Initial Comments of the R Street Institute Before The Federal Energy Regulatory Commission on Implementation of Dynamic Line Ratings Advance Notice of Proposed Rulemaking

UNITED STATES OF AMERICA
BEFORE THE
FEDERAL ENERGY REGULATORY COMMISSION

Initial Comments of the R Street Institute

I. Issue Summary

On July 15, 2024, the Federal Energy Regulatory Commission (Commission or FERC) published an advance notice of proposed rulemaking (ANOPR) on the implementation of dynamic line ratings (DLRs) in the Federal Register.[1] This succeeds a Feb. 24, 2022, Notice of Inquiry (NOI) on the implementation of DLRs.[2] The NOI followed FERC order No. 881, which revised the pro forma Open Access Transmission Tariff (OATT) by requiring transmission providers (TPs) to adopt transmission line ratings that reflected ambient air temperature, or ambient-adjusted ratings (AARs).[3] Before initiating the ambient line ratings rulemaking, the Commission held a workshop on grid-enhancing technologies (GETs) that included, but was not limited to, ambient and DLRs. The problem statement on GETs policy is overwhelming, with billions in expected annual cost savings with a payback period of months on upfront costs.[4]

Transmission line ratings are determined, in part, by weather conditions. Before Order 881, TPs typically used static or seasonal line ratings based on infrequent potential weather conditions. This resulted in overly conservative assumptions relative to most real-time weather conditions. Thus, static and seasonal line ratings resulted in inaccurate line ratings under most circumstances, which increased system costs and inhibited market performance by reducing the gains from trade within and between regional transmission systems. To remedy this, R Street filed comments and met with FERC commissioners and staff in support of economical GETs policy via the GETs workshop and the rulemaking process leading to Order 881, as well as commended the Commission for issuing the order.[5]

R Street’s positions on GETs, and those of numerous transmission consumer groups, were buttressed by an R Street paper that reflected input from a convening of national transmission consumer groups.[6] The paper identified optimization of the existing transmission system, with an emphasis on GETs, as one of four principles for consumer-led transmission reform. R Street is coordinating with some of these groups on this proceeding and is in the process of reconvening the groups to update the consumer agenda, with an expected emphasis on GETs policy, including DLRs.

R Street submitted initial and reply comments on the DLR NOI.[7] We hereby submit comments on the DLR ANOPR.

II. Summary of R Street Position

The ANOPR correctly recognizes that DLRs can increase the capacity, efficiency, and/or reliability of transmission facilities by accounting for real-time weather conditions. Studies estimate that DLRs increase transmission transfer capability by up to 25 percent.[8] DLRs have been, and will continue to be chronically underutilized because of TPs’ perverse incentives under cost-of-service regulation. This inhibits market trade by inflating congestion costs unnecessarily. Thus, the status quo is unjust and unreasonable. The ANOPR problem statement is sound, and the need for reform is overdue. R Street provides the following policy recommendations, some in response to ANOPR prompts and some beyond it:

• Adopt DLR requirements on TPs, ideally using a rebuttable presumption of prudence under certain circumstances, unless otherwise demonstrated by the TP to fail a cost-benefit test. Some DLR requirements, such as solar heating based on the sun’s position, constitute universal best practice and warrant a uniform requirement to maximize net benefits. The economic prudence of other DLR applications, such as wind speed and direction, may vary by circumstance. Rather than require burdensome cost-benefit tests on individual lines, the ANOPR correctly approaches this issue by proposing thresholds from which to identify wind-based DLR candidate lines. Any threshold-based requirements the Commission adopts should err on the side of setting threshold levels to capture the overwhelming majority of cases where DLRs would expect to pass a cost-benefit test. This will likely result in more TP self-exemption pursuits, which is consistent with their incentives, whereas setting weak thresholds is unlikely to result in opt-in behavior given TP incentives. The Commission should not expand self-exemption criteria. The proposed criteria are adequate for TPs to demonstrate needed compliance changes, such as those from supply chain backlogs.
• Implement DLRs assertively, irrespective of the RTO/non-RTO asymmetry. The choice of optimal DLR policy instrument and implementation criteria likely hinges on the quality of congestion transparency, and thus presents a sharp contrast between regional transmission organizations (RTOs) and non-RTO regions. The more aggressively the Commission plans to bolster congestion-cost transparency in non-RTO regions, the stronger the DLR policies can be calibrated. The Commission has been reluctant to create stronger requirements on TPs in RTO regions relative to non-RTO regions because doing so may create a disincentive for TP participation in RTOs. R Street discourages the Commission from using this rationale to weaken DLR requirements in RTO regions, as superior DLR utilization would enhance the net benefits of RTO participation for consumers and the state. The determinates of RTO expansion hinge on many factors that tilt in favor of DLR adoption to enrich RTO value proposition, as the perceived net benefits are strong considerations in state RTO expansion conversations, such as those underway in the West.[9]
• Establish a routine GETs forum. DLRs, as with GETs overall, are in the relatively early stages of commercial deployment. Their benefits and commercial readiness will improve over time, and they should continue moving down the cost curve. The economic prudence of GETs adoption is evolving rapidly, and it is quite possible that GETs applications that are premature today will be prudent in the near future. Even when GETs, like most DLRs, are deemed prudent, lessons from implementation are rapidly evolving and could expedite adoption, lower costs, and boost reliability by minimizing mistakes.[10] A routine GETs forum would improve compliance with existing GETs policy and improve the quality and expedience of future GETs policymaking.
• Refine transmission congestion-transparency measures in non-RTO regions for DLR purposes. Aspects of the ANOPR’s proposed Limiting Element Rate (LER), with modification, may serve as congestion indicators sufficient to identify priority DLR candidate lines. R Street offers alternatives to the LER approach, including a production cost modeling-based requirement to assess congestion costs in non-RTO areas. The Commission may forego this recommendation if it instead opts for the preferable policy direction of establishing robust transmission congestion-transparency policy and institutions in non-RTO areas.
• Pursue robust transmission congestion transparency outside of RTOs for purposes beyond DLRs. The ANOPR reinforces that transmission congestion is unacceptably opaque in non-RTO regions lacking an energy imbalance market. The adverse economic and reliability consequences extend far beyond the scope of DLR adoption. The conditions in bilateral-only areas fundamentally undermine open-access transmission policy and the underpinnings of market-based rate authority. This cannot be reconciled with the objectives of Order No. 890 to remedy undue discrimination and provide for transmission system transparency.[11] The Commission should strongly consider pursuing robust economic congestion-transparency reforms outside of RTOs with a bigger purpose in mind. This likely requires a related and separately dedicated proceeding. Potential remedies include requiring the adoption of an independent transmission monitor (ITM), if not energy imbalance markets, in non-RTO areas.

