Socialized Is Not a Dirty Word: The Only Just and Reasonable Method for Assigning the Costs of High-Voltage Interstate Transmission Lines Is to Socialize Them

INTRODUCTIONOn April 14, 2003, just after 2:00 p.m., an overgrown tree in Ohio brushed up against a high-voltage transmission line, causing it to shut down.1 Over the next two hours, this faulted line combined with two faulty monitoring programs and one generator outage to overload the electrical grid in the Midwest.2 At 4:05 p.m., transmission lines began failing so quickly that operators could not shut down or reroute power.3 Circuit breakers tripped all the way from New York to Michigan and into Canada.4 Within just seven minutes, 256 power plants were offline, and fifty-five million people in eight states and Canada were without power.5 When the lights finally came back on, analysts estimated the 2003 blackout cost the U.S. economy $4 to $10 billion.6The 2003 blackout highlights the importance of high-voltage transmission facilities, or "lines," to the U.S. energy market, the economy, and our daily lives.7 By definition, transmission facilities are simply high-voltage power lines that efficiently move electricity from a generation facility, or power plant, to low-voltage distribution lines that feed electricity to consumers.8 Transmission lines, however, are more than just a vehicle for moving electricity.9 With out adequate transmission facilities, the goal of competitive electricity markets providing reliable and economic power cannot be fulfilled.10 As the electricity market is the third largest industry in the United States, even small changes in energy pricing and availability have a significant impact on the entire U.S. economy.11Recently, however, the United States has suffered from a significant underinvestment in transmission facilities.12 Between 2000 and 2008, only 668 miles of new transmission facilities were constructed in the United States, while the existing 200,000 miles of transmission facilities became increasingly strained by demand.13 The 2003 blackout was a symptom of this growing strain.14Although underinvestment in transmission facilities can be traced to various obstacles, such as state permitting processes and regulation changes, one of the most significant issues is cost allocation.15 Transmission facilities, although costly to build, still represent a small portion of the total cost of operating a grid.16 Rather than their actual cost, determining how much a state benefits from shouldering the cost of a new transmission facility constructed within its border is at issue, and whether the proposed line's perceived benefits outweigh its costs.17 The more states a transmission facility crosses, the more difficult it becomes to assess who should pay for the line, making it more likely that the project will be tabled.18This Note argues that spreading the costs of transmission facilities across an entire region is the best method for allocating the costs of high-voltage interstate transmission facilities.19 Not only is this consistent with the modern function of the U.S. energy market, but spreading costs has the potential to incentivize needed investment in interstate transmission facilities.20 Part I explains how transmission facilities function, how regulation over the past forty years has impacted the grid, and how the most recent Federal Energy Regulatory Commission ("FERC") determinations regulate regional transmission facilities cost allocation plans.21 Part II then discusses judicial review of cost allocation decisions and flaws with the beneficiary-pay method for allocating costs at a regional level.22 Finally, Part III argues that FERC should only ac cept socialized cost allocation of high-voltage interstate transmission lines because that is the only just and reasonable method of allocating costs, and that this strong and consistent stance could help spur the development of needed transmission infrastructure.23I. WHAT MAKES A TRANSMISSION FACILITY TICK: SCIENCE, REGULATION, AND POLICYThe importance of transmission facilities to the U.S. energy market can only be understood by providing a brief historical, political, and scientific context. …