The Cost Allocation of Transmission Lines

A long-range transmission plan just announced by the Midcontinent Independent System Operator, or MISO, lays out a roadmap for $10 billion worth of investment in some 2,000 miles of new transmission lines, potentially unlocking more than 50 gigawatts of renewable energy. In this episode, attorney Lauren Azar celebrates this win and traces the years of work and advocacy that went into it.

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David Roberts

Volts subscribers are well aware that the US, like most places, badly needs more long-distance power lines. Such lines unlock the potential of regions where renewable energy is abundant but people are scarce. They lower system costs for all customers on the grid. They make the grid more reliable and resilient.

However, it is incredibly difficult to build these lines. The process is a bureaucratic tangle, with ubiquitous controversies over how to allocate costs and benefits, and the pace of building is woefully short of what will be needed to help the US hit its carbon emissions targets.

But a ray of sunshine pierced that generally gloomy situation last week, when the market monitor of the midwest wholesale electricity market — the Midcontinent Independent System Operator, or MISO — announced the results of its Long-Range Transmission Planning Initiative. It laid out a roadmap that would involve $10 billion worth of investment in some 2,000 miles of new transmission lines, which MISO anticipates could unlock more than 50 gigawatts of pent-up renewable energy.

To someone like me, so accustomed to stories of failure around transmission, it came as a bit of a bolt from the blue. But it is, in fact, the result of years of long, steady work by advocates, stakeholders, and experts — including my guest today.

Lauren Azar is a longtime attorney and consultant working in the electricity industry. During her time as a lawyer, she has also worked as a senior advisor to the US secretary of energy on electricity grid issues, a commissioner on the Wisconsin Public Service Commission, and president of the Organization of MISO States, which was deeply involved in the last round of transmission planning in MISO. There's nobody in a better position to explain what has just happened in MISO and what it means for the larger field of transmission planning, so I'm extremely excited to welcome her on to the pod today.

Lauren Azar, thank you for coming to Volts.

Lauren Azar

Thank you, David. Looking forward to this discussion.

David Roberts

It's rare I get to discuss positive transmission news, so this is exciting. As I said, I think listeners know the basics about why transmission is good, why we need more of it, and why it's so difficult to build. So let's take a few steps back and just talk about MISO, where this happened. So maybe just start by — MISO is what they call a Regional Transmission Operator, an RTO, which means it has an area that includes a bunch of utilities within it, and it runs the wholesale electricity market in that region and plans transmission in that region. So tell us a little bit about where MISO is and what and who it includes.

Lauren Azar

Sure. So MISO stands for the Midcontinent Independent System Operator, and they operate the transmission grid from Manitoba, Canada, all the way down south to Louisiana and Mississippi. In addition to operating the transmission grid, they also run an energy market which decides what generators are going to run to deliver electricity to customers. And under federal law as an RTO, they are also obligated to ensure that the grid itself is able to deliver sufficient electricity to customers. And so that is where the transmission planning comes in.

MISO actually does transmission planning all of the time, every year, but it's smaller scale. It's these long-range transmission planning processes that don't happen very often. And the result of some LRTP planning happened and was approved last week.

David Roberts

Right. And so this is a process. MISO includes a bunch of states, a bunch of utilities. They're varied in terms of not only their resource mix but in terms of their goals. and aspirations, and political character. So it's quite a milage they're dealing with there. So let's talk a little bit about the process. So what is MISO setting out to do with this process, and who gets to be involved in the process?

Lauren Azar

MISO with regards to long-range planning, and that's planning for 20 years out. MISO uses what is called the "Strategic Foresight Process", which essentially what MISO does is it creates a series of hypothetical worlds for 20 years out, and then figures out what kind of transmission grid would be needed for those hypothetical worlds and what you are looking for. And those hypothetical worlds are called scenarios, or MISO calls them futures. And usually, in this process you try to get plausible bookended futures, so one that's more tepid and then one that's aggressive, and you try to then design solutions that would work in both of those bookends.

David Roberts

With the electricity industry changing so quickly to even imagine 20 years out, there's some element of absurdity to it, like we have no idea. So as I was reading MISO's futures, they got "Future 1", where everybody sort of meets their stated plans and goals, and then they range up to a future where there's super aggressive decarbonization and super aggressive electrification, which raises demands. And my thought was, "that range between those two possible futures is so vast." How on earth do you plan a transmission system that even plausibly could answer the needs of both?

