Volts podcast: when transmission planning actually goes well

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.


(PDF
transcript)


(Active
transcript)


Text transcript:


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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