EMP S3E10: ITC's Nathan Benedict defends monopoly transmission development and the incumbent's right of first refusal

We reached out to ITC Holdings Corp. for the transmission owner's view on monopoly transmission development and the incumbent transmission owner's right of first refusal, known by the acronym ROFR, to build new interregional transmission grid projects.

The issue has come to the fore as the federal government plans to undertake a massive buildout of the U.S. transmission network, and separately as the Federal Energy Regulatory Commission has proposed, in an as-yet unfinalized rulemaking, to partially reinstate ROFR for interregional transmission projects in hopes of sparking more much-needed transmission development.

The competitive selection process is too cumbersome to rapidly move oftentimes  controversial transmission projects, says Nathan Benedict, an economist and ITC's manager of regulatory strategies. "Relaxing of the federal ROFR has made it harder to collaborate on projects. When we think about . . . what it takes to get a regional transmission plan put together, you need people to come to the table who trust one another and who are focused on the reliability of the grid and not focused on dividing out these pieces in order to subject them to competitive bidding."

But how do we ensure that electricity consumers pay the least cost for the transmission buildout without competitive solicitations? "It's as easy as regulation," he says. 

Those who advocate denying the incumbent transmission owner the right of first refusal to build new transmission projects "are essentially wanting to bid on projects because they want monopoly rights," Benedict says. "What it is is it's a regulated bidding process that just creates new incumbents."

State lawmakers have been rushing to adopt new state-level ROFR mandates, and several of those already in place have been subject to litigation in both state and federal courts. Benedict declined to speak directly to a recent Iowa Supreme Court decision rejecting that state's ROFR as "quintissentionally crony capitalism." Nevertheless, he rejected the idea that ROFR protections for incumbent transmission owners represents crony capitalism. "It's simply regulation like we've had for a hundred years," he says.

Benedict is skeptical that FERC's proposed change in the federal ROFR standard will make much of a difference. He calls FERC's proposal a "limited reinstatement," and maintains full restoration of the federal ROFR is necessary. FERC's proposal is "a move in the right direction. But clearly, it's not enough to just do that."

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