Loophole Allows Monopoly Utilities to Charge Electric Customers with Minimal Regulatory Oversight. Consumers Want FERC to Fix It.
Electric bills have been rising, and for most Americans, the largest driver is the regulated “wires” part of the industry—the massive network of transmission and distribution lines that delivers electricity to homes and businesses. Utilities have spent too much on transmission without considering how consumers can get the most bang for their buck. One study found that over 90 percent of transmission spending by monopoly utilities was built without economic justification, such as cost-benefit analysis. The R Street Institute is one of 22 groups in a coalition of consumer advocates and large industrial electricity customers now demanding change.
In December 2024, this coalition filed a complaint with the Federal Energy Regulatory Commission (FERC) arguing that the current system for building power lines is deeply flawed. The complaint targets how monopoly utilities invest in major power lines and require captive customers to pay for it without effective oversight or consideration of better regional alternatives. This practice leads to unnecessary spending and higher consumer costs.
The complaint follows mounting consumer frustration. After FERC and state regulators identified the problem in 2022, states and consumer groups repeatedly requested policy fixes. FERC failed to act, compelling consumer groups to file regulatory complaints to secure relief. At stake are billions in current and future spending. In PJM alone, utilities have planned 1,584 local transmission projects valued at $18.1 billion over the next four years. The coalition argues that many of these projects have received little meaningful review to ensure they are needed and cost-effective.
The coalition proposes two major reforms: First, all power lines operating at or above 100 kilovolts (kV) should be planned regionally rather than by individual utilities. Second, independent experts, not monopoly utilities, should oversee this planning process. These changes may sound technical, but their impact would be profound: more efficient spending, better grid reliability and, ultimately, lower costs for consumers.
The Root of Rising Costs: An Outdated Planning System
Today’s electric grid spans the continental United States through three vast power networks: the Eastern Interconnection, the Western Interconnection, and the Texas grid. This interconnected system evolved over decades as utilities linked their systems together to share power and improve reliability. Yet despite these physical connections and their clear benefits, monopoly utilities still largely plan transmission as if they operated in isolation, avoiding consideration of better regional solutions. This outdated approach increases costs and decreases reliability.
FERC has recognized this problem. In its recent Order 1920, the agency acknowledged that local transmission planning often results in less efficient and more expensive outcomes compared to regional planning. Yet despite nearly two decades of encouraging utilities to plan regionally, FERC has allowed exceptions for “local” projects—and these exceptions have nearly swallowed the rule.
The numbers tell the story. In PJM, spending on local projects has increased dramatically while regional projects have remained flat. Utilities can plan and build these local projects with minimal oversight, without subjecting them to economic reviews or competitive bidding processes that could lead to lower costs. This diverts capital away from regional planning processes, which have superior economies of scale and use cost-benefit analysis to lower costs.
The core problem lies in regulatory incentives. Utilities earn a guaranteed return on their transmission line investments. This cost-of-service model leads utilities to choose expensive solutions that maximize their returns rather than lower-cost alternatives. Without competition or effective regulatory oversight, there is little pressure to control costs—and consumers pay the price.
The First Solution: Regional Planning for Major Power Lines
The coalition’s first proposed reform is straightforward: Any power line operating at 100 kV or above must be planned through a regional process rather than by individual utilities. This voltage level matches the existing threshold for mandatory federal reliability standards, acknowledging these lines’ importance to grid stability.
This change would close a major loophole. Right now, utilities can label major transmission projects as local even when they clearly have regional impacts. In Florida, one utility planned a 176-mile power line as a local project, deliberately designing it at a voltage level that would avoid regional oversight. In Ohio, transmission owners have spent $6.5 billion on such local projects in just five years—more than three-quarters of all transmission spending in the state.
Regional planning works when it incorporates economic criteria. The Midcontinent Independent System Operator (MISO) has demonstrated that regional projects can deliver benefits worth 2.2 to 3.4 times their cost, while the Southwest Power Pool found regionally planned projects delivered 3.5 times more benefits than costs. These successes show what is possible when transmission planners treat our grid as the interconnected system it is.
The Second Solution: Independent Oversight
Regional planning alone is not enough. Even in existing regional processes, utilities can manipulate outcomes by selectively sharing information about generation plans, customer demand forecasts, and the condition of existing lines. That is why the coalition’s second proposal calls for independent transmission planners to oversee the process.
Think of these independent planners like traffic engineers planning an interstate freeway. Just as we would not let local road construction crews plan major highways, we should not let utilities plan critical power lines without independent oversight. These planners would ensure that all possible solutions are considered, that costs are properly managed, and that the resulting plans serve the public interest.
In regions already served by regional transmission organizations (RTOs) like PJM or MISO, improving planning independence would help. But the real need lies outside RTOs, where FERC should require utilities to propose a process for developing independent transmission planners for their regions. While consumers would ultimately pay for these independent planners through small fees on transmission projects, the savings from better transmission planning would far outweigh the costs.
Why These Changes Matter More Now
Consumers have long called for changes, but the need for these reforms is increasingly crucial. The Department of Energy anticipates hundreds of billions of dollars will be spent on transmission upgrades in the coming years to address aging infrastructure and accommodate changing grid conditions, as documented in its recent National Transmission Needs Study. Without reform, much of this spending could occur through the same flawed local planning processes that have already cost consumers billions in unnecessary expenses.
While some argue that regional planning and independent oversight would slow development, experience shows the opposite—the current system is already failing to deliver the right projects at reasonable costs. For years, consumer groups have demonstrated that the status quo results in an overbuild of inefficient local projects while starving development of more efficient regional projects. Without reform, the transmission cost management problem will only worsen as load growth and other factors drive greater transmission needs.
The Path Forward
Our current transmission planning system is an outdated relic. Utility companies can make billions from local transmission investments with minimal oversight while blocking more efficient regional solutions. The incentives are clear: Utilities resist regional transmission planning because local projects are simply more profitable for them, regardless of the cost to customers.
The Federal Power Act requires that transmission rates be “just and reasonable.” But there is nothing just or reasonable about a system that allows utilities to spend billions on transmission projects without demonstrating their cost-effectiveness. The reforms proposed in the FERC complaint—requiring regional planning for major power lines and establishing independent transmission planners—represent a practical path forward that would protect consumers while strengthening grid reliability. With hundreds of billions in transmission investment needed in coming years, the time for reform is now.