Ferc Order Avoids $4.9b In Costs Across 19 Transmission P…

Advocates for competitive transmission bidding have new ammunition for their cost-savings argument.

According to publicly available RTO/ISO data compiled by the Electricity Transmission Competition Coalition, 19 recently completed transmission projects have reduced project costs by an average of 38% through competitive bidding. The projects, which were bid from 2021 to 2025, avoided costs totaling $4.9 billion. They range in size from a 115 kV line in Xcel territory to Transource’s 765 kV IL/WI state line endeavor and span three different regions: MISO (8), SPP (6), and CAISO (5).

“These are completed projects. Real and significant cost reductions. Without competition, the monopoly utilities have zero incentive to reduce costs,” argued Paul Cicio, longtime president and CEO of non-profit Industrial Energy Consumers of America, in a post on LinkedIn.

The winning bids for some large undertakings were hundreds of millions of dollars below RTO or ISO estimates, and only one of the 19 studied transmission projects ended up costing more than anticipated. Most came in at a 20% or more discount; some significantly more. Actual ratepayer savings are unclear, but ly to be less glamorous than the total purported figures.

MISO expected a 345 kV project from Hiple to the Indiana/Michigan border to cost $254 million, but LS Power secured the gig for $77 million, a 70% discount and $177 million in savings. Viridon’s Humboldt-Collinsville 500 kV T-Line was half as expensive as CAISO predicted, cutting costs by a whopping $1.16 billion; CAISO also grossly overestimated how much the Imperial Valley – North of SONGS 500 kV T-Line and substation would run, considering NEET secured the job with a bid $1.27 billion below the grid operator’s estimate. Competitive bidding generated discounts of 40% or more on half of the SPP projects studied.

Cost containment was offered in 18 of the 19 winning bids, and an enforceable schedule guarantee was included in all but a pair of CAISO projects.

What Does FERC Order 1000 Do?

FERC Order 1000, which went into effect in 2011, addresses inefficiencies and barriers hindering transmission infrastructure development, enabling competitive bidding amidst the adoption of four major reforms: Regional transmission planning requirements, interregional coordination requirements, ‘ex ante’ cost allocation requirements, and the elimination of right of first refusal (ROFR) in FERC-jurisdictional tariffs and agreements for facilities subject to regional cost allocation (Order 1920 reinstated a narrow federal ROFR for “right-sizing” existing facilities in 2024).

The rule establishes three requirements for transmission planning:

• Each public utility transmission provider must participate in a regional transmission planning process that satisfies the transmission planning principles of Order 890 and produces a regional transmission plan.
• Local and regional transmission planning processes must consider transmission needs driven by public policy requirements established by state or federal laws or regulations. Each public utility transmission provider must establish procedures to identify transmission needs driven by public policy requirements and evaluate proposed solutions to those transmission needs.
• Public utility transmission providers in each pair of neighboring transmission planning regions must coordinate to determine whether more efficient or cost-effective solutions exist for their mutual transmission needs.

The rule also sets up three requirements for cost allocation:

• Each public utility transmission provider must participate in a regional transmission planning process that includes a regional cost allocation method for new transmission facilities selected in the regional transmission plan. The method must satisfy six regional cost allocation principles.
• Public utility transmission providers in neighboring transmission planning regions must have a common interregional cost allocation method for new interregional transmission facilities that the regions determine to be efficient or cost-effective. The method must satisfy six similar interregional cost allocation principles.
• Participant funding of new transmission facilities is permitted, but not allowed as the regional or interregional cost allocation method.

Public utility transmission providers must remove from FERC-approved tariffs and agreements a federal right of first refusal for a transmission facility selected in a regional transmission plan for purposes of cost allocation, subject to limitations:

• This does not apply to a transmission facility that is not selected in a regional transmission plan for purposes of cost allocation.
• This allows, but does not require, public utility transmission providers in a transmission planning region to use competitive bidding to solicit transmission projects or project developers.
• Nothing in this requirement affects state or local laws or regulations regarding the construction of transmission facilities, including, but not limited to, authority over the siting or permitting of such facilities.

Is FERC Order 1000 Working?

The efficacy of FERC Order 1000 has been hotly debated.

In a 2019 report, the Brattle Group estimated that competitive bidding for transmission projects could yield 20-30% cost savings, consistent with results from similar processes in Canada, the U.K., and Brazil. At an estimated cost savings of 25%, the potential customer value from expanding competitive processes from 3% to 33% of all planned U.S. transmission investments would be approximately $8 billion over five years.

However, even though the group’s findings were published nearly eight years after Order 1000 was instituted, Brattle found that major regional investments had been limited and interregional projects were almost non-existent; competition in the space also left something to be desired.

More recently, Concentric Energy Advisors challenged Brattle’s findings in a study commissioned for the DATA Coalition (which includes Ameren, Eversource, Exelon, ITC Holdings, National Grid, PSEG, and Xcel Energy), arguing that competitive solicitations through 2022 had not consistently driven cost savings.

“In specialized industries with high fixed costs, competition can lead to the duplication of infrastructure, increased costs, and reduced overall efficiency,” the consultant warned.

The firm found competitive solicitations to date had not offered “a foundation for asserting that competition in transmission results in cost savings.” While some projects had indeed come in under budget, others had considerable cost overruns.

Concentric concluded that many selected projects included cost caps as a tool to advance proposals while creating an expectation of cost containment, yet cost caps “obscure the actual determination of cost savings since all cost caps have exclusions, and actual costs as compared to capped costs are often markedly different.” Importantly, the authors of the report added, the application of a cost containment mechanism to final project costs, and therefore the amount recovered from customers through rates, is generally not transparent.