oversight

Problems in Planning and Constructing Transmission Lines Which Interconnect Utilities

Published by the Government Accountability Office on 1977-06-09.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                          DOCUMENT RESUME

02453 - [A1712703)
                                                         which
Problems in Planning and Constructing TLansuission Lines
                                                           30
Interconnect Utilities. EMD-77-21; B-1C0228. June 9, 1977.
pp. + 4 appendices (10 pp.).
Report to Ruciard L. Dunham, Chairman, Federal Power Commission;
by J. Dexter Peach (for Monte Canfield, Jr., Director, Energy
and Minerals Div.).

Issue Area: Energy: Pederal Role as a Proprietor of Energy
    Resources (1603).
Contact: Energy and Minerals Div.
Budget Function: Natural Resources, Environment, and Energy:
    Energy (305).
Congressional Relevance: House Committee on Interior and
                                                         Insular
    Affairs; Senate Committee on Interior and Insular Affairs.
Authority: Federal Power Act, sec. 202 (16 U.S.C. 791-825).
          According to Federal and independent power studies,
future reliability and adequacy of the electric power supply
depend on the timely installation of generating and transmitting
facilities to meet our future reeds. Findings/Conclusions: Data
from utilities, utility power pools, and national organizations
show that the present interconnections of utilities were
sufficient at the time of the study to meet power neees in
emergencies, but higher capacity transmission lines to
interconnect utility systems will be required to carry the
growing electric loads projected through the year 2000. Federal
studies of interconnections conducted from 1969      to 1975 for the
most part were based on costs and    benefits  for  the
interconnecting utilities; were aimed at systems in the
Southwest and concentrated on small isolated systems; and were
done without -.nvolving the affected utilities. Recoamendations!
                                                           promoting
The Federal Pcwer Commission should: take the lead in
 joint Federal-industry studies   to identify  and  evaluate new
interconnections and changes   in  existing  interconnections;
 follow up on completed studies to resolve objections which sight
 frustrate the adoption of study recommendations; work with
                                                         studies
 utilities to establish criteria for interconnectionidentify
 which will adequately consider   national  goals  and
 factors which may adversely affect proposed interconnections;
 and work with utilities to make sure that they use the criteria
 in both industry and Federal studies. (Author/SC)
Co    ~is~._.   UNITED STA TES
     -<o        GENERAL ACCOUNTING OFFICE




                Problems in Planning And
                Constructing Transmission Lines
                Which Interconnect Utilities
                Federal Power Commission

                According to Federal and independent power
                studies, future reliability and adequacy of the
                electric power supply depends on the timely
                installation of generating and transmitting
                facilities to meet our future needs.

                The Federal Power Commission should
                     --take the lead in promoting joint Fed-
                      eral-industry studies to identify and
                      evaluate new interconnections and
                      changes in existing interconnections;
                     --follow up on completed studies to re-
                       solve objections which might frustrate
                       the adoption of study recommenda-
                       tions;
                     --work with utilities to establish criteria
                       for interconnection studies, which will
                      adequately consider ral!,nal goals and
                       identify factors which may adversely
                      affect proposed interconnections; and
                     --work with utilities to make sure they
                       use the criteria in both industry and
                       Federal studies.
                EMD-77-21                                          JUNE 9, 1977
                      UNITED STATES GENERAL ACCOUNTING OFFICE
                              WASHINGTON, D.C. 20548


"NERGY AND MINERALS
      DIVISIUN




     B-180228




     The Honorable Richard L. Dunham
     Chairman, Federal Power Commission
     Dear Mr. Dunham:

          This report discusses problems in planning and constructing
     transmission lines which interconnect utilities. Our review
     was made to determine if needed interconnections were being
     identified and if they were being constructed in a timely
     manner.
          This report contains recommendations to you on page 29.
     As you know, section 236 of the Legislative Reorganization
     Act of 1970 requires the head of a Federal agency to submit a
     written statement on actions taken on our recommendations to
     the House Committee on Government Operations and the Senate
     Committee on Governmental Affairs not later than 60 days after
     the date of the report and to the House and Senate Committees
     on Appropriations with the agency's first request for appro-
     priations made more than 60 days after the date of the report.
          We are sending copies of this report to the Director,
     Office of Management and Budget, and to the Secretary of the
     Interior.

                                        Sincerely yours,,



                                       Monte Canfield, Jr.
                                 S/     Director
UNITED STATES                               PROBLEMS IN PLANNING AND
GENERAL ACCOUNTING OFFICE                   CONSTRUCTING TRANSMISSION LINES
                                            WHICH INTERCONNECT UTILITIES
                                            Federal Power Commission



             DIGEST
             According to Federal and independent studies,
             the reliability and adequacy of the nation '
             electric power supply depends on the timely
             installation of new generating and transmitting
             facilities.
            Electric utilities have increasingly interconnected
            with each other to permit the flow of electricity
            among them. Interconnections generally have
            technical and economic advantages for utilities,
            and similar benefits for regions and the Nation.

             Individual utilities may save money through
             interconnections by
                -- sharing their electric power-generating
                   capacity to cover an unexpected deficiency
                   in Cheir normal power supply,

                -- purchasing lower cost power,
                -- reducing or delaying additional generating
                   capacity, and
                --selling excess power ttat would not be
                  otherwise used.
            Even when an interconnection presents minimal or
            no economic advantage to a utility, a region or
            the Nation may benefit by
               --the ability to transfer power to shortage
                 areas dt.ring national emergencies,

               --the conservation of scarce resources,
               --the reduction of effects on the environment by
                 delaying additional generating capacity, and
               --the consideration of national defense issues.


                                                             EMD-77-21
Iur       t. Upon removal, the report   i
;over dteb should be noted hereon.
DO INTERCONNECTIONS
MEET POWER NEEDS?
Yes--data from utilities, utility power pools,
and national organizations shows that the
present interconnections of utilities were
sufficient at the time of our study to meet
power needs in emergencies.

Utilities have transferred power Lo meet
national or regional needs on a regular basis
as well as during emergencies. For example,
when the Tennessee Valley Authority's Browns
Ferry nuclear plant was shut down due to a
fire, the Authority purchased adequate replace-
ment power from utilities which interconnected
with it.
However, a report prepared for the Energy
Research and Development Administration said
that reliable and efficient production of the
growing electric loads projected through the year
2000 would require higher capacity transmission
lines to interconnect utility systems.  (See
pp. 4 and 5.)
ADEQUACY OF INTERCONNECTION
STUDIES
The Federal Power Commission, responsible for
encouraging utilities to interconnect voluntarily,
studied interconnections and issued 35 reports
 rrom 1969 to 1975. Power agencies within the
Department of the Interior have also studied
interconnections. 'See p. 6.)
Federal studies for the most part were

  ---based on costs and benefits for the
     interconnecting utilities;
 -- aimed at systems in the Southwest and
    concentrated on small isolated systems
    rather than regional systems, which could
    result in larger benefits; and

 --done without involving the affected utilities.
   (See p. 6.)




                      ii
           Need for expanded Federal
           Power Commlssion role
           recognizing rnational .criteria
           The national advantages of interconnections
           should be considered when planning lines among
           utilities. The Federal Power Commission did
           not do this when evaluating interconnections;
           instead it studied the economic benefits to
           the utilities, particularly those in the South-
           west. (Twenty-eight of the 35 studies made
           were of the Southwest.)
           Commission followup action on its studies is
           limited to maintaining status listings.  It
           does not determine why the utilities have not
           established interconnections ot further analyzed
           the proposed interconnections.

           For example, one studj examined the benefits
           of interconnection and coordination of 93
           separate electric generating systems in Kansas
           and western and southern Missouri. The study
           estimated savings of $1.92 billion between
           1980-90 to the utilities. Whether there were
           possiole national benefits in addition to those
           savir.gs was not considered in the analysis.
           The Commission's only action was to send copies
           of the study in November 1975 to the utilities
           involved. However, Commission staff we inter-
           viewed felt that it could do more to promote
           and encourage voluntary interconnection if it
           had more resources.   (See pp. 7 and 8.)
           The Ccmmission should establish national criteria
           to be used when considering needed interconnections
           because an interconnection could present no eco-
           nomic advantage (or disadvantage) to a utility,
           while providing advantages to a region or the
           Nation. These criteria should be directed at
           conservation of scarce resources, reduced trans-
           mission and generation, and reliable national
           emergency services and national defense. Each
           of these goals becomes increasingly important as
           the Nation's domestic energy supplies decrease.

           According to the utilities contacted, unless an
           interconnection shows economic benefits to one
           or more of the interconnecting parties, a utility



jIiur_9.                         iii
will not act on its own to install an inter-
connection. Consideration of national goals
should be an integral part of the interconnection
planning process. Establishing criteria to
evaluate whether those goals are met would be
a first step in making the utilities aware of
the Government's serious interest in promoting
interconnections. If the criteria, once estab-
lished, are not used by utilities in their
decisionmaking, the Commission should move to
seek legislative authority to compel their
consideration.
The Energy Research and Development Administration
is developing criteria for the study of electric
utility system expansion. This is a good first
step which would help the Commission establish
national criteria and should help it determine
the next steps in improving its performance in
this area.  (See p. 13.)
Need for joint
Interconnection studies
The Com'.liisiin and Interior independently studied
interconnections, usually without consulting the
utilities. These studies were not well received
Dy the utilities and, as a result, most recom-
mendations have not been implemented.    (See p. 14.)
The Commission should encourage joint
Government-utility studies to systematically
'1) identify and study future regional and inter-
regional interconnections and (2) follow up on
previous studies to determi. why tke utilities
nave not implemented them or further analyzed
the proposed interconnection.

