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The U.S. Supreme Court declined to hear a case that challenged a pricing formula for long distance transmission lines. The decision leaves in place a ruling from a lower court allowing the pricing formula to stand. While flying below the radar, the issue has broad implications for the renewable energy industry.
At issue is how long distance transmission lines are paid for. The U.S. Federal Energy Regulatory Commission (FERC) – the body regulates transmission lines that cross state borders – approved a pricing formula proposed by the Midwest Independent System Operator (MISO), the electricity grid operator in the Midwest. MISO’s proposal was intended to figure out a way to cover the cost of bringing wind power from states in the Great Plains to urban centers in the Midwest, which would require the construction of high voltage transmission lines across several states. MISO proposed spreading the cost of the power lines across all utilities in its service area, with utilities picking up a share of the cost proportional to how much power they use. FERC approved the proposal.
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Michigan and Illinois sued to stop it in court, arguing that only the beneficiaries of the wind power should pay, not the entire region. MISO argued, and FERC agreed, that the entire region would in fact benefit by building access to cheaper electricity, more than offsetting the cost of the power lines. This would bring benefits to the entire region, not just the direct customers of the wind power.
The Supreme Court’s decision not to take up the case allows this pricing model to move forward. It is a win for the renewable energy industry, which is trying to figure out ways to connect wind-rich areas in remote places of the Great Plains to population centers.
By Joao Peixe of Oilprice.com
Joao is a writer for Oilprice.com