Summary of Transmission Project Cost Control Mechanisms in Selected U.S. Power Markets
Prepared for the Alberta Electric System Operator
We were asked by the Alberta Electric System Operator (“AESO”) to document and summarize U.S. efforts aimed at controlling costs of transmission projects in an effort to mitigate the risk of significant increases in the cost of planned transmission projects after they have been evaluated and approved. More specifically, we were asked to address the following questions:
- How are transmission costs managed? Who is responsible?
- Who, or under what framework, reviews/approves transmission capital expenditure prudence?
- What roles do independent system operators (“ISOs”) or regional transmission operators (“RTOs”) play with respect to transmission cost control?
- What interactions do ISO/RTOs have with stakeholders regarding transmission costs?
- What incentives do transmission owners (“TOs”) and ISO/RTOs have with respect to transmission cost containment?
The last several years have seen significant increases in transmission investments. For example, as we have documented elsewhere, recent levels of annual U.S. transmission investments are four times the annual investment levels during the 1990s, when investment levels were at historically low levels as compared to the major construction boom during the 1960s through early 1980s.67 The current increase in transmission investments, which is anticipated to continue for the foreseeable future,68 also has been associated with significant increases in the initial planning-related cost estimates for transmission projects.
