Few know that the United States’s victory in World War II rested, in no small part, on achieving “speed to power.” On Dec. 7, 1941, aircraft launched from carriers attacked the U.S. naval station at Pearl Harbor and decimated the Pacific Fleet. Franklin Roosevelt immediately formed a war cabinet that, recognizing naval and land warfare had changed, set an aggressive goal of producing 50,000 warplanes per year.
One potential barrier stood in the way: electricity. In 1941, Arkansas held the largest U.S. deposits of bauxite, the raw ingredient used to produce aluminum for aircraft. And anticipating hostilities, the U.S. Defense Plant Corporation had built the Jones Mill aluminum smelting plant in Malvern, Arkansas, in October 1941. The plant, however, needed electricity — and lots of it. The plant at full operation would draw 120MW 24/7, which exceeded Arkansas’ total installed generating capacity of 100MW.
Just seven days after Pearl Harbor, 11 southwestern utilities met to create the Southwest Power Pool to deliver electricity to the Jones Mill plant and much more. They succeeded, and the rest is history.
REPUBLICAN AI PUSH HITS INTERNAL RESISTANCE OVER DATA CENTERS
Today, unprecedented demand for electricity creates another speed-to-power regulatory challenge. Until 2011, the grid was built in the same manner that won the war and then electrified the nation. In 2011, we modified that process in FERC Order 1000. To win this round of speed-to-power, aspects of Order 1000 should be modified, specifically the right of first refusal and competitive solicitations in some RTOs.
In 2011 I voted in favor of FERC Order 1000, a wide-ranging transmission planning rule with many positive and non-controversial provisions. My principal focus was to expedite the delivery of low-cost renewable resources from the U.S. heartland to urban load pockets via interregional, high-voltage transmission. The commission introduced elements of competition into transmission development.
However, a rule designed to expedite power delivery now causes delays. Fifteen years ago, a time of flat or declining electric load, the elimination of ROFR and the addition of competitive solicitations were not problematic. Now, they are.
Thomas Jefferson strongly advocated amending laws and even the U.S. Constitution to reflect changed circumstances: “Laws and institutions must go hand in hand with the progress of the human mind.” Perhaps this was Jefferson’s prescient reference to the electrification revolution.
Over time, I have become a skeptic of eliminating the right of first refusal.
Order 1000 did exempt certain reliability projects from the new rules, and wisely so. As to economic and public policy transmission development, dueling studies propounded by utilities on the one hand and independent transmission developers on the other argue for and against the benefits of solicitations. The record is replete with project delays and cost overruns of both utility and independent developers. This suggests what engineers employed by both sides understand: The construction of high-voltage electric transmission is plagued by permitting ordeals, litigation, and, increasingly, supply chain constraints. More tedious, bureaucratic red tape is contrary to the public interest.
While the benefits of solicitations are subject to debate, the fact that the procedure itself causes delays is not. When transmission planners approve an urgent reliability project, work commences immediately. Otherwise, solicitation routinely delays construction beyond the baked-in 18-month process (if all goes right) by bid challenge litigation. In an era of flat or declining load growth, exhaustive exploration of benefits to be wrung from competing proposals may not be harmful. On the contrary, would-be customers now fitfully await electric service. Delays in fixing the grid raise the price of power in several ways. Procurement of labor and materials is ever more challenging. Transmission congestion denies customers access to lower-cost power. Unavailability of power at any price imposes carrying charges and opportunity costs. The harmful consequences of lassitude now dwarf the potential benefits under the rosiest competition scenario.
Public utility laws and regulations are frequently amended, but one overriding principle endures: Delivering electric service to customers is essential and must be accomplished affordably, reliably, and on time. Solicitations often fail that test. A regulatory response to changed circumstances is appropriate to fulfill FERC’s statutory mandate under the Federal Power Act. In Reliable Electric Service Requires a Renaissance of the Regulatory Compact, I observe that basic utility regulation is trenchantly relevant today. While I generally support the principle that competition benefits consumers, the 15-year solicitation detour needs a timeout. Prudency determinations embedded within the compact have deterred utility overspending for over 100 years, whereas there is no cure for delay.
WISCONSIN TOWN BECOMES FIRST TO RESTRICT DATA CENTERS AS PUSHBACK GROWS NATIONWIDE
As to the regulatory compact, a final and important point must be addressed. Artificial intelligence is essential not only to U.S. businesses but to our way of life. The societal impact of AI will likely grow faster than Moore’s law postulated — the doubling of computing capacity every two years. More importantly, data centers are needed for the economic and military security of the United States.
On the Left and Right are those who believe data centers should not be supplied with electricity. This view is both unlawful and unwise. Public utility law posits it is not the role of government nor public utilities to pass judgment on their customers’ lawful use of electricity, water, and gas. Electricity is an essential service. Customers across the U.S. rightly expect and deserve affordable, safe, reliable, and timely electric power. Let’s fix the regulatory impediments to those objectives and win the need-for-speed.
Marc Spitzer is a partner at Steptoe LLP. He was admitted to the State Bar of Arizona in 1982 and served four terms in the Arizona Senate, chaired the Arizona Corporation Commission, and was a member of the Federal Energy Regulatory Commission from 2006-2011.