Halfway through his undergraduate studies in economics at the University of the Pacific, Stockton, Calif., Nathan Benedict realized that he was broke, and would need a full-time job to afford to complete his degree. It was 1998, and the Telecommunications Act of 1996 had transformed the foundations of the telecom industry, allowing just about anyone to enter and compete against large, traditional incumbents.
Benedict, then 20, landed a job with a local exchange carrier called Pac-West Telecom. The company rented telecommunications equipment, space and bandwidth to Earthlink and other providers of a new consumer technology called dial-up internet. Benedict’s boss and company founder, a man he describes as “a really clever guy,” wondered “how can we use this (telecommunications) infrastructure that we’ve built more efficiently?”
Dial-Up for Dollars
At the time, consumers were the primary users of dial-up internet services, and mostly at night. Pac-West Telecom figured out that by selling commercial phone systems to car dealerships, doctors’ offices and other “daytime” businesses, they could offer telephone and internet services to these businesses as well. It would make effective use of their network 24 hours per day, allowing them to grow their service volume, increase efficiencies and lower operating costs.
Benedict’s experience at Pac-West Telecom became the foundation for a business philosophy he has followed ever since: “How can we optimize what we’ve got and use it most effectively?”
Connecting the Present to the Future
Today, as the manager of regulatory strategy for ITC Holdings Corp, Novi, Mich., Benedict applies that philosophy to the regulatory and political challenges of transmitting electricity easily and cost-effectively among regions of the nation’s electric transmission grid.
“The country desperately needs strong interregional #transmissioninfrastructure to connect parts of the electric grid that are currently separated along arbitrary boundaries,” he explains. “A more interconnected grid would simplify and speed the delivery of abundant new supplies of renewable energy to consumers, which will help the nation reduce carbon emissions from traditional fossil-fuel burning power plants. It would also increase the operational efficiency, stability and reliability of the transmission grid.”
ITC Holdings is the nation’s largest independent electricity transmission company. It owns, operates and maintains legacy transmission systems in eight upper Midwest states.
RTO Roadblocks
Officially, the interstate transmission of electricity is regulated and managed by the Federal Energy Regulatory Commission (FERC). In practice, however, it is monitored and controlled regionally by nonprofit transmission system operators known as regional transmission organizations. Each RTO plans transmission projects in its own region, and typically has its own standards for measuring the value of a given project to the region.
“Transmission planning processes among RTOs typically fail to consider the economic benefits that interregional projects would deliver to consumers at the national level,” said Benedict. “As a result, many otherwise beneficial interregional transmission projects end up on the planning room floor."
Putting Curiosity to Work
A typical day for Benedict begins with a cup of coffee and a 25-mile commute in his Chevy Volt from his home in a historic neighborhood of Detroit to ITC’s corporate headquarters northwest of the city. His days are mostly spent in the office working on strategic transmission issues, though occasionally he travels to meetings with staffers and Commissioners from the FERC.
“I find regulatory work to be both ‘geeky’ and fascinating,” Benedict admits. “In this job, there’s always something new to wrap our heads around.”
Negotiation by the Inch
Indeed, Benedict and his regulatory colleagues have their hands (and heads) full working with the FERC and RTOs to create more interregional transmission infrastructure. He describes the process as a “game of inches.”
“We try to identify small changes around the edges that will move the ball forward while continuing to look for broader, top-down fixes,” he says. “Our ultimate goal is for the FERC and the RTOs to adopt interregional transmission infrastructure planning rules that will ensure reliable, affordable (and preferably renewable) energy for consumers while helping RTOs retain a say in local transmission planning and development decisions.”
Road to the Future
In a perfect world, interstate transmission of electricity would be funded and managed similarly to the U.S. interstate highway system; i.e. it would be regulated at the national level, enabling all forms of energy to “travel” freely from any state to any other state.
Unfortunately, says Benedict, that day is a long way off, in part because of a concept known as “stranded costs.” Any new tax implemented to fund a federal transmission network would likely eliminate utilities’ current ability to charge ratepayers for previous transmission infrastructure investments, even though the companies are required by existing regulations to operate and maintain those assets.
Instead of higher taxes, Benedict proposes that FERC adopt a set of “guardrails” or guidelines for interregional planning discussions between RTOs.
Under this new overlay, he explains, “each RTO would have the opportunity to present ideas on how best to conduct interregional planning or how best to select interregional projects using FERC’s guidelines. If their approaches were different, the RTOs would have to figure out a joint solution that would also meet FERC criteria.”
Playing the Long Game
Benedict acknowledges that interregional transmission planning processes will take time to evolve, but he is also clear on the urgency of resolving these issues.
“Every part of our national infrastructure – water, transportation, power – depends directly or indirectly on having a reliable national electric grid,” he said. “If the goal is to rebuild our national infrastructure to 21st century standards and take full advantage of our renewable energy sources, then we need to start collaborating at the local, state and national level to define policies that will allow us to create a robust, resilient interregional transmission grid. If done right, this grid will produce long-term energy and economic benefits for consumers, utilities and transmission providers alike.”
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