Electric Transmission: Approaches for Energizing a Sagging Industry

Publication Date: October 2007

Publisher: Library of Congress. Congressional Research Service

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Research Area: Energy

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Abstract:

The electric utility industry is inherently capital-intensive. At the same time, the industry must operate under a changing and sometimes unpredictable regulatory system at both the federal and state level. The transmission system was developed to fit the regulatory framework established in the 1920 Federal Power Act -- utilities served local customers in a monopoly service territory. The transmission system was not designed to handle large power transfers between utilities and regions. Enactment of the Energy Policy Act of 1992 (P.L. 102-486) created tension between the regulatory environment and the existing transmission system: The competitive generation market encouraged wholesale, interstate power transfers across a system that was designed to protect local reliability, not bulk power transfers.

The blackout of 2003 in the Northeast, Midwest, and Canada highlighted the need for infrastructure improvements and greater standardization of operating rules. The Energy Policy Act of 2005 (P.L. 109-58) set in place government activities intended to relieve congestion on the transmission system. The law creates an electric reliability organization that is to enforce mandatory reliability standards for the bulk-power system. In addition, processes are established to streamline the siting of transmission facilities. Many observers predict that until the electric power industry reaches a new equilibrium with more regulatory certainty, investment in transmission infrastructure and technology will continue to be inadequate.

This report discusses factors that have contributed to the lack of new transmission capacity and some of the resulting issues.