These studies should recognize the various
purposes, needs, and objectives of each
organization involved, as well as national
goals. Differences among organizations will
then be identified, discussed, and] ultimately
resolved.  (See p. 28.)
Joint Federal-industry studies should determine
how all relevant factors (financial, environmental,
and institutional) affect interconnection and
consider methods to develop alternative plans for
providing the needed services. (See pp. 20 and 24.)


                     iv
            FACTCRS AFFECTING CONSTRUCTION
            OF INTERCONNECTIO'NS

            The utility industry must deal with financial,
            environmental, and institutional considerations
            which may delay or cancel proposed intercon-
            nections. These factors are complex, and some
            are outside the control of individual utilities
            and at times, the utility industry. As a result,
            individual utilities and Government agencies may
            not be able to deal with these factors in a way
            to expedite the construction of transmission
            facilities.   (See p. 19.)

            RECOMMENDATIONS TO t HE CHAIRMAN,
            FEDERAL POWEr COMMISSION

            The Chairman should

             -- take the lead in promoting, throughout the
                Nation, joint Federal-industry studies'to
                identify and evaluate new interconnections
                and changes in existing interconnections;
             -- follow up on completed interconnection studies
                to resolve objections to the studies which
                might result in adoption of study recommen-
                dations;
             -- work with utilities to establish criteria
                for carrying out interconnection studies
                which will require adequate consideration of
                national goals and timely identification of
                factors which may adversely affect the pro-
                posed interconnection; and

             -- work with the utilities to make sure the
                criteria are used; if they are not used
                voluntarily within a reasonable time after
                their release, the Commission should consider
                whether further steps should be taken to com-
                pel their consideration and seek additional
                legislation if necessary.




Tair 5hat                         V
AGENCY COMMENTS

The Department of the Interior (see app. II)
stated that our report presents a comprehensive
analysis and agrees that transmission and gen-
eration should be planned to consider the
advantages interconnections may offer for pur-
suing national or regional energy conservation
programs, reduced transmission and generation
investment, emergency service, and national
defense.
The Federal Power Commission (see app. III)
said that there is little basis presented in
GAO's report to conclude that the Commission
has not effectively carried out its responsi-
bilities in promoting interconnections and that
the current network speaks for itself.
The National Electric Reliability Council said
that the present system of interconnections is
a result of the efforts and good judgment of
highly qualified, dedicated engineers and exec-
utives who are intimately involved in these
matters.




                      vi
                       Contents

                                                    Page
DIGEST                                                   i
.CHAPTER

       1    INTRODUCTION                                 1
                Scope of review                          3
       2   ADEQUACY OF INTERCONNECTIONS TO
             MEET POWER NEEDS                            4
       3   .ADEQUACY OF INTERCONNECTION STUDIES      6
               Need for expanded consideration
                 of national criteria                6
               Need for joint interconnection
                 studies                            14
               Utility industry views of FPC
                 responsibility to promote
                 interconnections                   17
   4       FACTORS AFFECTING CONSTRUCTION OF
             INTERCONNECTIONS                       19
               Financial problems                   20
               Environmental considerations         20
               Institutional constraints            24
   5       CONCLUSIONS, RECOMMENDATIONS, AND
             AGENCY COMMENTS                        27
               Conclusions                          27
               Recommendations to the Chairman,
                 FPC                                29
               Agency comments and our evaluation   29
APPENDIX

   I       National Electric Reliability Council    31
 II        Letter dated November 29, 1976, from
             Assistant Secretary, Administration
             and Management, Department of the
             Interior                               32
III        Letter dated November 3, 1976, from
             Chairman, Federal Power Commission     37
 IV        Principal officials responsible for
             administering activities discussed
             in this report                         39
                    ABBREVIATIONS

BPA     Bonneville Power Administration

ERL'T   Electric Reliability Council of Texas

ERDl.   Energy Research and Development Administration

FPC     Federal Power Commission

kV      kilovolt

MAAC    Mid-Atlantic Area Council

MARCA   Mid-Continrent Area Reliability Coordination
        Agreement

NERC    National Electcic r!eliability Council

PJM     Pennsylvania-New Jersey-Maryland Interconnection

SEC     Security and Exchange Commission

SPP     Southwest Power Pool

TVA     Tennessee Valley Authority

WSCC    Western Systems Coordinating Council
                          CHAPTER 1
                         INTRODUCTION

     Electric uti.'ities have increasingly interconnected 1/
their systems becaus. they provide more reliable and economical
service. The Federal Power Commission (FFC) said that the
following are the three principal objectives in providing
adequate transmission facilities for the purpose of inter-
connecting utilities.

     "1.   To support immediately any * * * area suddenly
           faced with a serious and unexpected deficiency
           in its normal generating supply. The network
           must have capacity to handle, well within stable
           limits, the automatic inflow of supporting power
           from the hundreds of generators in the surrounding
           interconnected network.

     "2.   To transfer, without serious restrictions,
           capacity and energy within regions and between
           regions to mee + power shortages. Emergencies can
           arise from inr ..erable causes, such as delays in
           commercial operation of new generation, problems
           with new equipment, the Failure of major gener-
           ating units or other elements cf the system, and
           unexpected peak demands caused by weather extremes.
     "3.   To exchange power and energy on a regional and
           interr.gional scale, and to achieve important
           reductions in generating capacity investment and
           in cost of energy production."

     Other benefits of interconnected operation may include:
     --Displacement of oil and natural gas with other types of
       generating fuels which are abundant (e.g., coal).
     -- Bulk energy transfers to take advantage of energy-cost
        differentials between the areas.


1/ An interconnection is a transmission line permitting a flow
   of electricity between the facilities of two electric systems.
   when the first transmission line is built between two systems,
   every additional line becomes part of a network because all
   transmission lines--intrasystem and intersystem--have an inter-
   acting role and become a part of an overall "system."
     -- Diversity exchanges made possible by differing load
        characteristics due to seasonal patterns, time: zones,
        and weather.
     -- Sharing of operating reserve to take advantage of
        different types of generation and to maximize
        efficiency in unit commitment and scheduling.
     -- Improvement in system stability.

     Even in instances where an interconnection may not present
an economic advantage to a utility, there may be advantages to
a region or t;.. Nation, such as
     -- the ability to %ransfer power to shortage areas during
        national emergencies,

     -- the conservation of scarce resources,

     -- the reduction of environmental impact by delaying or
        reducing additional generating capacity, and
     -- national defense considerations.

     The present highly interconnected transmission network in
the United States has been developed by the electric utility
industry. Facilities have been installed so that the network
can (1) sustain a wide variety of disturbances due to forces
of nature, equipment breakdowns, a wide variety of load con-
ditions ana (2) provide a medium for mutual emergency support
to all systems.
     The development of the network by the industry has provided
economies in operation and reductions in inves"tmnts by sharing
generating capacity, exchanging peakload assistance, transferring
power to cc,.serve high-cost fuel or criticai types of fuel, and
providing a reliable and adequate bulk power supply ir the
United States through emergency assistance among systems.
     With the exception of Texas utilities 1/, most large
utilities are now interconnected across State boundaries;
however, there is a continuing rned to expand and improve power
facilities. Through the years, ih;proved transmission and gen-
eration technologies, growing loads, and system reliability
requirements further stimulated transmission line construction.



1/ See page 24 for a discussion of the reluctance of Texas
   utilities to interconnect with out-of-state utilities.