Lauren Azar

First of all, let me just say that the portfolio that was approved last week, unfortunately, was only based on "Future 1", which in my mind was a disappointment. But whenever you're dealing with plausible bookends, one of the things that you can think about, and I think MISO is thinking about, is how can one plan build on another plan? So for these long-range transmission planning processes, and I'm going to refer to this as the LRTP process, MISO has already indicated that it's going to involve four different steps. In other words, four different plans are going to come out, and the next one is going to come out and be approved in December 2023. Tranche 3 in December 2024, and we hope December 25 will result in Tranche 4.

David Roberts

And these different tranches will be divided up by time period or by region, by area.

Lauren Azar

The first three are divided by region. Tranches 1 and 2 are all in what was MISO Classic. So the states in Central MISO and Northern MISO. Tranche 3 is going to be in MISO South. And then Tranche 4 is going to increase the capacity exchange between MISO North and MISO South.

David Roberts

Interesting. So some exchange between regions.

Lauren Azar

Yes.

David Roberts

And so, as I think about the process of transmission planning and why it's so vexed in the US, one thing is just this wide array of stakeholders who tend to want different things. So I'm wondering when MISO held all these meetings, lots and lots of meetings. Tell me a little bit about the array of stakeholders involved and who wants what. We don't have to identify specific people or companies, but sort of in terms of their interests, who's pulling which direction here.

Lauren Azar

Sure. And let me just say that MISO has their stakeholder process set up so that there are eleven different sectors. Each sector member is aligned with the other members of its sector. And for instance, I've been working with the environmental sector. But let me just give you a sense as to who would be against larger transmission lines, the interstate transmission lines that are designed for the LRTP.

David Roberts

I mean, this is what confuses people, I think, in my world, is transmission seems so great. Other than sort of like a landowner who doesn't want a power line on their property, it's really hard for me to imagine who else is pushing back against these things. But it must be somebody because they're not getting billed. So who are those people?

Lauren Azar

Yeah, let me put them into four buckets. The first buckets are the "vertically integrated" utilities. And those are utilities that own transmission but also own generators. And the reason they don't want new transmission coming into their service territory is if they have inefficient generators, those generators do not run because lower cost, as an example, renewables will be selected in the energy market and will be delivering electricity to their customers. And so they're more expensive generators, like coal and natural gas, will sit idle, and they're going to lose money.

David Roberts

So you have an entity here which is financially invested in power plants that wouldn't run if there were a broader transmission interconnection. They're not competitive on a regional basis. So you have to keep your little area insular to keep running those plants, basically.

Lauren Azar

Exactly.

David Roberts

That doesn't seem very public-spirited, Lauren. It seems like a perverse incentive, let's just say.

Lauren Azar

Well, and that's one of the reasons that RTOs were created, was to try to chip away at this misaligned interest between the consumer and the utility. So that was bucket one. Bucket number two would be ... it's also, unfortunately, misaligned interest between utilities and customers. Some utilities are wonderful, and they absolutely look out for the consumer's interest. Other utilities, however, really are more interested in increasing their stock prices and their revenues. It is much more expensive to build generators than transmission. And, as you may know, and hopefully your listeners know.

David Roberts

Oh yes, I beat this point to death, so I hope to God they know it by now.

Lauren Azar

Okay, well utilities make profits off rate base.

David Roberts

Yes. They make money by spending money. They want to spend money.

Lauren Azar

Well, they want to spend specific kinds of money. They want to spend "steal on the ground" money.

David Roberts

Right.

Lauren Azar

It is depreciated assets, or I should say undepreciated assets. So they want to build the expensive generators. They don't want the cheap transmission.

David Roberts

And the more regional interconnection you have, the fewer big generators you're going to have to build.

Lauren Azar

Exactly. And your regulators are going to be looking at, when I say your, the utilities regulator is going to be looking at ensuring that a utility is not overbuilding. In other words, not building too much capacity. So if they are able to access capacity elsewhere, they're not going to be allowed to build their own generators and their own footprint.

David Roberts

Again, that's so perverse. So perverse that an entity is involved in this process that has that interest. It's just wild. Okay, that's bucket two.

