Missouri Needs More Free Market Activity in Electric Transmission, Not Less
Two bills currently being considered in the Missouri Legislature would make building electric transmission lines more expensive and less competitive, leading to higher electric bills for Missourians.
Electric transmission lines carry electricity from power plants to your home or business. Too much electricity on a line increases the risk of frying a line, and as I’ve written before, several parts of Missouri have overloaded transmission lines already.
More transmission will need to be built, but these bills take the wrong approach to building more transmission lines.
The bills (which are identical House and Senate versions) would allow Missouri’s monopoly utilities to pre-empt any competitor that might build transmission lines for less. The monopolies would have the “right of first refusal” to build any transmission lines over 100 kilovolts (kV) if they connect to a facility owned by the monopoly, even if the location of that transmission line is outside the monopoly’s territory. Lines greater than 100 kV are used for long-distance transmission of electricity, in contrast to local distribution lines (the power lines you see by city streets and neighborhoods) which typically have capacity under 69 kV.
Why is the legislature proposing these measures? Removing any sort of competitive bidding process to construct transmission lines has made projects across the country more expensive. A study from the economic consulting firm The Brattle Group concluded that projects not subject to competitive bidding have cost over 34 percent more than the original estimates. In contrast, transmission line projects that were subject to competitive bidding have been on average 40 percent less expensive than original estimates. All transmission lines are built to standards set by the North American Electric Reliability Council, so competitive cost savings don’t come at the expense of quality.
Wouldn’t it be better for the legislature to propose subjecting transmission lines to competitive bidding, rather than shielding them from it? Since transmission costs are ultimately passed on to customers, it’s customers who bear the brunt, or receive the benefit, of cost-inflating or cost-saving policies.
Missouri will need more electric transmission lines built in the coming years. To build those lines at the lowest possible cost, Missouri needs more free-market activity in transmission projects, not less.