                              2
       The utilities operating independently
 utilities which form power pools             '.nd groups of
                                   plan and cnstruct transmission
 lines to interconnect utility systems
                                        and various utility
 associations' study interconnections.
 agencies are involved in planning and In addition, Federal
                                        constructing (e.g,,
 Department of the Interior), and promoting
 (e.g., FPC) voluntary interconnections.     and encouraging

 SCOPE OF REVIEW
      Our objectives were to determine how
                                            FPC was carrying
 out its responsibility to promote and
                                        encourage
 interconnections, if needed interconnections     voluntary
 tified and studied, what problems utilities   were  being iden-
 interconnections, and what the Federal       had in  constructing
 should be.                              interconnection  role

      Our review was made primarily at (1)
                                             FPC's headquarters
 office in Washington, D.C., and its
                                      regional
 Fort Worth, Texas; San Francisco, California; offices in
 New York; (2) the Department of the              and New York,
                                      Interior in Washington
 D.C.; (3) the Bureau of Reclamation's
                                        Lower and Upper Missouri,
 Upper Colorado, and mid-Pacific regional
ville tower Administration (BPA) in         offices; (4) Bonne-
 '5) National Electric Reliability    Portland,   Oregon;
New Jersey; (6) four NERC rE ional Council   (NERC)   in Princeton,
                                     ccuncils--Southwest Power
Pool (SPP), Electric Reliability Council
Western Systems Coordinating Council       of Texas (ERCOT),
                                       (WSCC), and Mid-Atlantic
Area Council (MAAC); and (7) numerous
                                        public (non-Federal)
and investor-owned utilities. We examined
documents, records, reports, and files        the pertinent
                                         relating
organizations' procedures for identifying,          to the above
constructing interconnections.                planning,   and




                              3
                         CHAPTER 2

                ADEQUACY OF INTERCONNECTIONS
                    TO MEET POWER NEEDS


     In our review, which included an analysis of data from
utilities, power pools, and national organizations, we found
that prr:sent interconnections of utilities were sufficient
at the time of our study to meet power needs in emergencies.
However, Federal and independent studies of the reliability
and adequacy of the national power supply indicate that future
reliability and adequacy of the electric bulk power supply
depends on the timely installation of new generation and
transmission facilities to meet our future needs.
     Also, several studies indicate that additional inter-
connections are economic but suggest further evaluation is
needed. Unfortunately, there is little or no consensus on
the validity of these studies. This matter is discussed in
chapter 3.
     We noted instances where utilities have transferred
power to meet needs on a regular basis as well as during
emergencies. For example, the Tennessee Valley Authority (TVA)
power load requirements are higher in winter than in other
seasons. According to TVA the seasonal variation in load
requirements is largely compensated through its interchange
agreement with other electric utilities. TVA receives power
from utilities primarily in the winter and provides power to
them primarily in the summer. Interchange agreements accounted
for about 8 percent of total kilowatt-hours of power passing
through TVA's system in fiscal year 1974.
     The 1973 oil embargo necessitated the transfer of energy
to the Middle Atlantic and New England States. A National
Association of Regulatory Utility Commissions report 1/ said
that from December 1973 to May 1974, 800,000 megawatt hours 2/
of energy had been transferred into this area. Also, when
TVA's Browns Ferry nuclear plant was shut down due to a fire,
TVA was able to purchase adequate energy from utilties with
which it interconnected.



1/ 1974 Report of the Committee on Electric and Nuclear Energy.

2/ One megawatt equals one million watts.


                              4
     The advantages of interconnections are recognized by the
utility industry and additional interconnections are being
constructed.  In addition, an increasing need exists to
strengthen the existing transmission network and construct
higher capacity transmission lines. A National Electric
Reliability Council 1/ report made in July 1975, stated that
the future reliability and adequacy of the electric bulk power
supply depends on the timely installation of new generation
and transmission facilities to meet the projected electric
loads and provide sufficient reserves for emergencies. NERC
believes that, in view of recent delays and cancellations of
planned facilities experienced by the power industry, the
Nation's transmission system needs to be strengthened.
     The report points out that
     "* * * interconnections cannot replace a long-term
     deficiency in installed generating capacity or * * *
     fuel supply * * *. However, r-,rrection of any existing
     weakness in the transmission   twork will increase the
     operating flexibility and provide additional support
     when forced outages [shutdown of a generating plant
     for emergency reasons] cause shortages of generating
     capacity."

NERC in the report recommended that "* * * electric systems
should continue to investigate all possible options for
augmenting generating capability, and ways in which emergency
transfer capabilities can be increased * * *."
     A report prepared for the Energy Research and Development
Administration (ERDA) said that much higher capacity trans-
mission and distribution lines must be constructed to reliably
and efficiently serve the growing electric loads projected
through 2000.




1/ NERC is an organization formed by nine regional councils
   representing the Nation's utilities to augment the reliability
   and adequacy of bulk power supply in the electric utility
   systems of North America. NERC consists of nine regional
   reliability councils (see app. I) whose memberships comprise
   essentially all of the electric power systems in the United
   States and some Canadian systems.


                              5
                          CHAPTER 3
             ADEQUACY OF INTERCONNECTION STUDIES

     The Federal Power Commission has legislative responsibility
to promote and encourage interconnections on a voluntary basis.
In carrying out this responsibility, it studied and issued
35 interconnection reports from 1969 to 1975. However, these
studies for the most part were

     -- based on costs and benefits accruing to the inter-
        connecting utilities without consideration of any
        national criteria,
     -- aimed at systems in the Southwest and concentrated on
        small isolated systems Lather than regional areas which
        could result in larger benefits, and

     -- made without involving the affected utilities, and
        their results were not always accepted by them; also,
        a followup cn completed studies by FPC to encourage
        their acceptance was lacking.
     Power agencies within the Department of the Interior and
utilities have also performed interconnection studies, but
their studies do not consider national criteria unless it
benefits thf participants. Interior, in two of its three
interconnection studies, considered solme national goals; but
the studies basically reflected the advantages to the utilities.

     The national advantages of interconnections--power transfers
during emergencies, conserving scarce resources, reduction of
environmental impact by delaying or reducinc additional generating
capacity, national defense--should be considered when planning
lines between utilities. The National Electric Reliability
Council and the Energy Research and Development Administration
have emphasized the national importance of interconnections
and their concern over the adequacy of interconnections in the
future.

NEED FOR EXPANDED CONSIDERATION
OL NATIONAL CRITERIA
     FPC is the only agency with responsibility to promote and
encourage voluntary interconnections. However, FPC has not
(1) established national criteria for evaluating interconnections,
(2) developed procedures calling for its regional offices to




                              6
review interconnections, (3) been involved in other studies
performed by Interior and utilities, and (4) followed up on
its own studies to determine why the utilities have not imple-
mented them or further analyzed the proposed interconnection.
     According to FPC, section 202 of the Federal Power Act
(16 U.S.C. 791-825) directs FPC to :
     "* * * promote and encourage the voluntary inter-
     connection and coordination of electric utility
     facilities for the purpose of assuring an abundant
     supply of electric energy throughout the nation
     with the greatest possible economy and with regard
     to the proper utilization and conservation of
     natural resources."
Under the act FPC can order interconnections only during
emergencies or when a utility or State commission requests an
interconnection with another utility (but only after FPC
determines the interconnection is necessary or appropriate
for the public interest).

FPC studies

     Through a preliminary analysis, FPC determines if the
cost of power differs substantially between two or more
utility systems or if other circumstances indicate the pos-
sibility of savings through interconnected operations. This
analysis is to estimate the monetary benefits of interconnected
and coordinated operations.  If the preliminary analysis shows
a benefit of an interconnection, FPC will do a detailed study
independently to determine if the interconnection is cost
beneficial. Also, according to FPC staff, it performs inter-
connection studies at the request of Members of Congress and
utilities.
     However, FPC has not established guidelines for its
regional offices to systematically identify and study inter-
conneclions nor has it established national criteria for
evaluating interconnections. As a result FPC's efforts to
promote and encourage voluntary interconnections have been
limited geographically and have only encouraged the involved
utilities to interconnect when the corporate cost benefit
ratio is favorable.

     Our review of 28 of 35 FPC studies made between 1969 and
1975 showed that FPC did not consider national criteria or
benefits. FPC interconnection studies were concerned with
the benefits to the utilities and not the Nation.



                              7
     FPC interconnection studies primarily focus on small
isolated systems.  During the period lq69-75 only two FPC
studies involved more than two utilities.  The 28 studies we
reviewed involved small isolated systems in the Southlwest.
Followup action by FPC on its studies is limited to maintaining
status listings on a routine basis and not determining why the
utilities have not implemented the studies or further analyzed
the proposed interconnection.  The FPC staff, in commenting
on their role to promote and encourage voluntary intercon-
nections, said that they could do more in meeting FPC's
responsibility if given more resources.

     For example, FPC issued a report in November 1975 on the
benefits of interconnecting and coordinating the operations of
93 separate electric utility generation systems operating in
Kansas and western and scuthern Missouri.   These systems
included 3 generation and transmissic'n cooperatives, 54 inter-
connected municipal generating systems, 28 isolated municipal
systems, and 8 investor-owned electric utility systems.

     The study estimated savings to the utilities of $1.92
billion between 1980 and 1990 from full interconnection and
coordination of these 93 systems without considering possible
national benefits.

     To realize these potential savings the utilities must

     -- establish a pooling agreement which allows the most
        efficient operation of the participating utilities'
        combined resources,

     -- establish a central control over all operating systems,

     -- obtain financing authority from the State legislatures
        in Kansas and Missouri to permit municipalities to
        participate in jointly planned and constructed facil-
        ities, and

     -- perform studies to determine transmission facilities
        required for full coordination.

     FPC believes it will be difficult to get the smaller
municipal systems to participate in a coordinated area-wide
system, because municipal systems in that area have traditionall
wanted to maintain total control over their systems.  The only
action FPC took was to send copies of the November 1975 study
to the utilities involved; no followup action has been taken
by FPC since then.  However, FPC says it is monitoring these
systems.