Lauren Azar

Yes, bucket three. I'm going to call the "end users". And those are usually large consumers who are mostly interested in ensuring costs stay low today, even if it's going to save the money tomorrow. And so they really don't necessarily even like the shift that's happening in the industry. They just want to stay right where they are. And so they often come back and say, "we don't need any changes, we don't want new transmission, or we want minimum transmission."

David Roberts

Because they just don't want to make the initial outlay, the initial investment.

Lauren Azar

Yeah. And I was thinking about this. I'd be interested in taking a look at that and what the impact, for instance, of mutual funds and needing immediate profits is on that position.

David Roberts

Yeah, quarterly profits.

Lauren Azar

Exactly. Versus understanding that I'm going to make an investment today that's going to save money, when this line is built in ten years.

David Roberts

Which used to be, like, I guess, in an old-fashioned world, used to be sort of what business thinking was, "how do you make investments for long-term success?" But now it's like we got three months to show the numbers.

Lauren Azar

Yeah. And so I wouldn't be surprised if that trend impacts their positions in this.

David Roberts

Okay, that's bucket three.

Lauren Azar

And bucket four, it's politics. Some people just don't like renewables, and they see this as a renewables play, which I completely disagree with. I mean we are seeing a transformation in the industry. A lot of this is being driven by cost. A lot is being driven by customer preferences, and frankly, a lot of it is being driven by extreme weather.

David Roberts

Well, it amounts to the same thing, right? I mean, if you follow low cost, if you follow resilience, pull those strings, you end up with renewables. There's not a lot of you can do to get around that.

Lauren Azar

Yeah.

David Roberts

Well, that's a daunting amount of resistance. So maybe up against that, who are the sort of entities who are pushing for sensible regional, long-term thinking about this? The environmental communities, I assume.

Lauren Azar

Yeah, I mean, let me just start with there are plenty of transmission owners that actually want to build transmission, and so they are leading this effort at MISO, which is fantastic. We do have two independent transmission owners in MISO, which means they're not "vertically integrated" utilities. And so they don't have that misalignment of interests. We also have the environmental sector, as you indicated. We've got the renewable generator developers and frankly, any developers of generation, whether it's renewables or natural gas, are interested in more transmission.

David Roberts

They're waiting in the queue, presumably.

Lauren Azar

Exactly. And then we've got independent transmission developers that are interested in developing transmission under the competitive transmission development process. So they're pro-transmission. The regulators, generally, it really depends on their state, and their state's position, and whether or not their states' have goals, and frankly, how their utilities are performing as to what their position is. But the state regulators in this situation supported the LRTP portfolio.

David Roberts

So these lines they're talking about building here up in the sort of upper Midwest. One of the, I guess, you call it a friendly critique of these results, is saying almost all of these lines that you're talking about in this plan are going to be built by these "vertically integrated" utilities. Which means they will not ... because if they're built by independent transmission operators, there's a bidding process, right? You put up a project, and then transmission developers can come bid on it. And the thought is that competitive process will end up with better results, cheaper results. But there's very little auction here. There's very little independent transmission development. Is that something ... do you agree that that's a flaw here, or are they doing the best they could do? What's your take on the relative dearth of competitive process in here?

Lauren Azar

Well, first of all, I just want to clarify that in Michigan, Wisconsin, and Iowa, and it may extend into other states, there are independent transmission companies that all they do is own transmission. They don't own any generators. And those are not the kind of developers that you're talking about, that have to use the competitive process. These are public utilities within the state.

And I'm just going to give an example in Wisconsin here, back in 2000, the legislature decided that they were going to disaggregate the utilities. Well, they were going to give an incentive to disaggregate the utilities and allowed the utilities to create the American Transmission Company. And so ATC owns and operates the transmission grid in about two-thirds of the state of Wisconsin. So that's an example. They're an incumbent utility here. They don't have to go through the competitive process.

David Roberts

But, presumably, are governed by regulators, just like public generation utilities are. So, ideally, you would think the regulators would push them toward lower costs in the same way that competition would, although I gather maybe that doesn't always happen.

Lauren Azar

Well, for the two independent transmission companies in MISO, I think there are only two: it's ITC and ATC. Yes, they are regulated both by the federal government as well as the state government, but they do not have that misalignment of interest, that we had talked about earlier, because all they're doing is transmission. They don't have any generation to protect.

