In September, after months of negotiations and to much fanfare, a bipartisan group of senators introduced a major package of energy reforms. The Bipartisan American Affordability and Jobs Act (BAAJA) has been enthusiastically championed by luminaries of the “Abundance” movement, since parts of the bill would ease regulatory bottlenecks that hinder new energy projects. Economic populists on the left have not embraced the bill in the same way, though they should. BAAJA would take meaningful steps to prevent unpopular corporate interests—namely, utility companies—from hindering the transition to cheaper, cleaner energy sources.
America’s flimsy electrical grid is the top constraint on clean energy expansion. To avoid overwhelming the strained system, developers must complete complex grid-impact assessments for projects they propose. This study process takes three to five years on average and has created a backlog of over 8,000 proposed projects—most of them renewable—waiting to connect to the grid. Even after years of waiting, developers often discover their projects require expensive upgrades to the wider grid, not just a simple connecting line. Faced with exorbitant costs, many abandon their projects altogether.
America needs a massive expansion of its electrical grid—particularly long-distance transmission lines connecting remote clean generation sites to population centers. But utilities are averse to building these kinds of lines. They earn more reliable returns on smaller, piecemeal upgrades within their own service areas, while larger transmission projects require costly coordination with neighboring utilities. Long-distance lines also threaten the profits of utilities that own power plants by exposing them to competition from cheaper electricity elsewhere. Consumers ultimately pay the price through wasteful utility spending on upgrades that do little to strengthen the grid, and high electricity bills that competition would help bring down.
BAAJA would jumpstart the long-distance transmission buildout in a couple of ways. First, the bill makes it easier for private “merchant” transmission developers to build these lines. Today, merchant projects are rare because developers struggle to secure private financing and obtain regulatory approval from multiple jurisdictions that interstate lines cross, often amid local opposition. To ease the financing challenge, the bill allows merchant developers to recover the costs of new lines from ratepayers who stand to benefit—effectively allowing developers to usurp local utilities and do their job for them. As for permitting, the bill empowers the Federal Energy Regulatory Commission (FERC) to approve high-priority interstate transmission lines if states and municipalities don’t do so within a year.
Allowing merchant developers into the market could also spur utilities to build long-distance lines themselves. Today, utilities prefer investing in smaller projects, but “if a big new interregional line comes in and it relieves a ton of congestion and adds a bunch of reliability, the smaller projects they wanted to do are no longer justified” in the eyes of regulators, Aidan Mackenzie, an infrastructure analyst at the Institute for Progress, says. Better for utilities to cooperate on long-distance lines than have developers beat them to it. The bill further facilitates cooperation by mandating new long-distance planning processes based on nationally standardized models.
Another provision discourages utilities from pursuing wasteful local projects in the first place. Local transmission projects appeal to utilities partly because many fall outside state or federal regulators’ purview. BAAJA allows FERC, at a state’s request, to review such projects and penalize utilities for imprudent investments.
Together, these competition and oversight provisions would squeeze utilities towards investing in long-distance transmission. “Essentially, the bill would make it harder for utilities to act on their incentives,” Mackenzie said, adding that it would represent “a pretty big expansion of what federal power over utilities has been.”
To be sure, BAAJA is not a panacea for America’s inadequate grid. As Grayson Flood of Groundwork Collaborative notes, much would depend on how FERC implements and enforces key provisions, and the bill does not deliver the centralized transmission planning and financing authority Flood and other progressives have called for. Still, it is a big step forward—“necessary, but insufficient,” he told me. Preliminary modeling suggests it could shave billions from Americans’ electricity bills and promote renewable power.
But that depends on whether BAAJA’s transmission provisions survive the utility lobby. Some have argued that the very introduction of these reforms reflects a decline in the industry’s political power amidst public outrage over skyrocketing utility bills. But David Pomerantz, Executive Director of the Energy and Policy Institute, told me it would be unwise to write off a well-resourced adversary that has defeated numerous congressional and regulatory efforts to make it easier to build transmission lines in the past. “Electric utility companies will do anything they can to undermine the elements of the BAAJA that seek to encourage regional transmission planning and development that they find threatening to their monopolies,” Pomerantz said.
Industry opposition makes for good populist politics. Congressional Democrats should welcome the utility companies’ hatred, vote to pass BAAJA in the lame-duck session, and tell voters all about it.