                              8
Department of the Interior's activities
     Since 1968, two of Interior's power agencies--Bureau of
Reclamation and Bonneville Power Administration--have performed
three interconnection studies. Only two of these studies con-
sidered some national goals--oil conservation and diversity in
customer demand between power systems--but even these consid-
erations were in terms of the economic advantages to the
utilities. National benefits were considered incidental.
      For example, a steering committee in Interior published a
study in 1968, "Transmission 190," which found that electricity
supply and demand data indicate that seasonal variations in
demand and related supply requirements by 1980 will permit
diversity exchanges 1/ between the Pacific Northwest and the
central United States.   This conclusion was recognized in the
FPC National Power Survey of 1964. The study investigated
12 different plans for making the interconnections, each of
which showed positive benefit-to-cost ratios ranging from 1.3:1
loo 1.9:1. The study stated that the proposed extra-high-voltage
transmission interconnections would enable the interconnected
utilities to look beyond their area boundaries for economical
sources of energy.   In addition, these utilities could share
in the output of larger and more economical generating units.
     The steering committee recommended that a program of
inter-regional planning and construction be initiated--by
Federal and non-Fedezal utilities--to provide the power system
benefits identified in the report. The report related the
benefits to the utilities by showing that interconnections
would enable them to look beyond their area for economical
energy sources and did not discuss the advantages to the
Nation from the interconnection.
     On December 16, 1975, the Secretary of the Interior
received authorization, through Public Law 94-156, to engage in
feasibility studies of 12 potential water resource developments.
Included was the authority to study the power interconnections
for the purpose of improving electric power transmission systems
affecting the 17 Western States.




1/ Diversity exchanges can be used when one regional area's
   high use period occurs at a different time from another.
   Thus, the two regions exchange power so that each can
   import electricity during high use periods and export it
   during low use periods.


                              9
     Interior's interconnection studies would (1) include
consideration of potential power interconnections which would
assist Federal, public, and investor-owned power suppliers to
serve their customer's load requirements at a lower cost and
(2) result in conservation of resources. An Interior official
said that Interior has not requested funds for the study in
their fiscal year 1977 budget.
Utilities' studies

     Utility officials said that identification of potential
interconnections by individual utilities is generally initiated
by a utility which projects a deficit or surplus of capacity
or energy. The utility will try to identify and evaluate
potential generation facilities and/or interconnections which
could be used to eliminate the deficit or transfer the surplus.

     Utilities we contacted said that each potential inter-
connection is unique; therefore, each Ā°valuation of an inter-
connection must be molded to reflect the specific characteristics
of that interconnection, such as size and type of generation,
amount of capacity and energy to be transferred, and distance
between the utilities to be interconnected.
     Utilities view interconnections as an advantageous method
of meeting their capacity and energy requirements as long as
the surpluses available from another system are dependable or
a diversity between their systems can be utilized.
     When evaluating interconnections, utilities consider the
advantages to their systems; national and inter-regional needs
and objectives do not concern them.
     Some utility groups--known as power pools--have coordinated
the planning and/or operation of their generation and trans-
mission facilities. This allows the members of the pool to
achieve greater economy and reliability. As of 1970 there
were 22 formal power pools nationally which had 60 percent of
the Nation's generating capacity.
     One prerequisite to the achievement of coordinated opera-
tions is adequate transmission interconnections between the
member utilities. The following explanation tells how one of
these power pools identifies and evaluates potential inter-
connections.




                             10
     The Pennsylvania-New Jersey-Maryland
     Interconnection (PJM)
     PJM is a voluntarily organized power pool responsible for
the coordinated operation of the electric generation and trans-
mission of bulk power for 11 investor-owned utilities. PJM
operates a single system with central operational control over
its members' generating and transmission facilities. This
practice allows power to be freely transferred among members
over interconnections so that electricity can be delivered to
the ultimate customers as efficiently as possible.  PJM is
heavily interconnected--internally and externally--with 54
interties among system members and 25 with utilities not in
the pool.
     PJM uses two methods for identification and evaluation of
potential interconnections. First, member companies develop
plans for interconnections needed to meet their own system's
requirements. Second, the Planning and Engineering Committee
of PjM periodically conducts long-range planning studies to
identify the overall needs of the pool without regard to
ownership of facilities.

     The Committee is responsible for coortinating the plans
developed by member companies. The companies' planning is not
superceded by the Committee; however, plans are reviewed for
their effects on the reliability of the PJM system. This
central review of proposed facilities is to make sure that
the transmission facilities, including interconnections which
are constructed, serve the best interests of the entire
system.
     The Committee's periodic studies provide general guide-
lines as to the preferred types, sizes, timing sequence, and
general location of future generation and bulk transmission
capacity needed by PJM. These overview studies have played an
important part in PJM's development because they identify the
need for facilities, including interconnections on a systemized
basis rather than on the needs of individual utilities. How-
ever, according to PJM officials the final decision of what
facilities are to be constructed remains with individual
members.

     Specifically, PJM considers the following as the benefits
it derives from an integrated operation:
     -- Improved network reliability.

     -- Greater operating efficiency.



                              il
     -- Economies uf scale.
     --Better scheduling of additions.

     -- Flexibility in maintenance programs.

     -- Inhipro- a use of manpower and money.

     -- Lower cost to the customer.
NERC studies

     NERC was formed voluntarily by the electric utiliti industry
in 1968. Its membership includes Government, investor-owned,
and public utilities in the United States as well as Canadian
utilities interconnected with systems in the United States.
NERC is managed by a Board of Trustees, which includes repre-
sentatives from each of nine regional councils and all segments
of the electrical industry. Although not a member, FPC attends
NERC meetings as an official observer.
     NERC's purpose is to augment the reliability and adequacy
of bulk power supply in the electric utility systems of North
America, rather than to consider economic factors. To achieve
this coal, NERC proposes to

     "*   *   *   --encourage and assist the development of
                    inter-regional reliability arrangements
                    among Regional Orga izations or their
                    members;
                  -- exchange information with respect to
                     planning and operating matters relating
                     to the reliability and adequacy of bulk
                     power supply;
                  -- review periodically regional and inter-
                     regional activities on reliability and
                     adequacy;
                  -- provide independent reviews of inter-
                     regional matters referred to it by a Regional
                     Organization; and
                  -- provide information, where appropriate, to
                     the Federal Power Commission and to other
                     Federal agencies with respect to matters
                     considered by the Council."




                                   12
     NERC evaluates w,.ther existing and planned transmission
facilities are adequate to provide reliable service and to sup-
port generation-deficient areas during Pnergenr.ies. According
to NERC many lines are built because they are essential ior
maintaining the integrity of the netswork, and if this were not
so, the existing network would not have its present reliability
and flexibility.

     NERC established a permanent subcommittee (Inter-regional
Subcommittee) in 1970 to continuously review the overall
adequacy and reliability of the Nation's bulk power system.
NERC feels the coordination efforts by the regional reliability
councils has assured that the expans'on of the network is always
such that new facilities are compatible and the network can
remain reliable. However, NERC does not consider national goals
and objectives in its evaluations.

Efforts to develop
national riteria

     As previously stated in chapter 1, even in instances where
an interconnection presents no economic advantages to a utility,
there may be advantages to a region or the Nation   The only
agency presently developing national criteria is ERDA.

     ERDA contracted three companies in 1975 to develop criteria
for the study of electric utility system expansion. Part of the
study is expected to be complete,' by mid-1977. This process,
which we believe has considerable value, is viewed by ERDA as
an initial step in identifying all factors (quantitative and
qualitative) which shoui be taken -. to account in identifying
and evaluating potential inteLconnections.

    One of the ERDA contracts requires the contractor to:
    "Identify parameters which are necessary and sufficient
    for conduct of studies of national issues relating to
    bulk power supply expansion, including, but not limited
    to parameters in the following areas:

    a.   National Resource objective and resource policy
    b.   Load growth characteristics
    c.   Economic trends or forces
    d.   Supply criteria and objectives
    e.   Fuel availability and costs
    f.   Regulatory policy, national and state
    g.   Electrical (system data)
    h.   Technological factors (new equipment or process
         options)"



                             13
NEED FOR JOINT
INTERCONNECTION STUDIES

     FPC and Interior have performed many of their intercon-
nection studies independently from the affected utilities.
All 28 FPC studies and 2 of the 3 Interior st_'dies, included
in our review, were done independent of utility input according
to the utilities we talked to. These studies were not well
received by the utilities. As a result, 14 FPC studies and
both Interior studies have not been implemented.    In our
review we noted that four studies were performed involving
inter-regional interconnections (two FPC and two Interior),
none of which have had their recommendations implemented. The
following two cases are examples of such inter-regional studies
where joint irnvlvement could have increased the opportunities
for the acceptance of the study.
FPC study

     FPC published a staff report on a proposed interconnection
between the Electric Reliability Council of Texas and Southwest
Power Pool 1/ in October 1972 2/.  Electric utility systems
within ERCOT are isolated from-systems outside Texas.   (See
app. I.) The report concluded that interconnected and coordin-
ated operation would result in a capacity savings of 2,080
megawatts between 1975 and 1980. This capacity reduction would
represent a savings of $193 million during the 5-year period.
The savings would result because of shared generating capacity
between the two reliability councils and would not reduce the
level of system reliability existing under isol.ted operation.
     FPC proposed three high-voltage interconnections to connect
the two areas. They would provide an estimated inter-regional
power transfer capability o2 about 2,200-megavolt amperes be-
tween ERCOT and SPP, and were estimated to have a cost of $37
million, over the study period, resulting in an overall net
savings of $156 million.
     Although ERCOT operates a number of interconnections with
the Commision Federal de Electricidad, in the Republic of
Mexico, no normally used interconnections connect ERCOT to


1/ ERCOT and SPP are two of the nine NERC regional councils.