But let's get back to your first question, with regards to competitive transmission development. And these are companies that essentially aren't necessarily incumbent utilities that would compete for proposals that MISO would put out for transmission. And my understanding, I'd have to go back and look David, but my understanding is that about $1 billion of the $10 billion in costs for the LRTP Tranche 1 would be put out to competitive bid.

David Roberts

Would it be, in your mind, better if there were more of these independent operators and more competitive process? Like, how much weight do you put on that in terms of ensuring quality and cost competitiveness of the results?

Lauren Azar

The folks out there right now that are competing to do the development are pretty well-known entities. So I'm less worried about ... and I've got my former commissioner hat on, because early on when I was a commissioner, we didn't have any history with them, so we didn't know if they were actually going to build quality stuff. And I think there's enough comfort now that they are in it for the long haul, which is a good thing.

Would it be better if everything was competitively built? Given the urgency with which this industry is changing and how quickly we need to get things done, if we could competitively bid and still get everything done quickly, sure. But I think there is a bit of a trade-off here with how quickly we would get the build out if everything was competitively built. So I think MISO tried to come up with a middle road, where there still was a nice chunk for the developers to come in and bid for, but opted for 9/10th of it to be done with due speed.

David Roberts

The term "quickly" is not often used in this context. It's funny, like it seems to be just conventional wisdom now. Like the time from announcing a line, to having a line, is ten years, which just seems, I guess, a little crazy to me. But is that standard in other countries? Is that, you know, should I sort of, like view that as an artifact of bureaucratic, you know, misalignment and whatnot. Could it go faster? Or is that just the nature of the beast?

Lauren Azar

That's the nature of the beast in the United States. It's the regulatory framework that we set up, and it involves the amount of regulatory approvals that are required. How the land acquisition process happens. Once you get all the approvals you needed and all the land that you need, it takes two to three years to build these lines. And so the vast majority of the time spent is on getting to the point where you're putting your first shovel in the ground.

David Roberts

Right. That just seems like there's some fat that could be trimmed there. So MISO has this "Future 1", and we should mention that the "Future 1" is just utilities meet their stated goals, and the states they're within meet their stated carbon goals, which there are a bunch of utilities and states in MISO that have pretty aggressive carbon goals. So it's a pretty aggressive future. They have this future they're building toward. They come up with these 2000 miles of lines, $10 billion. So who pays that $10 billion? And to back up a step, who decides who pays that $10 billion? And how does that get divided up? Because my understanding is figuring out who pays, tends to be one of the worst tangles here and one of the most difficult sort of barriers to overcome.

Lauren Azar

Yes, and in the transmission world, it's called the "cost allocation for the transmission lines". Ultimately, the Federal Energy Regulatory Commission is the one that approves the cost allocation rules for the RTOs. And each RTO puts together proposals on how it wants to pay for lines. The project type depends on under what bucket of cost allocation rules, essentially, get triggered. And when we started the LRTP process back in 2020, we knew that the cost allocation was going to be an issue. So there was a concomitant process going on to try to figure out how to pay for these lines, knowing that they were very similar to the Multi-Value Projects that I was ... I headed up the cost allocation process for that back in 2009, in 2010.

So we went through a lot of different iterations at MISO, through the stakeholder process, on whether or not LRTP needed to have a different kind of cost allocation than the original Multi-Value Projects. And in the end, it was decided. And MISO got approval from FERC to apply the MVP tariff, so those are the MVP rules, to the new LRTP projects with one change. So originally when we did the projects back in 2010, 2009 to 2011, MISO only had a footprint of MISO North and Central, and I'll just call that MISO Classic.

It was only after that that we added MISO South. And MISO South really doesn't like the cost allocation for the MVPs.

David Roberts

MISO South, by the way, includes Louisiana, just to give listeners a sense of.

Lauren Azar

Yeah, so it includes Mississippi, Louisiana, Texas, and Arkansas, as well as, the city of New Orleans.

David Roberts

Very different in character, let's say, than MISO Classic, in a bunch of different ways. So what is the Multi-Value Project? These are transmission projects that MISO planned ten years ago, which were also, I think, held up as sort of exemplars of how to do things well. So what was that "cost allocation process" in the MVP?

