The Regional Capture of a National Resource

The untold story of “congestion charges.”

Congestion Charges
Lyle D. Larson

Lyle D. Larson

October 24, 2017 11:24 AM

It used to be that electricity was electricity, no matter how generated. Keeping the price of that electricity low was the central object. But now things are different. An array of federal and state policies, together with corporate and consumer demand, have conspired to foster ever-increasing demand for electricity generated by renewable fuel. Perhaps more than any federal or state “renewable portfolio” mandate or tax incentives, a key driver of growth in renewable power generation is coming from corporations, such as Apple, General Motors, JP Morgan Chas, and Microsoft, who have pledged to power all of their operations with renewable energy.

But we have a location problem. While a very substantial demand exists for renewable energy in the population and commercial centers of the Northeast, Mid-Atlantic, and Southeast, the “Saudi Arabia of wind” is located in the Great Plains and the Southwest regions of the country. The same is generally true for solar generation potential. So how does wind and solar power generated in the Great Plains and Southwest make its way to the east coast? Well, problematically, it really doesn’t get there at all. The toll system may have a design flaw because certain rules known as “congestion pricing” are now leading to unintended consequences.

The toll system was supposed to create a more efficient power grid for movement of power across regions, but instead it is keeping wind and power in the regions where it is generated.

This needs to be reexamined.

We see high voltage transmission facilities all the time. They are most conspicuous when driving on an interstate highway through rural areas. These facilities are part of a nationwide network through which power “flows” from “sources” to “sinks.” For most wind and solar generation potential in the United States, the sources are in the Great Plains and the Southwest, but the sinks ought to be in the East. Yet, the sinks are almost always in the same region where the wind and solar power is generated—even to the point where regional grid operators in the Midcontinent (the Midcontinent Independent System Operator, or MISO) and Southwest (the Southwest Power Pool, or SPP) are struggling to absorb the large influx of wind and solar generation injected into their networks. These efforts portend an increase in base transmission rates, but little or no additional ability to flow power out or across their regions. Why is that? Because MISO and SPP are trapping the renewable output and capturing the value of the low-cost generation by making it exceedingly expensive to export wind and solar power from their networks.

To move power out of one region and into another, one must pay a transmission toll from the network in which power is generated and must pay again for any other transmission network that is used until the power is delivered to its destination. The tolls are applied to a form of wheeling known as point-to-point service. Each wheel through a region includes two separate charges for transmission service: one charge is for use of the actual interstate facilities, a second charge (which can double the utility’s cost) is for “congestion charges.”

Congestion charges are not charged for actual use of the physical transmission network. Rather they are purely a financial product, recommended by energy economists and embraced by FERC, that have nothing to do with moving a single electron.

Congestion charges are the dirty little hidden charge that has been a death knell to the economics of moving wind and solar power from our nation’s Saudi Arabia eastward through regional transmission organizations to our nation’s largest commercial and population centers.

Congestion charges are a product of FERC-regulated tariffs established by MISO and SPP. These fee constructs were created and are suited for situations when and where power plants have flexibility to locate in places where the transmission grid is most robust. That is, where there is less congestion.

These charges are designed to create a more efficient pattern of investment in power generation and delivery infrastructure. However, these fees are not universally applied and are assessed to “point-to-point” transmission service used to move and export wind and solar power in a way that is not imposed on by more localized or regional flows. The end result is regional and local power flows that are essentially exempt from congestion fees, while point-to-point wheels for solar and wind power are not exempt. This, in turn, causes wind and solar power to become economically trapped in the regions of origin.

It is time for FERC to reconsider whether the congestion cost aspect of RTO energy market clearing and transmission pricing is sound public policy. The theory underlying the policy was that power generation is fungible and can be generated in places of a developer’s choosing. But this is not the case for wind and solar power. The wind blows and the sun shines the strongest in the Great Plains and the Southwest. This is reality. The preferential treatment of regional and local flows over point-to-point “export” flows should be addressed and either reduced or eliminated so that this power can get to the neediest markets.

The solution to improving the availability of wind and solar power on the East Coast is not just a question of building more generation facilities. It requires reconsideration of congestion pricing and preferences that relieve local and regional flows from those charges at the expense of point-to-point flows.


Lyle Larson counsels clients involved in all aspects of the electricity industry, from power plant development and operation, wholesale power sales tariffs and issues, transmission tariff arrangements, and supply to retail consumers. Among other things, Lyle serves as Federal Energy Regulatory Commission (FERC) counsel to over 25 separate market-based rate sellers and qualifying facilities that own or control over 50,000 MW of generation (coal, gas, nuclear, solar, wind, and biomass) in 16 states, in each interconnection and every Regional Transmission Organization (RTO) region.