See the full comments below:

[1] 89 Fed. Reg. 14666 (July 15, 2024). https://www.govinfo.gov/content/pkg/FR-2024-07-15/pdf/2024-14666.pdf.

[2] Federal Energy Regulatory Commission, Implementation of Dynamic Line Ratings, Notice of Inquiry, Docket No. AD22-5-000, Feb. 24, 2022. https://www.govinfo.gov/content/pkg/FR-2022-02-24/pdf/2022-03911.pdf.  

[3] Federal Energy Regulatory Commission, Managing Transmission Line Ratings, Final Rule, Docket No. RM20-16-000, Order No. 881, Dec. 16, 2021. https://www.wrightlaw.com/62D00A/assets/files/documents/W0284102.PDF. 

[4] See, e.g., T. Bruce Tsuchida et al., “Unlocking the Queue with Grid-Enhancing Technologies,” The Brattle Group, Feb. 1, 2021, p. 11. https://watt-transmission.org/wp-content/uploads/2021/02/Brattle__Unlocking-the-Queue-with-Grid-Enhancing-Technologies__Final-Report_Public-Version.pdf90.pdf.

[5] “Comments of the R Street Institute before the Federal Energy Regulatory Commission on Post-Workshop Comments on Grid-Enhancing Technologies,” Docket No. AD19-19-000. https://www.rstreet.org/wp-content/uploads/2020/02/FINAL-Hartman-GETs_Post-Workshop_Comments.pdf.

[6] Jennifer Chen and Devin Hartman, “Transmission Reform Strategy from a Customer Perspective: Optimizing Net Benefits and Procedural Vehicles,” R Street Policy Study No. 257, May 2022. https://www.rstreet.org/wp-content/uploads/2022/05/RSTREET257.pdf.

[7] “Comments of the R Street Institute on Implementation of Dynamic Line Ratings,” Docket No. AD22-5-000, April 25, 2022. https://elibrary.ferc.gov/eLibrary/filelist?accession_number=20220426-5050&optimized=false.

[8] Warren Wang and Sarah Pinter, “Dynamic Line Rating Systems for Transmission Lines,” Department of Energy, April 25, 2015. https://www.energy.gov/sites/prod/files/2016/10/f34/SGDP_Transmission_DLR_Topical_Report_04-25-14.pdf.

[9] Michael Giberson, “An RTO for the West: Opportunities and Options,” R Street Policy Study No. 308, September 2024. https://www.rstreet.org/wp-content/uploads/2024/09/FINAL2_r-street-policy-study-no-308-1.pdf.

[10] John Engel, “A utility tried out dynamic line ratings. How did it go?,” Power Grid International, Aug. 22, 2024. https://www.power-grid.com/td/transmission/a-utility-tried-out-dynamic-line-ratings-how-did-it-go/#gref.

[11] “Preventing Undue Discrimination and preference in Transmission Service,” Federal Energy Regulatory Commission, Order No. 890, Feb. 16, 2007. https://www.ferc.gov/sites/default/files/2020-06/OrderNo.890.pdf.