The 119th Congress’s Grid Opportunity
Background
After serious consideration by the 118th Congress—whose lame-duck session included a push for the Energy Permitting Reform Act (EPRA)—and after changes were adopted as part of 2023’s Fiscal Responsibility Act, the topic of permitting reform has resurfaced on Capitol Hill. While the relevant Senate committee passed EPRA in 2024 on a bipartisan basis, the effort—which touched on judicial review, onshore and offshore mineral and land leases, transmission, and liquefied natural gas exports—stalled in the Senate when it became clear House Republicans did not support it (mainly due to skepticism regarding the transmission sections). Although broader permitting is up for consideration in the current Congress, this piece will focus on the need and opportunity for transmission reform.
EPRA’s transmission provisions focused on reforming existing federal backstop transmission authority and dictating that the Federal Energy Regulatory Commission (FERC) enact a rule requiring interregional transmission planning. The former change would eliminate the role of the Department of Energy (DOE) in backstop siting, whereby DOE identifies National Interest Electric Transmission Corridors (NIETC) based on a congestion study. This change would negate the need for duplicative reviews under the National Environmental Policy Act (NEPA), which take place once for the NIETC map and again each time a facility seeks a FERC certificate. These corridors are geographic areas of the country where “consumers are frequently harmed by a lack of transmission structure” and where transmission development would advance national interests like increased reliability and reduced consumer costs.
While reasons for skepticism of any policy may vary, common congressional Republican refrains on transmission while considering EPRA last year included:
- Discomfort with the idea of empowering federal utility regulators.
- Concern that most transmission facilities will be built in red states and/or that the only reason for building them is to meet renewable energy policies in blue states.
- Disagreement with renewable energy subsidies in general, with the particular worry that transmission reform would exacerbate federal tax expenditures.
As to the final refrain, the passage of the One Big Beautiful Bill largely alleviated concerns over renewable energy tax credits. Understanding the shortcomings of our electric grid and its development provides important context on why the first two refrains miss the mark.
Historic Rationale
As opposed to interstate natural gas pipelines (which receive their construction permits from FERC), transmission is certificated and permitted at the state level. There are a number of reasons for this distinction between the two types of interstate linear infrastructure. Historically, all electric utilities across the country were vertically integrated. Still in use today, vertically integrated utilities generate power from their own plants and move that electricity to customers over transmission and distribution wires. Because these regulated utilities earn their profits as a percentage of their investment, there was little financial incentive for them to share resources or mitigate needs by economically coordinating with each other—including building transmission amongst and between unaffiliated entities to share power when appropriate.
Thus, transmission was used merely to move power from a utility’s power plants to its substations, where it was then distributed to end-use customers. Although the types of power generation (e.g., coal, fuel oil, hydro) varied between utilities, this stand-alone model, though inefficient, was widely employed. Given that utilities’ service areas largely reflect state-granted monopoly franchises with little bleed-over into other states, state approval to build transmission within this utility-by-utility paradigm made sense within the context of the time.
Conversely, gas is extracted in discrete geographic areas. While some parts of the country are blessed with significant and easy-to-produce natural gas, others are not. However, those other areas still likely have demand for fuel. Therefore, contrary to the go-it-alone method of electric utilities, movement of gas between broad geographic areas was considered necessary early on. While the Natural Gas Act has empowered FERC to site natural gas infrastructure for decades, the Federal Power Act does not provide that same authority for transmission—with one exception.
Following the 2003 blackout (and out of concern the country didn’t have enough inter-utility transmission), Congress authorized FERC to approve and site transmission on a backstop basis—but only if a state withheld permission to build the transmission or was unable to authorize its construction. However, based on the DOE’s national congestion study, FERC was only empowered to use this authority for transmission proposed for location within an NIETC. Congestion occurs when transmission facilities do not have sufficient capacity to carry electricity to where it is needed. Litigation over FERC’s regulations related to this backstop authority largely negated its use; however, the process was reinstituted and revamped with the passage of the Infrastructure Investment and Jobs Act in 2021. While the DOE’s focus on congestion will identify areas where transmission relief can be helpful, it will not capture all drivers of economic transmission development. This leaves out large swaths of the country where transmission development would benefit utility customers, including connecting new load and generation.
Overcoming Transmission Fragmentation
In the eyes of consumer groups and independent experts, the core problem of current transmission policy is that it rewards the overbuilding of inefficient projects and the underbuilding of efficient ones. This reflects the perverse incentives offered to incumbent transmission owners, as cost-of-service rates encourage them to overcapitalize transmission expenses. The incentive is worst in vertically integrated areas, and economic research shows why utilities are motivated to suppress large-scale transmission development that enables cheap power imports to compete with a utility’s own generation.