Lauren Azar

Yeah, the "cost allocation" is essentially all of the beneficiaries sharing the cost based on their pro rata share of customers. So if you've got a lot of customers, you pay more because you're sucking out more electricity from the grid. And if you have fewer customers, you're paying less because you're using the grid less.

David Roberts

When you say "you", we mean "you utilities".

Lauren Azar

It's called a "postage stamp allocation". And so the costs are spread broadly based on usage. That's the easiest way to describe it.

David Roberts

We should say here as background, the overall process MISO found would be investment of around $10 billion and net benefits. At the end of it all, more than double that. I forget the exact number, something like $26 billion in benefits. So on a macro level, it seems like this ought to be easy to do, right, because the benefits so outweigh the costs that whoever is paying the costs ought to receive enough benefits to more than compensate for it. But of course, it's never that simple.

Lauren Azar

Can I emphasize that point? So the costs are spread by zone, and there are seven different zones receiving benefits here. The lowest cost savings is $2.1. So for every $1 spent in that zone, they will save $2.1. The highest every dollar spent will save $4.4. And that is only over 20 years.

David Roberts

Right.

Lauren Azar

And these transmission lines last for 60 to 80 years. So we're talking massive savings for every dollar spent.

David Roberts

This is like the "tearing your hair out" aspect of all this. On the broad level, these are just complete no-brainer projects. The benefits vastly outweigh the cost. But again, you get up in that, it's like who gets what, who pays what, and who gets what always ends up complicated. But dividing up cost based on usage seems quite intuitive and sensible. So what is Louisiana's..what's their problem with that?

Lauren Azar

Louisiana, MISO South doesn't like a "postage stamp" because they think that rather than just everybody sharing on their load ratio, that we should look at the very, very specific benefits being received by customers and allocating the costs based on those specific benefits. So if one area, for instance, is receiving benefits based on having to use less fuel, they would then be allocated the costs related specifically to using that amount of less fuel.

David Roberts

It seems more complicated.

Lauren Azar

It is much more complicated.

David Roberts

Almost as though the intent is just to muck everything up and slow everything down. I don't want to cast any aspersions.

Lauren Azar

Well, for smaller lines that are designed for very specific reasons, like relieving, just call it economic congestion, that sort of approach makes sense. But when you're talking about these large regional lines that are intended to bring regional reliability, I agree 100%. I think going more granular in your cost allocation actually leads to less accurate cost allocation.

David Roberts

Yeah, you're missing a lot of these sort of macro-benefits. Like resilience of the larger grid, benefits to everyone who's on the grid, and even people who are adjacent to the grid. And it's fuzzy where to draw the exact lines on those, but you can't pretend those benefits don't exist.

So the first round is a bunch of lines, more or less for the upper MISO. You got 2,000 miles of lines here, $10 billion of investments. Presumably, this is all going to trigger a process. Things are going to start moving now. So forgetting the subsequent tranches, which I want to talk about in a second, just in terms of this, like now they've released this plan, this document, this roadmap, what happens now? Presumably, all those, you know, all that whatever, seven years of approval seeking that gets started now, what actually happens in response to this?

Lauren Azar

So a few things. Number one, you're absolutely right. What the utilities decide is which lines they're going to be building first, and they're going to be preparing applications to submit to their state commissions, as well as any federal agency approvals that they need, and they will start that regulatory process. What's interesting, there are 18 different lines here, and I suspect there is going to be a rational sequence in which these lines are built. And so part of that I think is probably also going to happen very early on is MISO will be working with the transmission owners to determine which of the lines need to hurry up and which ones can wait a year or two before they start their regulatory process.

David Roberts

One of the things about transmission in the US is how many veto points there are over these things. So I would like to get a sense of how certain we are that this is going to result in these lines being built, or do we still face a bunch of process where say, a random landowner in Michigan can come in and just refuse and stop the whole thing cold? Like how assured are we that there are going to be results from this? Are there still more veto points ahead?

Lauren Azar

There are many veto points and that is one of the weaknesses in our ability to build transmission infrastructure. I mean, if you think about building the national highway system, as an example, if any specific municipality could have just said no.

David Roberts

There were a lot of them.

Lauren Azar

What our highway system would look like right now.

David Roberts

Yes.

