federal Energy Regulatory Commission (FERC) to adopt transmission rules to promote capital investment in the system, improve operation of the system and allow for returns to the investor reflecting financial, operational, and other risks inherent in transmission investments.The bill adjusts the tax code so that the disposition of assets that provide transmission service will not be recognized for capital gains tax purposes. This is similar to the way gains are deferred on the sale of your primary residence if you reinvest in a new home.

The bill also makes mandatory electricity reliability standards for those who use the transmission system.Currently, the North American Electric Reliability Council (NERC) has standards, guidelines and criteria for assuring that transmission system security and reliability are in place. However, compliance with NERC standards is currently voluntary and is not subject to government oversight. Finally, the bill gives FERC limited backstop transmission siting authority to help site transmission lines in interstate congestion areas if states have been unable to agree or move forward on siting in a timely fashion.

It makes no sense to have an electricity delivery system as obsolete as the Pony Express, when capital could be available to modernize and build a 21st century transmission system.The provisions in our bill will provide greater reliability in the delivery of electricity as well as create incentives for investment in the transmission sector.

Without these improvements, the likelihood of blackouts will increase, and California-style congestion and bottlenecks on the system will become more severe.Congestion on the grid leads to higher costs and lower reliability.In addition, congested transmission lines have indirect environmental costs, because congestion makes it more difficult to access the cleanest generating power available from newer facilities.

The approach in our bill is supported by FERC, NERC and the Bush administration.The core principles of our bill — mandatory reliability provisions and new incentives for investment in transmission — are being incorporated into the comprehensive energy bill that will be reconciled with the Senate in a conference committee later this year.It is imperative that any final energy bill that the president signs includes these provisions so that the marketplace can begin to attract the necessary capital needed to improve and increase the capacity of our nation’s transmission grid.

Rep. Albert Wynn is a Democrat from the 4th District of Maryland.Rep. Richard Burr is a Republican from the 5th District of North Carolina.Both serve on the House Committee on Energy and Commerce.

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