2/ FPC ordered its staff to update and amend as necessary its
   1972 study as a result of a petition and application filed
   with it by the four corporation utilities (Docket No. E-9558,
   issued July 21, 1976).

                             14
other councils in the United States.  Eeveral executives of
the ERCOT utilities said that interconnection with SPP would
be a costly project which would produce few tangible economic
benefits.
     Many of the ERCOT members we interviewed did not address
themselves directly to the methods or conclusions of the FPC
study, bilt expressed the opinion that reserves could not be
reduced below present levels without adverse effects on system
reliability. They aloo questioned the significance of FPC's
findings on reserve savings in light of the fact that utilities
in Texas give first priority to construction of coal-fired
and nuclear-generating capacity (not reserve capacity).   They
argue that with or without interconnections, ERCOT will prob-
ably have a large reserve margin, since existing oil and
natural gas generation will remain idle and can be used as
reserves.

      In addition to questioning the validity of the economic
benefits projected by FPC, ERCOT criticized the cost estimate
of interconnection developed by FPC. FPC concluded that only
three segments of a high-voltage transmission line would be
required to interconnect ERCOT and SPP. Several ERCOT rep-
resentati-,es said that substantial funds would have to be
spent on internal strengthening of Doth the ERCOT and SPP
transmis ion system to permit stable operation. They added
that the cn3t of this internal strengthening was not consid-
ered in FPC's !:udy and, consequently, the cosi of intercon-
necting ERCOT and SPP was considerably understated.

     A number of ERCOT executives also said that ERCOT's
pattern of isolated operation produces intangible benefits
in the areas of planning and operation. For example, ERCOT
is a group of manageable size utilities; therefore, planning
conflicts can be resolved and responses to operating con-
tingencies can be developed quickly by personal contacts
between utility personnel. They said that if ERCOT is inter-
connected to other regions, problem solving will require more
meetings, effort, and time.

     Operating solely in intrastate commerce is a qualification
fcv membership in ERCOT, and its chairman told us that ERCOT
utilities believe isolated operation best meets their goal of
providing economical, reliable electric service. Texas utility
executives expect to face a number of regulatory problems if
they interconnect interstate and are subjected to FPC juris-
diction.




                             15
      Although we did not attempt to determine the validity
of FPC's or ERCOT's contentiors, the Central and Southwest
Corporation, which has subsidiaLy utilities in ERCOT's and
SPP's regions, evaluated the benefits from interconnecting
its four subsidiaries. The study Jointe out that long-run
economic benefits of $38.7 million are available by intpr-
conrcting the Corporation's subsidiaries. The study indi-
cate,' that an additional potential savings of $227 million
is available if full, coordinated use can be made of the
transmission systems in Texas.    (A further discussion of the
Corporation's study 's contained in charter 4.)
     Although ERCOT is isolated from its neighbors, ERCOT
officials said that joint studies would have the advantages
of obtaining input from all parties and, therefore, would have
a better chance of being accepted. The participants would
identify and understand areas of disagreements--not necessarily
eliminate disagreements. Such a joint effort, which would in-
clude ERCOT, should (1.) reduce questions concerning the validity
of projected economic benefits and cost estimates and (2) result
in the study's acceptance.
Department of the Interbor's study
     The Bureau of Reclamation published an interconnection
study in March 1975 which identified a potential for cost
savings and reduction in oil and gas consumption. The inter-
connection considered was between the companies in the [4id-
Continent Area Reliability Coordination Agreement (MARCA) and
in the Western Systems Coordinating Council 1/.
     The study was based on data published by MARCA and WSCC.
The study projected that entities in the MARCA area may be
capable of generating enough excess energy during light load
periods to displace the consumption of 23.9 million barrels of
oil at an estimated cost of $245.3 million by 1983 when the line
could be operational. The $245.3 million represents about one-
sixth of the amount required to consturct the two 1,900-mile,
765 kilovolt (kV) alternating current lines. The study con-
cluded that a more comprehensive interconnection study should
be undertaken to determine how these two systems might be
interconnected to achieve these savings.




1/ MARCA and WSCC are two of the NERC regional councils. See
   appendix I for map indicating the areas covered by MARCA
   and WSCC.

                              16
     In March 1975 WSCC officials told us that they were not
aware that such a potential had been identified.   Some utility
officials believed that it would not be reliable for customers
to be supplied with electricity generated 1,900 miles away
because of the Prossibility that the lines could go out of ser-
vice and leave customers without power.   In December 1975 the
Congress authorized the Secretary of the Interior to engage
in detailed feasibility studies of power interconnection poten-
tial. These studies will include consideration of a MARCA-WSCC
interconnect ion.

     As part of FPC's role of promoting and encouraging inter-
connections, it should pa-tc-ipate in interconnection studies.
NERC believes that studies can only be conducted by those who
are intimately knowledgeable of the present facilities, the
capabilities of the facilities, the mode of operation, and the
limitations that exist. If FPC had participated jointly with
Intcrior, as well as with WSCC and MARCA utilities, all parties
would have been aware of the potential benefits. As a result
of their awareness (and joint participation), their concern
for reliability may have been reduced and could have increased
the chances of their accepting the study conclusions or in
the modification of the study to account for any valid concerns
of the utilities.
UTILITY INDUSTRY VIEWS OF FPC
  TESPONSIBILITY-TO PROMOTE iNTERCONNECTIONS
     We met wi'- executives of 48 electric utilities to discuss
FPC's responsibility to promote and encourage interconnections.
These executives presented widely diverse opinions on the need
for FPC involvement in identifying and evaluating intercon-
nections, and on the need for FPC to take a more aggressive
role in promoting interconnections through more studies. Most
felt that the transmission system generally has been meeting
the needs of the Nation.

     The NERC president recognized the advantages of a joint
Federal and utility industry effort to study potential inter-
connections. Such a joint effort should address and help solve
the problems associated with constructing interconnections.

     Some executives of a private utility favored FPC's efforts
in promoting interconnections. They viewed FPC as a catalyst
for more anlaysis of potential interconnections. An official
of the Bonne,;ille Power Administration believes that FPC could
provide the needed leadership to ensure that all beneficial
interconnections are identified and built.




                              17
     Other private utility executives believed that FPC can
nut make any contributions to the utility industry by promoting
and encouraging interconnections. Furthermore, utility exec-
utives told us that constructing additional interconnections
will nr/t by themselves solve the energy, fuel, or capacity
problem facing the utility industry.

     Most utility executives do not believe that FPC personnel
possess the detailed knowledge of individual power systems
necessary to effectively assess the specific costs and benefits
of interconnections between such systems. For example, one of
che criticisms of the FPC report which identified benefits to
interconnecting ERCOT and SPP was the argument that it failed
to recognize improvements to ERCOT's system which would be
required before interconnections could be made. Utility exec-
utives contend that only engineers with a detailed Knowledge
of a given system would recognize such requirements.
      Most of the utility executives we met with said that if
FPC continues or expands its efforts in studying and promoting
interconnectionr.s, it must be with the volunatry participation
of the utilities affected. Such cooperative efforts would
allow those individuals most familiar with the system to actu-
ally participate in the analysis. In their opinion these coop-
erative efforts could also ensure that study conclusions would
be "objective and realistic" because they would have input from
the utilities directly involved as well as the Government. Also,
because all parties concerned would have a part in performing
the studies, there would be a much higher probability that the
recommendations would be implemented than if FPC were to do
the studies independently.

     In any future efforts to work more closely with utilities
in joint studies of interconnections, FPC should make every
effort to maintain its independence and objectivity.




                            18
                            CHAPTER 4
                        FACTORS AFFECTING
              CONSTRUCTION OF INTERCONNECTIONS
      The utility industry must deal with financial,
                                                       environ-
 mental, and institutional considerations which may
                                                     result in
 delay or cancellation of proposed interconnections.
 factors are often complex and outside the control      These
                                                    of
 utilities and, in some situations, the utility industryindividual
                                                           itself.
     Delays and cancellations as a result of these factors
limit the efficiency and effectiveness                      may
                                       of the utility industries'
efforts to provide customers with the most reliable
supply of electrical power.                          and economic
                             The effect of delays and cancella-
tions of interconnections could reduce operating flexibility
and transmission capability.  Furthermore,
delays in transmission lines could make the in a number of areas,
                                             network vulnerable
to outages.

     Successful completion of many planned transmission
needed to interconnect systems is questionable           lines
                                               because
various factors. The following schedule shows some      of
                                                    of the
reasons cited by FPC 1/ for transmission line delays.

                  Line Delays as of June 1975

                                    Number of lines      Average
     Reason for delay               delayed (note a)      delay
                                                         (months)
Fiscal problems                             22            32.5
Environmental considerations                38            26.3
Institutional (prolonged pro-            32
  cedures to obtain approval                             17.4
  from Government agencies)
a/ Some lines are delayed for morn than one reason.