Inefficient utility-by-utility transmission expansion reflects balkanized transmission planning, permitting, and siting regimes. It results in a widening transmission need gap with load growth, even though transmission costs are rising sharply. The status quo is to build smaller, less efficient lines to meet a single utility’s reliability criteria—cumulatively more expensive than leveraging economies of scale for large, efficient investments across multiple utility footprints. Utilities’ inefficient transmission investment has already eroded consumer confidence in transmission buildout, largely because current processes lack transparency, accountability, and economic discipline.
Regulators have routinely noted the importance of overcoming the utility bias to overbuild in developing efficient transmission, especially vertically integrated utilities. FERC rules passed in 2011 tried to overcome utility bias by mandating regional planning processes, which ultimately failed to drive any significant interregional planning. Overcoming utility bias is difficult without proper cost-of-service regulation.
FERC’s work to mandate independent planning and economic discipline in regional planning was a significant leap forward, with consumer groups asking federal regulators to expand those processes to even more transmission facilities. Without mandated economic planning, utilities largely conduct transmission development behind closed doors to meet reliability criteria without any economic review, such as a cost-benefit test or cost comparison of alternative projects.
Utility bias often equates to regulator bias. By highlighting transmission costs and minimizing benefits, utilities are able to convince state regulators, who are responsible for setting rates that end up in customers’ bills, that transmission is a burden, not a benefit. Because state regulators play the primary role in siting transmission, their opinion matters more than most.
State regulators’ well-intentioned gatekeeping aside, states’ provincial perspectives on transmission often reflect concern around their relative competitiveness with other states. For instance, the governor of State A, which has excess power plants and natural resources to run those generators, may not be interested in building transmission in their state so that the governor of State B can attract industry elsewhere, using the transmission to serve its electric needs. Instead, State A would want to use their generating assets to serve prospective customers only in their state, thereby highlighting their competitive advantage with electricity. Regardless of how they come about their bias, states often employ regulatory schemes that make it easier to site and build an incumbent utility’s in-state transmission rather than the multi-state transmission another entity might build. This paradigm was highlighted recently in Pennsylvania, where state regulators refused to approve a permit to build transmission that would help reduce power prices for customers in other parts of the Mid-Atlantic region, citing the fact that state law requires the transmission to address a Pennsylvania need.
A broader federal backstop process invoked when states will not (or cannot) approve needed transmission would address situations in which individual state actions undermine national needs. The primary benefit of state siting regimes is the ability to dictate the location of infrastructure. Federalizing the siting process makes states mere stakeholders in deciding where transmission goes. Former FERC Commissioner Philip Moeller previously noted that the “‘specter of FERC hanging’ over the shoulders of states” on transmission siting led to more interest in working cooperatively to develop transmission themselves rather than letting it ever get to FERC. However, the “risk” of a state’s transmission denial being backstopped by FERC today depends on whether a denied facility is located within a few of the narrow slivers identified in the DOE congestion study. Negating the need to conduct and depend on that study and leaving FERC’s backstop authority intact—with congressional direction on what approval criteria FERC should use—would make today’s process far more workable. States can and should change their laws so they can approve transmission in ways that meet their siting preferences. Otherwise, they risk a completely federalized siting process like interstate pipelines have—something DOE Secretary Chris Wright recently expressed support for and that aligns with other executive branch interests in empowering FERC on the transmission front.
Many policymakers acknowledge the need for additional electric infrastructure in light of demand growth associated with data center buildout and manufacturing reshoring. Today’s demand for transmission network expansion highlights the shortcomings of past development. For instance, generation interconnection queues are backed up across the country because insufficient transmission headroom triggers expensive, ad hoc network upgrades to interconnect new generation. Leaving sufficient headroom for allocation to subsequent facility users, the grid’s proactive buildout presents a more orderly, cost-effective, and efficient opportunity to integrate new generation—especially power plants owned by non-utilities. While most interconnection queues are full of renewable projects, grid expansion is necessary to accommodate incremental thermal generation.
Coordination and accumulation of utility and customer needs—including municipal and cooperative utilities not ordinarily regulated by states—is necessary to ensure the efficient and effective investment in grid assets everyone uses and benefits from. Overseen at the federal level, this proactive and more holistic effort can either look like mandated planning of the type required by FERC Orders 1000 and 1920 or be subscription based. Subscription-based offerings could take any shape but would most likely operate like a pipeline, where the developer solicits interest in transmission capacity and builds facilities once they have enough paying customers to pencil out the investment. But while subscription-based merchant concepts have the benefit of skirting transmission cost-allocation concerns, they cannot capture all reliability and cost-savings benefits and could run into utility bias obstacles.
To be effective, whichever model is used must coordinate across broad geographic areas—something neither expressly required nor incented today. R Street has routinely called for greater interregional coordination and planning alongside the consumer groups who pay for transmission, in addition to congressional or regulatory action reducing barriers to merchant transmission development. Congressional effort is necessary to require interregional coordination and planning to identify needs and opportunities across the grid and to reduce barriers to non-utility or multi-state transmission development.
