There is no doubt that Public-Private Partnerships will play an integral role in improving this country's infrastructure in the coming years. By leveraging private investment, P3s have the ability to bridge the funding gap in many state and local governments. States are slowly recognizing that they can tackle critical infrastructure needs by partnering with the private sector. Some states, however, are still hesitant to commit to P3s.
Pillsbury's P3 practice has created a chart that lists which states have enacted significant P3 enabling legislation. This P3 Enabling Statutes chart is available on Pillsbury's P3 practice homepage. The statutes include links to the full text of the enacted legislation so that you can learn more about how you can take advantage of these P3s. In addition to listing the agencies and types of projects authorized, the chart also lists whether the statutes encourage unsolicited proposals. To promote ingenuity and entrepreneurialism, P3 legislation should continue to welcome unsolicited proposals from the industry.
We will of course continue to update this chart as more states pass P3 enabling legislation.
Last week, the Federal Energy Regulatory Commission ("FERC") began enforcing Order 1000, a broad and detailed set of guidelines regarding the development of the nation's power transmission system. The Order, which has been viewed as one of the most significant transformations to the electricity market in recent memory, impacts regional transmission planning and allows for new transmission projects to be competitively bid. As outlined by FERC, Order 1000 consists of three categories of reforms - planning reforms, cost allocation reforms, and nonincumbent developer reforms.
The most controversial aspect of the Order appears to be this third category of reforms, which takes away incumbent utilities' right of first refusal from any FERC jurisdictional contracts. But not all energy executives are opposed to this reform. Transmission & Distribution World shared the views of several top utility executives, including one who supports the elimination of the right of first refusal because it opens up opportunities for more providers to participate in building transmission lines and allows existing utilities to compete in other parts of the country. Other executives, however, fear that opening up development by letting inexperienced companies bid on transmission may jeopardize reliability.
It is undisputed that the nation's current power grid is out of date. The American Society of Civil Engineers reports that 70 percent of power lines and transformers are over 25 years old, and 60 percent of circuit breakers are over 30 years old. Clearly, the need for investment and opportunities for development, construction, and business are massive. Bloomberg reports that approximately $673 billion will need to be invested by 2020 to avoid major breakdowns of the power grid. $104 billion worth of new transmission capability will be constructed by 2022, resulting in an estimated $6 billion in profits for developers of power lines.
It is anticipated that the costs of modernizing the power grid will be borne in part by consumers, who will likely face increased rates. But a more efficient power grid should ultimately lead to lower rates. In addition, modernization will help facilitate the use of renewable energy. SmartGridNews.com notes that new transmission lines are essential for energy sources like solar and wind to be incorporated into the power grid.
The true impacts of Order 1000 may not be known for some time, but the need for improving the grid combined with the opportunity for increased competition may provide a much needed economic boost.