1/ Data is from FPC's Transmission Line Construction
                                                     Data for
   the month of June 1975.



                               19
     Obstacles to the construction of lines have already caused
many postponements.  In June 1975 FPC reported that 184 (68
percent) out of the 271 transmission lines under construction
were delayed.  These delays were the result of the previous
factors as well as others such as technological limitations
and equipment delivery and installation problems.  FPC reported
that the delays ranged from 1 month to 13 years, and averaged
15 months. These factors have also caused cancellations of
planned transmission lines.

FINANCIAL PROBLEMS

     The electric power industry is one of the most capital-
intensive industries in the United States, with financing
requirements representing about 15 to 20 percent of all U.S.
ccrporate financing.  The utility industry's ability to provide
a supply of electrical power between 1970 and 1976 had been
financially Lestricted in many cases by

     -- rapid increases in the rate of inflation, which
        caused increased construction, operating, and
        maintenance costs,

     -- reduction in the development of new technological,
        cost-saving opportunities,

     -- increased public pressure to reduce the number of
        rate increases granted, and

     -- reduced investor confidence.

     These conditions had a critical impact on many utility
companies.  According to FPC, the rapid expansion of the
utility industry's external financing requirements, combined
with rising interest rates, caused the deterioration of elec-
tric power company credit.  Sinci? 1970 the credit ratings of
secruities of approximately 70 major invpstor-owned utility
companies had been declining; however, the economy has been
improving, and credit ratings are now improving.

ENVIRONMENTAL CONSIDERATIONS

     The production and delivery cf electricity has undesirable
effects on the environment.  Some of these effects are

     --land use effect caused by transmission rights-of-way,

     -- general esthetic effects such as noise and appearance,
        and



                               20
     -- interference with other spatial uses such as
        approaches to airports and waterways.
Electric utility companies must meet various Federal, State,
and local environmental requirements that have significantly
increased the time necessary for planning and constructing
power facilities.
     Also, the location of generating plants determines the
location of transmission lines. While the plants may be en-
vironmentally acceptable, the resulting transmission lines
may have to cross land where the lines would be environmentally
unacceptable. Therefore, lines, as well as plant locations,
must be jointly evaluated. Environmental acceptability of one
does not mean the same acceptance of the other.

     Although the requirements of State and Federal agencies
vary in specific information requested, all generally require
information to evaluate the environmaental impact of the
facilities. For example, the Interior's Bureau of Land Manage-
ment requires the applicant who wishes to construct a line
across Federal lands to submit an application and conduct an
environmental impact survey from which an environmental report
is prepared. The report includes

     --a description of proposed construction and

     -- information concerning the project's impact on air
        space, air and water quality, scenic and esthetic
        features, historical and archaeological features,
        and wildlife, fish, and marine life.

     The application and above required data are reviewed, and
the district office prepares an environmental analysis report
of the proposed construction. The report assesses the impact
the proposed transmission 1line will have on the surrounding
environment and contains an environmental statement and analysis
of alternatives. During preparation of the report, the public
is informed about the proposed construction, and comments are
solicited. The completed report is sent to the Council on
Environmental Quality which distributes copies to appropriate
Federal, State, and local government bodies and sees that a
notice appears in the Federal Register.

     If a decision is made that the construction will signifi-
cantly affect the environment, then an environmental impact
statement must be prepared. A notice of the final statement
is published in the Federal Register. The statement is
supposed to include



                             21
     --a description of construction,

     --a description of environmental impacts,

     --a summary of probable adverse environmental
       effects which cannot be avoided,

     --a. description of the relationship between
       local short-term uses and maintenance of
       long-term productivity,

     --a summary of irreversible and irretrievable
       commitment of resources, and

     -- comments from the public, Federal, State,
        and local governments.

After the scatement is approved by Interior, a permit is issued.

     Utility and land agency officials state that it generally
takes about 18 months to 2 years to obtain right-of-way permits
for larger transmission lines.  If law suits are filed against
the proposed construction, the time may be even longer.

     Present attitudes on protecting the environment are strong
and legitimate.  Environmental protection is not a peripheral
aspect to constructing interconnections and, therefore, requires
attention in planning such lines.

     The following case exemplifies the many environmental
considerations that have to be recognized.

     Keeney-Salem transmission line

     In 1965, Delmarva Power & Light Company initiated plans for
a 500-kV transmission line in Delaware to coniie t with the
pennsylvania-New Jersey-Maryland Interconnection's 500-kV
transmission system.  The proposed line was designed to cross
the State of Delaware extending from the western border with
Maryland to the New Jersey State line on the eastern side of
the Delaware River.

     The Keeney-Salem interconnection has met continual concern
from environmental groups. Since 1966 the following events
have affected the proposed line:

    -- The original layout, presented in 1966, was not con-
       structed because (1) the location's proximity to an
       airport limited the height of the line, (2) the low



                             22
       height of the line did not allow ships adequate
       clearance on the Delaware River, and (3) the line
       would be too close to a historic park and a
       national cemetery.
     -- A second approach required a right-of-way paralleling
        the river. Opposition was made to this route on
        the basis that the line would be partly located
        on tidal marshland aind would traverse potential
        parkland.
     -- A third alternative route was secured. Construction
        permit applications for this route were initiated
        in late 1969. Subsequent public hearings raised
        objections from local sailing clubs that the line
        would cause additional obstacles in the river and
        would be esthetically undesirable. The utility
        company, therefore, made several studies of both
        underground and overhead alternatives. None was
        found to be feasible. A construction permit for
        the proposed site was obtained from the Corps of
        Engineers in July 1973.
     -- Planning and construction began immediately. In
        October 1973 the Corps of Engineers, acting on a
        State of Delaware Luling, ordered work to stop.
        The Delaware State Attorney General stated that the
        permit had been improperly issued because the State
        Water and Air Resources Commission failed to hold
        a public hearing. The utility company filed a
        complaint in the courts challenging the State of
        Delaware's position.
     -- The legal issues were cleared and the lermit needed
        to resume construction was given by the Corps of
        Engineers in August 1976. Construction began again
        in September 1976 and it is estimated that it will
        be 15 months from start to finish.
     This line will be part of an extension of 500-kV bulk
power system in PJM, and the two lines together are necessary
to deliver the output of nuclear generating units to the vari-
ous load centers. Delayed construction of the Keeney-Salem
transmission line has required implementation of emergency
operating procedures on several occasions to relieve critical
line loadings.




                             23
INSTITUTIONAL CONSTRAINTS
     The existence of statutes, policies, and contracts   has
                                  to constructing  transmission
caused institutional constrairts                   kept utilities
facilities. Such institutional constraints have          projects,
from considering or entering into  some  interconnection
                                                  we identified
while delaying some others. During our review,       of int-er-
the following instances affecting  the  construction
connections.

Reluctance of Texas
utilities to interconnect
     ERCOT prohibits any of its member companies from inter-
connecting with systems outside of Texas. This prevents
                                                  interstate
members from buying or selling electric energy in
commerce.
     The Central and Southwest Corporation, a public utility
                                                          and
holding company, had operating subsidiaries in both ERCOT
                                              operating area
SPP. Each subsidiary represented an economic          bound-
responsible for dispatching electric power within its
aries. These subsidiaries include:
     -- Public Service Company of Oklahoma.
     -- Southwestern Electric Power Company.

     -- Central Power and Light Company.
     --West Texas Utilities Company.
                                                            in
West Texas Utilities Company, at that time, had divisions
                                                     Subse-
each Council and had two economic operating areas.        and
quently, West Texas Utilities  Company's divisions merged
now belong to the same council  (SPP).

     in November 1975 the Corporation released an expansion
                                                          the relative
study covering a 20-year period (1975-95) examining
                                                  or operating   as an
economies of continuing the  isolated   pattern
                                                       the operating
interconnected system. The study recognized that           and abun-
pattern had been well suited  to  an  era  when  low cost
                                     were  available  locally   to
dant oil and natural gas supplies                           that   fuel
use as fuel for power generation.     It  also  recognized
                             fundamental    and  probably  irrever-
conditions are undergoing a                                      gas
sible change, and that recent emphasis on oil and natural        the
                                     baseload   generation  for
conservation indicates the future
Corporation will be coal-fired   or  nuclear.