Congressional Opportunities
As the 119th Congress approaches its halfway point, three legislative proposals and discussions touch on some of the issues identified above. While these efforts will certainly be subject to additional debate, they all identify issues with today’s transmission network planning and development processes.
1. EPRA 2.0
Given the position of Sen. Mike Lee (R-Utah) as Chair of the Energy and Natural Resources Committee, his support for EPRA last year, and his recent comments supporting FERC-related permitting reform, EPRA could be a starting point for transmission permitting reform this time around. As previously noted, EPRA removed the need for DOE involvement in FERC backstop siting, negating the importance of the DOE’s congestion study. Removing this study process reduces the number of NEPA studies and allows transmission across the country to avail itself of the backstop process. In lieu of the current process, EPRA allowed transmission developers who were unable to get state approval to site their facilities go to FERC to get a certificate, with FERC judging the need for a given project based on defined criteria in the bill. If approved by FERC, EPRA also had provisions for how the costs of that transmission should be allocated to beneficiaries, reflecting the law and processes FERC uses today for state-sited transmission. EPRA also required FERC to issue rules mandating interregional transmission planning. After more than a century of observation, it is clear that without mandated planning, incumbent monopoly utilities will not start looking at more efficient power transfers between regions on their own.
In early 2025, Rep. Troy Balderson (R-Ohio) introduced the GRID Power Act, which would establish a FERC process to fast track the interconnection of new power generation. The legislation would allow generation that contributes to reliability to move to the front of the line of power plants seeking grid connection if they meet certain criteria. While the bill’s acknowledgement of the interconnection backlog highlights the backlog’s impact on resource adequacy (as well as the lack of grid headroom), its focus is on mitigating the current situation rather than prospectively fixing it. Because regions across the country have already implemented fast-track processes for certain shovel-ready generation projects, the GRID Power Act’s impact could be muted. Further, the bill’s criteria for moving up in line focus on what generation can do as opposed to what benefits it provides. Processes for getting generation on quickly should be explored in tandem with processes that efficiently expand the grid to accommodate that generation and serve customers cost-effectively.
Sponsored by Reps. Scott Peters (D-Calif.) and Andy Barr (R-Ky.), the Streamlining Powerlines Essential to Electric Demand and Reliability Act (SPEED and Reliability Act) should not be confused with the similarly named Standardized Permitting and Expediting Economic Development (SPEED) Act sponsored by Reps. Bruce Westerman (R-Ark.) and Jared Golden (D-Maine).
The SPEED and Reliability Act touches on some of the same subjects as the 2024 EPRA effort, particularly bolstering FERC’s backstop siting authority. Initially, the SPEED and Reliability Act would remove the DOE’s role in identifying NIETCs via their congestion study, negating the duplicative NEPA reviews and instead providing FERC criteria to determine whether to approve transmission certificates for projects unable to be sited at the state level. FERC would then use those criteria to determine whether the project is needed.
As R Street’s Phil Rossetti previously noted:
[T]he bill aims to expand state and local engagement in the federal permitting process of electric power transmission and mandates a one-year period of engagement before FERC can permit a project. The bill further aims to clarify ‘cost allocation,’ where those who benefit from new federally permitted transmission (e.g., lower electricity costs) must also bear the project costs.
The bill largely follows EPRA’s lead on transmission cost allocation, hewing its language to adhere to FERC’s current cost-allocation requirements. Simply, the legislation requires customers to pay for transmission sited under the FERC process relative to how much they benefit from the facilities. Customers who receive little or no benefits will pay nothing.
The NIETC concept developed 20 years ago for FERC’s backstop siting authority is clearly flawed. The DOE congestion study delays and complicates the process, unreasonably limiting the “needs” that can be identified and subsequently addressed. Giving FERC and developers clear rules for what benefits a transmission project applicant must show to get approval removes uncertainty with the current process. Importantly, the bill does not bypass states. If a state has a process for approving transmission, then applicants must avail themselves of it. Under the bill, states will have ample time to consider the project before developers can apply for a FERC permit. If the applicant gets to FERC, then states can convey their interests and concerns with the project there, including providing the entire record of the underlying state case and their basis for denial. The risk that FERC will site transmission under the legislation in the absence of state collaboration when building out needed infrastructure will hopefully discourage arbitrary state denials and prod state legislatures to fix their permitting regimes.
Policy Insight
While Capitol Hill is slowly beginning to acknowledge the need for transmission reform, the approaches currently under consideration vary in direction and effect. While near-term efforts are required to address current demand, their impact will be insufficient without longer-term fixes. Our grid is maxed out. While process and efficiency improvements can help, they only get us so far. Insofar as new grid investments are needed, customers demand that those facilities are planned in an efficient and cost-effective manner. Congressional action is important to address the red tape, inertia, existing biases, and misaligned priorities that limit our collective ability to build out needed transmission infrastructure.