Lauren Azar

And that's not true for all states. It's really state specific as to how land is acquired for these transmission projects. But for instance, a state like Iowa, indeed, it's very much dependent on local approvals. In Wisconsin, you only have to get the state approval in order to obtain the land that you need. So it's state by state. I can tell you, for the MVPs that were approved in 2011, those, believe there were 17 lines if I remember correctly, all but one of them are already in service, and the one that's not in service is under construction but is in litigation. So there are lots of veto points. But so far, at least if you look at the MVPs, we have a pretty good success record in MISO Classic.

David Roberts

I see. So this is not certain that all these lines laid out in this report will be built, but we feel pretty good about their chances.

Lauren Azar

Absolutely. I have some strong confidence that we'll get these done.

David Roberts

And reading around, I've been given to believe that maybe this first round, this first tranche dealing with sort of the upper regions of MISO, might kind of be the easiest. So there are three more to go. Are they all are all of the tranches going to take two years of process? What's next? And do you agree that this first round was was the easiest?

Lauren Azar

I can't say the first round was the easiest. I think Tranche 2, which is also going to be in MISO Classic, the rumor is that it's going to be as big as Tranche 1. So that's a large investment also in MISO Classic. But you have states and MISO Classic, and regulators in MISO Classic, that have worked together over more than a decade on developing transmission. So will we have ... continue to have the squabbles and the brawls? We absolutely will. The cost allocation is set for Tranche 2 as well. The same MVP tariff will be applied.

David Roberts

And then you get to Tranche 3, the southern part. What's the what?

Lauren Azar

Yeah.

David Roberts

How new are these southern states to MISO? I'm wondering sort of how much the, like, shared history has a role to play here.

Lauren Azar

I think it was around 2013, but do not quote me on that one.

David Roberts

So they've been in MISO awhile?

Lauren Azar

Yes, they've been in MISO awhile. And as a general rule, MISO South stakeholders have not been all that excited about developing transmission, period.

David Roberts

And is that mainly because there's these "vertically integrated" utilities that have these sort of perverse interests we were discussing earlier? Is that mostly the explanation or is there more to it than that?

Lauren Azar

I think it's that, and I think it's politics.

David Roberts

Because of renewable.

Lauren Azar

Yes.

David Roberts

They fear you coming in and forcing a bunch of renewables on them, thus, weakening their manhood, or I don't know what they think is going to happen. So do you think that's going to be, I mean, is that process underway at all? Have those talks begun at all? Do you have any idea what to anticipate when ... because presumably the problems that are prompting this process in the first place, congestion, and rising costs, and all this kind of stuff, also face the southern states in MISO. So inaction doesn't seem like a possibility here. So how do you —do you anticipate more difficulty there working through that?

Lauren Azar

Well, first of all, I just want to point out that the South has very unique challenges as well, with regards to extreme weather, and more than the rest of MISO, they need transmission in order to provide the resilience in those extreme weather events. I mean, Winter Storm Uri was catastrophic, and if they had more transmission, they would not have lost as many lives. So the actual planning process in MISO South, I can't say how easy or hard that's going to be. What I can say is historically, again, they have pushed back against regional transmission in the South.

As far as cost allocation goes, it is MISO South that wants to have a more granular cost allocation. And we have already started that process to start discussing whether or not there will be a new cost allocation developed that would likely apply not only to MISO South but then also to MISO North.

David Roberts

Oh really? So yeah, I'm wondering, is there anything in the rules that says you have to have the same cost allocation process for all these tranches?

Lauren Azar

Yeah, FERC, in one of its orders, indicated that for any specific single project type, you can only have the same cost allocation. And so we already have an approved cost allocation for this LRTP project type. The question is whether or not MISO is going to be able to come up with an agreement with MISO South that then could be applied to MISO North, for this LRTP project type.

David Roberts

And it also strikes me intuitively that the fourth tranche, which is the connecting the regions to one another with power lines, might be the stickiest of all because all the sort of perverse incentives we were discussing earlier — if you have your little territory, and all of a sudden a high voltage power line comes into it that can share power from all the way down to Louisiana and all the way up to Canada, it's going to lower your costs. It's going to lower your need to build new generation. Which is all, again, as we discussed, very pro-consumer, very good thing from a social point of view, but very bad if your financial viability relies on investing a bunch of money in infrastructure. So do you have any sort of thoughts about whether that might be unique, the sort of interconnecting of regions, uniquely difficult, or what do you anticipate in that piece?