                                24
     The expansion study indicated that additional longrun total
economic benefits of $38.7 million by 1995 were available through
interconnecting the operations of the four Corporation subsid-
iaries. However, these potential benefits to interconnected
operation could not be realized because of ERCOT's membership
requirement. The savings are primarily the result of operating
economies available when using an economic dispatch which con-
siders the consolidated electrical load of the entire inter-
connected area. The Corporation began a more detailed study
of the specific costs and benefits in January 1976.
     An additional potential savings of $227 million 1/ above
the $38.7 million discussed above is available if full, coor-
dinated use can be made of the transmission systems in Texas
to transfer power between the Corporation's operating subsid-
iaries. In t'iis situation, short-high-capacity interconnections
could be put in place between ERCOT and SPP. Preliminary
indications are that the Corporation's power transfers would
not adversely affect the load of existing and planned ERCOT
circuits. However, detailed load flow and stability studies
are still required.
Legal limitation on Bonneville Power
Administration energy transfers
     Public Law 88-552 (16 U.S.C. 823) limits BPA in trans-
ferring surplus energy from the Pacific Northwest, and therefore,
restricts utilities outside the Pacific Northwest from either
constructing additional interconnections or increasing the
capacity of the existing interconnections.
     The act requires BPA to serve the requirements of the
Pacific Northwest before marketing such power and energy out-
side the region. The act states that the export of Federal
hrdroelectric power in the Pacific Northwest is limited to
surplus energy and suirplus peaking capacity, and notes that the
Secretary of the Interior can stop delivery of the surplus energy
by giving notice, within 60 days, of any conditions that may
impair the Northwest's energy. The act also states that the
Secretary may terminate any contract of surplus peaking capacity
upon notice within 5 years.
     The 5-year provision, while protecting the Northwest,
removes opportunities for new long-term contracts for power with




1/ The study does not recognize the impact that may accrue to
   other utilities.


                            25
Southwestern utilities. Without the assurance of a long-term
contract, utilities we contacted state they would have no
guarantees to meet their energy needs and justify their invest-
ment in new interconnections.




                             26
                         CHAPTER 5

               CONCLUSIONS,   RECOMMENDATIONS,
                    AND AGENCY COMMENTS
CONCLUSIONS
     Although present interconnections appear adequate to meet
our current needs based on experience to date, Federal and
independent studies of the reliability and adequacy of the
national power supply indicate that future reliability and
adequacy of the electric bulk power supply depends on the
timely installation of new generation and transmission facil-
ities to meet our future needs. Further, several studies
indicate that additional interconnections are economic. Un-
fortunately, there is little or no concensus on the validity
of these studies.
     This conclusion stems in part from our belief that FPC
has not effectively carried out its ?xi ting responsibilities
of promoting and coordinating intercon, ction throughout the
Nation. Its recent studies have been conducted primarily in
the Southwest and have received only partial acceptance by
the utility industry. Interconnection studies have also been
independently made by utilities, the Buteau of Reclamation,
BPA, and others without FPC involvement.

     We believe that FPC should establish national criteria to
be used in considering needed interconnections because there
may be many instances where an interconnection could present
minimal or no economic advantage (or disadvantage) to a utility
but could provide advantages to a region or the Nation. These
criteria should allow consideration of such goals as energy
conservation, reduced transmission and generation, reliable
rational emergency services, and national defense.  Each of
these goals is becoming increasingly important as the Nation's
domestic energy supplies decrease.

     National resource objectives and resource policy have not
been considered by utilities as a benefit of an interconnection
Unless an interconnection shows economic benefits to one or
more of the interconnecting parties, a utility will not act on
its own to install it. He believe that consideration cf such
goals should be an integral part cĀ¢ the interconnection planning
process.

     ERDA is developing criteria for the study of electric util-
ity system expansion. ERDA sees this as an initial step, which
we believe has considerable ;alue in identifying factors which


                              27
 should be taken into account in identifying and evaluating
 potential interconnections. FPC, in establishing national
 interconnection criteria, should consider and use, where
 practical, the results of ERDA's study.
     The establishment of such criteria would be a first step
in making the utilities aware of the seriousness of the Govern-
ment's interest in promoting interconnections.  If the criteria,
once established, are not used by the utilities in their deci-
sionmaking, then FPC should move to seek legislative authority
to compel their consideration. We believe, however, it is
premature to move to such compulsory action at this time.

     A recent study prepared for the Congressional Research
Service pointed out that interconnection studies have been
performed but that additional evaluation of those studies is
needed. However, despite this need, no entity--Federal or non-
Federal--assures that such further evaluations will be made.
The only followup action that might be initiated would be if the
specific participants decide on their own to further evaluate
the interconnections.
     We believe that a need exists for FPC to promote a joint
Federal-utility effort to systematically (1) idenitfy and
study future interconnections on a regional and inter-regional
basis, and (2) follow up on previous studies to determine why
the utilities have not implemnented them or further analyzed the
proposed interconnection.

     The interconnection studies that result from these joint
planning efforts should recognize the various purposes, needs,
and objectives of each organization involved, as well as
national goals. This coordination should insure that differ--
ences among organizations will be identified and discussed,
and ultimately improve the opportunity for their resolution.
      Financial, environmental, institutional, and technological
factors are affecting the !itility industry's ability to provide
its customers with completely reliable service at the lowest
prices consistent with our Nation's social and environmental
goals. Joint Federal-industry studies should include a deter-
mination of the impact of all relevant factors and consider-
ation of methods to develop alternative plans for providing
the needed services.




                             28
RECOMMENDATIONS TO THE CHAIRMAN, FPC
     We recommend that the Chairman, FPC

     -- take the lead in promoting, throughout the Nation,
        joint Federal-industry studies to identify and
        evaluate new interconnections and changos in existing
        interconnections,
     -- follow up on completed interconnection studies to
        resolve objections to the studies which might result
        in adoption of study recommendations,
     -- work with utilities to establish criteria for carrying
        out interconnection studies which will require ad-
        equate consideration of national goals and timely
        identification of factors which may adversely
        affect the proposed interconnection, and
     --work with the utilities to make sure the criteria
       are used; if they are not used voluntarily within
       a reasonable time after their release, the Commission
       should consider whether further steps should be
       taken to compel their consideration, including
       seeking additional legislation as necessary.
AGENCY COMMENTS AND OUR EVALUATION

Department of the Interior
     Interior stated in their letter of November 29, 1976,
(see app. II), that our report presents a comprehensive anal-
ysis and agrees that transmission and generation should be
planned to consider the advantages interconnections may offer
for pursuing national or regional energy conservation programs,
reduced transmission and generation investment, emergency
service, and national defense.
     Interior pointed out that two of their studies were of
an exploratory nature and for this reason, all potential
parties wert not included. We believe, however, that any
interconnec ,on studies should be of a joint nature to
include all parties.
Federal Power Commission

     FPC said in their letter of Ncvember 3, 1976, that there
is little basis presented in oar report to conclude that FPC
has not effectively carried out its responsibilities in pro-
moting interconnections and that the current network speaks
for itself.  (See app. III.)

                             29
     According to NERC, however, it has been the initiative
of industry to interconnect and not because of FPC or any
other Government agency. We relieve the future electrical
demands will require joint studies and that national criteria
should be considered. Therefore, it is important for FPC
to follow its mandate to promote interconnections.

National Electric Reliability Council
     NERC said that the present system of interconnections is
a result of the efforts and good judgment of highly qualified,
dedicated engineers and executives who are intimately involved
in these matters. NERC said that the present system of inter-
connections is a result of the planning and development by the
electric utility industry.
     We agree that the present system should be attributed to
the electric utility industry; however, we believe that the
future electrical demands will require joint studies and that
national criteria should be considered. Therefore, it Is
important that industry and the Government work together to
achieve this.




                             30
APPENDIX I                                                                                              APPENDIX I




                                                                                     A                              I




                   ElctcReiaiyMdCotent    A1.rea




              Agreemen
               t                                   M   I...-v     Ni'    d,                              C
             ERCOT
                Elric    Teliaby                   MARCA    Reliability Coordintoi       SPP Southwest Power Pool
                                                            CoTAgreement

               MMAAtlw~C ArCC
                     NATILMAAC           E]NPCTC CoNortheast
                                                          Powr             Western Systems
                                                 RELIABILCotiInTYcoulCoorinnLting       CouncIL




                                                       31
APPENDIX IT                                                                 APPENDIX II


                      United States Department of the Interior
                                     OFFICE OF THE SECRETARY
                                      WASHINGTON, D.C. 20240


                                                                 NOV 20 1976

                Mr. Monte Canfield, Jr.
                Director, Energy and Minerals Division
                General Accounting Office
                Washington, D.C. 20548

                Dear Mr. Canfield:

                We have reviewed your proposed report to the Congress entitled "Problems
                in Planning and Constructing Transmission Lines Which Interconnect Utili-.
                ties" forwarded with your letter of October 4, 1976. While the report
                makes no recommendations to the Department, we offer the following comments
                in the hope that they will be useful in clarifying certain sections of the
                report.

                                          General Comments

                The subject draft report presents a comprehensive analysis of a highly
                complex subject. The GAO should be commended for the scope of its efforts
                and its presentation of a very difficult subject.

                The main impact of the report suggests that the Federal Power Commission
                (FPC) establish and ensure the use of national criteria in future inter-
                connection studies. The point is well taken. We feel transmission and
                generation should be planned to consider the advantages interconnections
                may offer for pursuing national or regional energy conservation programs,
                reduced transmission and generation investment, emergency service, and
                national defense.

                The Department of the Interior should be actively involved in any inter-
                connection planning since often regional interties require an inter-
                connection with one or more of the five power marketing agencies of the
                Department.