Related Articles

Sun Tax Out, Self-Sufficiency In

by Mariano Roca López

How Spain is paving the way for self-sufficient homes.

Spain to Repeal "Sun Tax"

Trending Articles

Presenting The Best Lawyers in Australia™ 2025

by Best Lawyers

Best Lawyers is proud to present The Best Lawyers in Australia for 2025, marking the 17th consecutive year of Best Lawyers awards in Australia.

Australia flag over outline of country

How To Find A Pro Bono Lawyer

by Best Lawyers

Best Lawyers dives into the vital role pro bono lawyers play in ensuring access to justice for all and the transformative impact they have on communities.

Hands joined around a table with phone, paper, pen and glasses

How Palworld Is Testing the Limits of Nintendo’s Legal Power

by Gregory Sirico

Many are calling the new game Palworld “Pokémon GO with guns,” noting the games striking similarities. Experts speculate how Nintendo could take legal action.

Animated figures with guns stand on top of creatures

Announcing The Best Lawyers in New Zealand™ 2025 Awards

by Best Lawyers

Best Lawyers is announcing the 16th edition of The Best Lawyers in New Zealand for 2025, including individual Best Lawyers and "Lawyer of the Year" awards.

New Zealand flag over image of country outline

Legal Distinction on Display: 15th Edition of The Best Lawyers in France™

by Best Lawyers

The industry’s best lawyers and firms working in France are revealed in the newly released, comprehensive the 15th Edition of The Best Lawyers in France™.

French flag in front of country's outline

Announcing The Best Lawyers in Japan™ 2025

by Best Lawyers

For a milestone 15th edition, Best Lawyers is proud to announce The Best Lawyers in Japan.

Japan flag over outline of country

The Best Lawyers in Singapore™ 2025 Edition

by Best Lawyers

For 2025, Best Lawyers presents the most esteemed awards for lawyers and law firms in Singapore.

Singapore flag over outline of country

Announcing the 13th Edition of Best Lawyers Rankings in the United Kingdom

by Best Lawyers

Best Lawyers is proud to announce the newest edition of legal rankings in the United Kingdom, marking the 13th consecutive edition of awards in the country.

British flag in front of country's outline

Announcing the 16th Edition of the Best Lawyers in Germany Rankings

by Best Lawyers

Best Lawyers announces the 16th edition of The Best Lawyers in Germany™, featuring a unique set of rankings that highlights Germany's top legal talent.

German flag in front of country's outline

How Much Is a Lawyer Consultation Fee?

by Best Lawyers

Best Lawyers breaks down the key differences between consultation and retainer fees when hiring an attorney, a crucial first step in the legal process.

Client consulting with lawyer wearing a suit

Presenting the 2024 Best Lawyers Employment and Workers’ Compensation Legal Guide

by Best Lawyers

The 2024 Best Lawyers Employment and Workers' Compensation Legal Guide provides exclusive access to all Best Lawyers awards in related practice areas. Read below and explore the legal guide.

Illustration of several men and women in shades of orange and teal

Things to Do Before a Car Accident Happens to You

by Ellie Shaffer

In a car accident, certain things are beyond the point of no return, while some are well within an individual's control. Here's how to stay legally prepared.

Car dashcam recording street ahead

Celebrating Excellence in Law: 11th Edition of Best Lawyers in Italy™

by Best Lawyers

Best Lawyers announces the 11th edition of The Best Lawyers in Italy™, which features an elite list of awards showcasing Italy's current legal talent.

Italian flag in front of country's outline

Combating Nuclear Verdicts: Empirically Supported Strategies to Deflate the Effects of Anchoring Bias

by Sloan L. Abernathy

Sometimes a verdict can be the difference between amicability and nuclear level developments. But what is anchoring bias and how can strategy combat this?

Lawyer speaking in courtroom with crowd and judge in the foreground

The Push and Pitfalls of New York’s Attempt to Expand Wrongful Death Recovery

by Elizabeth M. Midgley and V. Christopher Potenza

The New York State Legislature recently went about updating certain wrongful death provisions and how they can be carried out in the future. Here's the latest.

Red tape blocking off a section of street

6 Ways a Lawyer Can Help You With Your Medical Malpractice Claim

by Adam Malone

If you believe you have a medical malpractice claim, contact an experienced medical malpractice lawyer. Read on to learn how they can help with your claim.

Doctor in white lab coat showing x-ray to patient in blue scrubs