Lauren Azar

There will certainly be some stakeholders that will want to slow-roll that. What I can say is I do know that some of the southern regulators recognize that their development of solar in MISO South will be nicely balanced by the wind in MISO North. And so having that kind of enlarged interconnection between the two regions is going to allow for the balancing of those renewable resources. So there's, I think, a growing appreciation for the need for that.

David Roberts

Looking a little bit beyond even that, beyond MISO, one of the longstanding critiques of transmission is now the way the utility sector has changed, the way the electricity sector, the way electricity technology has changed, we need to be thinking about this on the broadest possible scale. Like, there's constantly calls for a national grid for these regions to be interconnected, one to another, for the US's three big separate grids to be interconnected. So is there anything in this process that could accommodate lines not just within MISO, but connecting MISO to adjacent regions? It seems like if you do that, you get a) even more social and economic benefits, but b) you drag even more of these stakeholders with perverse interest to the table. So is that part of this process at all, or is there such a process?

Lauren Azar

It is not part of the LRTP process, but MISO has been working with SPP on doing just that.

David Roberts

SPP is the southern Power?

Lauren Azar

I think it's the Southwest Power Pool.

David Roberts

There you go, another RTO, another regional transmission.

Lauren Azar

Exactly. It's directly to the west of MISO. And so they, for the first time, and I believe this started last year, started doing serious interregional transmission planning based on their interconnection queue delays. So the line between SPP and MISO, the seam there, goes right through some of the strongest and best wind resources in the United States. And so a lot of queue projects are being held up by delays between the processes of SPP and MISO, and they are working hard to resolve those.

David Roberts

So they're working ... there's some sort of inter-RTO process, or at least discussions underway?

Lauren Azar

A plan actually has already come out. So, yeah, I'd have to go back and look at the map. But there is a plan of lines. They are developing a cost allocation right now for those lines, and the two RTOs have agreed to do that joint planning process, at least at a minimum every two years. So this is a fantastic development.

David Roberts

Yeah, that's really cool. Are they out ahead of the other RTOs in the country? Is that happening anywhere else? Is anybody else? It seems, like, whenever I look into transmission processes, and thinking, and long-term planning, MISO keeps sort of popping up as, like, the leader, the exemplar, in the US. Why is that? Why is MISO so much better at this than the other RTOs? Is there a simple explanation?

Lauren Azar

I do not know the answer to that question. What I can say is other RTOs do have strengths that MISO doesn't have, but MISO is, with regards to transmission planning and cost allocation, is one of the leaders nationally. I wouldn't be surprised at the fact that we do have some of the best renewable resources. So in other words.

David Roberts

Tons of wind.

Lauren Azar

Right. Our industry is changing so dramatically in MISO that they have to be on the forefront.

David Roberts

Right. So I want to wrap up with two questions. One is just from the sort of baseline US transmission perspective. This is somewhat miraculous. It's amazing, since more transmission announced at once than ever before, and it looks like it's actually going to happen. So obviously the process was successful in some terms. But I just wonder, looking back on it now, or, I guess, you're still in the middle of it. I assume you're going to be involved in these subsequent tranches as well?

Lauren Azar

I expect to be, yes.

David Roberts

I'm wondering if you have any thoughts on how the process could be improved, whether there are sort of particular roadblocks or tangles that you think could be improved, when they come back and do this again in 2030, or whatever.

Lauren Azar

Well, first of all, let me just stop right there. One of the improvements is this needs to happen every few years. So the fact that the MVPs were originally approved in 2011, and the next tranche was not really approved until 2022, that by itself is a problem. David, I didn't expect this question, so I would have loved to think about it in advance. There are other things that I think could be improved. The "Futures", I know you identified them. The "Future 3" is being pretty aggressive. We think it could even be more aggressive than it currently is, just given how quickly the changes are happening in the US.

There were also, and this gets really geeky, with regards to Tranche 1, there I think could be some improvements made, as far as where MISO cited some of the renewable resources in the process. That's off the top of my head.