                The report is somewhat critical of past actions of the Department. The
                Bureau of Reclamation's authority for involvement in transmission inter-
                ties is limited. Until the signing of Public Law 94-156 on DecembhL 16,
                1975, the authority granted to the Secretary of the Interior, by the
                Reclamation Act of 1939 and the Flood Control Act of 1944, to be involved
                in power transmission was related to the marketing of surplus power from
                Federal hydroprojects. Acting within that authority, Reclamatioy/hHas con-
                ducted or participated in several joint studies of interties.




    z96 -191b




                                                32
APPENDIX II                                                         APPENDIX II

     The draft report makes no mention of studies that led to the eventual
     construction of interconnection transmission interties. Both the Burea,:
     and the Bonneville Power Administration (BPA) have coordinated some
     interconnection studies with customers and other affected utilities.
     For example, the 3,900 MW capacity Pacific Northwest-Pacific Southwest
     intertie was constructed following a series of studies conducted jointly
     by Interior agencies and the utilities during the early 1960's. Further-
     more, current studies are in progress, conducted by the same organizations,
     which consider increasing the capacity of the intertie lines by 4,400 MW.

     While the report criticizes Reclamation for conducting studies without
     involving all potential interested parties, what seems to have been over-
     looked is the necessity to make a preliminary analysis of possibilities
     before in-depth studies can be formulated. The studies cited by GAO
     have all been reconnaissance-level studies attempting to determine whether
     further in-depth analysis is justified. Both the "Transmission Study 190"
     and the March 1975 "Intertie Appraisal Study," referred to in the report,
     were of an exploratory nature, as evidenced by the fact that the primary
     recommendation in the report of each of those studies is for further
     study.

                             Specific Comments

     Digest, Page 1. In addition to the listed advantages, an economy which can
     be realized by the interconnection of utilities is a reduction of trans-
     mission capital investments and of environmental impact. These costs
     and impacts can result from the reduction of facility duplication. Tt
     should be noted, however, that while transmission interties can materially
     assist in energy conservation, this may not always be true. Transmission
     interties may enable the use of somewhat more efficient energy conversion
     installations to supply energy to consumers or enable a different raw
     energy resource to be used in conversion to electrical energy, such as
     the use of water that may otherwise be spilled. Only the gain in energy
     conversion efficiency can contribute to energy conservation, and this may
     be offset in part by transmission energy losses.

     We think it would be useful to discuss in more detail in the body of the
     report the benefits to the nation of saving diminishing fossil fuel
     supplies, such as gas and oil, which would occur as a result of some
     interconnections.

     Page 3. Second Paragraph. The report states that Interior studies did
     not involve the affected utilities. BPA has performed many interconnec-
     tion studies in the Northwest involving the a.c. and d.c. interties,




                                        33
APPENDIX II                                                        APPENDIX II

     Canadian interties, and interties proposed to Montana, Colstrip, etc.
     All of these studies involved the affected utilities and the results,
     generally, were accepted by the affected utilities.



                    [See GAO note 1, p. 36.]




     Chapter 3. Pages 24 and 25. The discussion of the "Interior study"
     requires some editing such as:


                    (See GAO note 1, p. 36.]




          Page 25, paragraph 2 - We reconmuend Jeletion. The effort being
          discussed is an appraisal to determine whether a "study" would
          be worthwhile. It is not practicable to have initial appraisal
          activity become multiorganization efforts.

     Chapter 3. Page 27, Last Paragraph. We agree with the report's statement
     that to be successful, joint studies involving the technical experts of
     the utilities are essential. We would go one step farther and say that
     the studies should incorporate environmental concerns from their inception.


                    [See GAO note 1, p. 36.]




                                       34
APPENDIX II                                                          APPENDIX II

     Chapter 4, Page 31, Environmental Considerations, First Paragraph.
     The effects listed in the report appear to deal only with transmission,
     not generation and marketing. This paragraph could also list:

          "--The physical effect of removal of land from other uses;
           --The effect of construction and operation on natural resources
              such as soil, vegetation, air, and water;
           -- The esthetic effects of noise and appearance;
           -- The economic effects."

    In light of GAO's recommendation that joint Federal utility studies be
    conducted, when Federal lands or marketing agencies are involved it
    would appear appropriate that such studies should fall under the Federal
    lead agency role established by the National Environmental Policy Act
     (NEPA). The meeting of environmental requirements could be expedited by
    the consolidation of Intergovernmental Coordination (A-95) and NEPA
    reviews at the Federal level. BPA, in effect, does this with very few
    delays in projects occurring as a result of NMPA and other environmental
    legislation. Intertie studies might be conducted by a joint Federal/
    utility task group consisting of both utility technical and environ-
    mental planning expertise. Such expertise should be drawn from the
    utilities and the land management agencies involved. Such a task team
    under the Department of the Interior Federal lead agency designation
    could ensure that environmental factors are considered in the technical
    analysis of the intertie requirements. It would also provide a team
    which could complete the environmental impact statement resulting from
    the proposal generated by the feasibility studies.




                 [See GAO note 1, p. 36.]




    Chapter 4, Page 39, Second Paragraph. The report states that the 5-year
    commitment limits long-term contracts with Southwestern utilities.      It
    should be noted that BPA has 20-year power sales contracts with utilities
    outside the region with 5-year pullback provisions for specific purposes
    only.

    This paragraph ignores the possibility of developing diversity exchanges.




                                      35
APPENDIX TI                                                         APPENDIX II




                   [See GAO note 1, p. 36.]




     We appreciate the opportunity to coament on this very important subject.

                                       Sincerely,




                                Deputy Assistant Secretary
                                       Administration and Management




              GAO notes:

                    1. The deleted comments relate to matters which
                       were discussed in the draft report but omitted
                       from this final report.

                   2.   Page references in this appendix refer to the
                        draft report and do not agree with the page
                        number in the final report.




                                      36
APPENDIX III                                            APPENDIX III

                        FEDERAL POWER COMMISSION
                           WASHINGTON. D.C. 20426
                                                    IN RNPLY NEFER TO;




                                                    NOV 3 1976



   Mr. Monte Canfield, Jr.
   Director, Energy and Minerals Division
   U. S. General Accounting Office
   Washington, D. C.  20548

   Dear Mr. Canfield:

       This is in response to your letter of October 4, 1976,
  inviting our comments on the draft of your proposed report
  to Congress to be entitled, "Problems in Planning and
  Constructing Transmission Lines Which Interconnect Utilities."
  A detailed review of the proposed report has indicated that
   it is deficient in some areas and that some of the reported
   conclusions are not supported by the facts in the text.

        The GAO letter dated February 12, 1975, initiating this
   study stated that it was intended to be a general survey
   into the potential for increased effectiveness of
   interconnection and transmission systems for electi.c power.
  We feel that this would still be a more appropriate title
  for the report.  This proposed report to the Congress by no
  means lists all the problems nor analyzes them as the
  present title might lead one to expect.

       It is of particular concern to us that very little
  mention is made of the nine existing Electric Reliability
  Councils, of the work they are doing, or of the role that
  the Federal Power Commission has taken in initiating and
  continuing their work to provide an adequate and reliable
  bulk power supply in the United States.

       It is our opinion that the nine Councils and the
  National Electric Reliability Council, working together
  and with the FPC, have made great strides toward assuring
  an adequate bulk power supply. A key part of this effort
  is the coordination and interconnection of the electric
  systems not only within each region but among regions.  A
  comparison of the regional interconnections existing in
  1967 with those existing today and with those planned will




                                37
APPENDIX ITT                                                   APPENDIX III


     Mr. Monte Canfield, Jr.


     indicate a significant amount of interconnection progress.
     Although this endeavor on the part of the industry has been
     primarily voluntary, there seems little question that the
     interest, the participation and the urging of the FPC has
     been most instrumental in the progress that has been made.

          The Commission has under consideration legislative
     proposals that would give it authority to order electric
     power wheeling under certain conditions.  It should be
     pointed out that if this authority should be granted, one
     of the most important questions which we will have to face
     will be the decision on reasonable economic and financial
     terms for the provision of services.

          The report states that the FPC has not effectively
     carried out its responsibilities in promoting interconnections.
     We believe that there is little basis presented in the
     proposed report for this conclusion. At one point, the
     report presents the opposite opinion when it states that
     existing interconnections are adequate.

          We feel that the incorporation of the more detailed
     comments attached would strengthen the report.  We would
     be happy to meet with you and your staff at your convenience
     to discuss these comments and other thoughts we may both have.

                                          Sincerely yours,



                                          Richard L. Dunham
                                          Chairman

     Enclosure    [See GAO note.]




          GAO note:   The enclosure is not included here but was
                      considered in this report.




                                     38
APPENDIX IV                                           APPENDIX IV



              PRINCIPAL OFFICIALS RESPONSIBLE
               FOR ADMINISTERING ACTIVITIES

                 DISCUSSED IN THIS REPORT

                                                 Tenure of office
                                               From        To       -

                    FEDERAL POWER COMMISSION
CHAIRMAN:

    Richard L. Dunham                          Oct. 1975   Present
   John N. Nassikas                            Aug. 1969   Oct. 1975

CHIEF, BUREAU OF POWER

   Whitman Ridgway                             Apr. 1976   Present
   Whitman Ridgway (acting)                    Feb. 1976   Apr. 1976
   T. A. Phillips                              Nov. 1970   Jan. 1976




                                39