The column below reflects the views of the author, and these opinions are neither endorsed nor supported by WisOpinion.com.
The siting and ownership of electric transmission lines is one of the most important energy policy discussions currently being debated in Madison, especially in an era when power demand is growing at the fastest rate in a generation.
Passage of a Right of First Refusal (ROFR) law would ensure that Wisconsin utilities, who are accountable to Wisconsin regulators and legislators, construct the transmission lines that keep the lights on for families and business throughout the Badger state.
A ROFR law will strengthen the reliable delivery of Wisconsin’s electricity by ensuring that transmission developers familiar with the intricacies of the state’s electricity grid, communities and environment will oversee the construction of system upgrades. Additionally, it also requires transmission owners to control costs through an open competitive bidding process by contractors selected for project construction. This results in transmission investments that not only increase reliability but also affordability for consumers.
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Some will argue that these ROFR laws restrict true free market competition to the detriment of electricity customers by providing state-regulated utilities the option to build transmission lines first. However, there is no evidence supporting those claims. In fact, a study conducted by Concentric Energy Advisors concluded “…competitive solicitations [without ROFR] have not been successful in driving cost savings and have added delays to the development of transmission infrastructure. Competitive solicitations added as many as 1,000 days to the development of transmission projects, and many experienced cost escalations.”
Recent events in Maine illustrate the major problem with so-called “competition” in electric transmission procurement. In November 2021, Maine regulators issued and RFP for a project to move 1,000 megawatts of wind power at a reported price of 5 to 6 cents per kWh. Fourteen months after the developer won the contract in October 2022 to a developer, the state regulator terminated the deal because the developer couldn’t meet the cost provisions inherent in its bid. Now, almost four years later, the re-issued RFP is still pending. One can only surmise that the costs have escalated substantially since the initial submission. Generally speaking, building today is cheaper than building tomorrow.
ROFR opponents often tout cost caps in bids, however, the evidence demonstrates that such caps are illusory. The truth is that cost caps have provided private developers with multiple exceptions during the construction phase which then significantly increased the ultimate cost to consumers. Once a developer is selected to develop a bid line under a “cost cap” agreement, they are often handed a blank check – with limited or no oversight by state regulators.
For example, California’s Ten West Transmission Link recently sought cost recovery for more than twice the $259 million cap. Another project, the Desert Link, reported that construction was completed under the $145.5 million cost cap, but that didn’t include more than $55 million in “excluded” costs, which are nothing more than costs that consumers will pay because they are exempted by loophole from the cost cap. What good our cost caps if they don’t actually restrain costs?
Right now, electric grids across the country are facing a host of reliability challenges – none more so than the Midcontinent Independent System Operator (MISO) which includes Wisconsin. The North America Electric Reliability Corporation—the federal entity responsible for overseeing the reliability of our electricity grid – considers MISO at an elevated risk for blackouts. Delays in transmission investment not only hinder reliability of the grid but also have the potential to increase consumer costs because of the inability to deliver lower-cost power to customers because of inadequate transmission capacity.
Don’t take our word for it. Just look at the reports of recent auction results from MISO where capacity costs increased 22 times higher than the prior auction. Not exactly a bargain for Wisconsin’s electricity consumers.
Put simply, this is why Wisconsin needs to enact a ROFR. This legislation will result in a more reliable and affordable grid through competition in the contractor bidding process; will continue to ensure that transmission developers are accountable to state – not federal – regulators; and will accelerate our ability to construct transmission to meet growing demand – all in the best interests of Wisconsinites’ energy future.
Chris Ventura is Midwest Director for Consumer Energy Alliance