David Roberts

And what about, this is a related question, but what could other RTOs take away from this? And as far as you're aware, are the other RTOs and ISOs watching this, interested, inquiring about it, trying to learn from it? Like is there, is there any reason to expect that MISO having sort of had this notable success, or notable progress, is going to inspire change in other regions, or are they all just sort of so bespoke they all do their own thing?

Lauren Azar

Most importantly, FERC, the Federal Energy Regulatory Commission, is essentially going to be requiring RTOs, and ISOs, and other planning areas to do this kind of strategic foresight. So they issued a Notice of Proposed Rulemaking, and that will probably be finalized I think by the end of this year. But it requires scenario planning. It requires planning 20 years out. It requires using specific benefit metrics. Actually, it gives discretion on the benefit metrics at this point. They're requesting comments on that. But the good news is MISO successes have led to the federal government recognizing that this works and is going to require it of everybody.

David Roberts

And this just being regional transmission planning, which you'd think like of course it works. Of course it doesn't work if you don't do it, more to the point.

Lauren Azar

Ironically, regional transmission planning was already required by FERC, but some areas weren't doing it using scenarios, some areas weren't doing it using a 20-year planning horizon.

David Roberts

Right.

Lauren Azar

So FERC is getting a lot more specific in what's required.

David Roberts

Right. And just as a very final thing, is there any change on the way from FERC, or anything in the infrastructure bill, or anything in this new reconciliation bill? Because there are transmission reforms, I know, being talked about all the time, being talked about at FERC, and there's, I think, some transmission reforms in the infrastructure bill and some money in the infrastructure bill. Is any of that sort of legislative and regulatory activity at the national level going to affect what you do at MISO in any particular way?

Lauren Azar

There are certainly components of it that will improve, for instance, potentially development of some of the projects that are being identified between SPP and MISO. My frustration with where we are from a regulatory framework perspective is it just continues to be a patchwork, and we just continue to put new patches on it.

David Roberts

Sounds like us.

Lauren Azar

Yeah. We have a national problem, and it needs a national solution. And we aren't getting it with these one-offs.

David Roberts

Yeah. So what is that? Let's conclude with that then, because this is ... like anybody who sort of studies transmission, or just the logic of the grid, you're led inevitably to the need for planning at the highest possible level, right? Because there are all these sort of synergies and interactive effects, especially now with renewables. They're concentrated some places, and loads are concentrated other places in the country. So the need for national planning is quite obvious, I think, just from the logic of how the grid works. But as you say, all these states involved, and regulatory commissions involved, and FERCs involved, and it's a soup of bits and pieces.

What would a solution to that look like in your mind? This is a huge question to end on, but I mean, are we talking about a bill in Congress? Something like that? Or like taking some authority away from states and putting it at the national level, or sort of like? I mean, this is obviously well beyond your remit, but I'm curious to your thoughts. It's just sort of like what would a kind of, if we just wanted to cut this Gordian knot, what would a national solution look like?

Lauren Azar

Well, first of all, it will take congressional action.

David Roberts

Right.

Lauren Azar

There's no question. And one of the difficulties, unless Congress is willing to put a lot of money into the solution as well, I think what you're going to have to look at is the economic development implications for each state. So as the state commissioner, you're always wanting to ensure that you have sufficient electricity to serve your customers, and at a lower cost so that you can attract potentially new businesses into your state. So unless the United States wants to put a lot of money into the national solution, I do believe that the states are going to need to be at the table as well.

So it is going to need to be a collaborative process. But I agree. I think, if not a national plan, at least we need interconnection-wide plans. That is going to be the cheapest way, overall, to enable the transformation that we're already experiencing.

David Roberts

Yeah, it's real difficult to look at current political situation and imagine that happening, but who knows?

Lauren Azar

And I think that's why we end up with one-off new patches coming in because that's all we can get.

David Roberts

Yeah, well, maybe, as is the case in renewable energy, it's just sort of the brute force of renewables becoming facts on the ground, becoming cheap and built, kind of forces change. Maybe just getting a bunch of transmission built will, in itself, loosen things up and create a virtuous cycle. We can always hope.

Lauren Azar

Hopefully.

David Roberts

Well, thank you so much for coming on and explaining this. This is super interesting. I had no idea this was going on. So it was like a little gift in the middle of otherwise difficult political times.

Lauren Azar

Wonderful. Thank you so much, David.

David Roberts

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