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Robinson Meyer:
Hello, it's Thursday, October 29. And as you know, the biggest story in U.S. Energy policy right now, at least other than the upcoming midterm elections, is that Congress will take up bipartisan permitting reform next month. This was a legislative proposal advanced in September by four senators called the Bipartisan American Affordability and Jobs Act. And if you read Heatmap or you look at social media, or even sometimes if you look at Instagram Reels, you will see that this package is very controversial. American environmentalists, climate activists, clean energy folks, they have been arguing about this bill essentially constantly since it came out. That's partially because it would just do a lot of different things: It would encourage the expansion of the power grid. It would change environmental review laws. It would make it easier to build clean energy and also pipelines. And it would make it harder for presidents to revoke permits from some energy projects. There's a lot of different views about those provisions and how they would all work together.
But just about everyone involved agrees the bill's power grid policies are really, really good. The Natural Resources Defense Council described this section as one of the bill's, quote, “green flags,” as opposed to what it saw as its red flags. And even John Podesta, the former Biden climate advisor who's been more critical of the proposal, said the grid section was, quote, “pretty strong,” unquote, and told our reporter that this section was actually worth passing the bill over if negotiators could fix some of his other criticisms.
All of this has had an interesting effect on what we cover, both at Heatmap and I think more broadly. And that's because the media — we love to cover conflict. That's not just because conflict or disagreement is more interesting, although I think often it is, but also because it lets us as journalists be useful. It can actually be helpful for reporters or an informed person to poke around a disputed question, try to learn new information, and then try to figure out what's true. That's really one of our jobs as journalists. What all of that means, though, is that when there's less conflict over something, we don't cover it as much, even when it's really, really important.
And that's happening, I think, with this power grid section, which will be one of the most important parts of the law if it passes — but which nobody has really talked about because nobody disagrees about it very much. So today I want to talk to someone who knows a lot about this package, knows a lot about this particular area of the law, and is really jazzed about the changes that this bill would make.
David Pomerantz is executive director of the Energy and Policy Institute, a watchdog and research group that investigates fossil fuel and monopoly utility lobbying. He's been at the Institute for more than 10 years, but his background is in climate activism. He was previously at Greenpeace for eight years, where he rose to be a senior climate campaigner. Dave and I discuss what this bill would do and how it would take on the power of monopoly utilities. We talk about why a bill like this could only really pass now in recent U.S. political history. And we also discuss why utilities are, at least in Dave's view, one of the biggest enemies of the energy transition, even though utilities are in charge of the electricity system and at least in theory generating more electricity is what we want to do if we want to decarbonize the economy. It was a really interesting conversation. I learned a lot.
I'm Robinson Meyer, the founding executive editor of Heatmap News, and it's all coming up on ShiftKey. David Pomerantz, welcome to Shift Key.
David Pomerantz:
Thanks so much for having me.
Robinson Meyer:
It's funny. I mean, we were talking about this right before we started, but we have known each other for a long time. I feel like I read Energy and Policy Institute work all the time, but we've never had you on the show. So it's very exciting to have you finally here on Shift Key.
David Pomerantz:
Well, I'm very grateful for the invitation. I am an avid listener and so honored to be here with you. Thanks, Robinson.
Robinson Meyer:
I think for those of us who do anything around electricity, the Energy and Policy Institute is a very familiar name. But it might not be a name that everyone in Climate World, so to speak, or climate and energy world is familiar with. Could you just give us a brief intro to your work and what the Institute's work does?
David Pomerantz:
Yes, happily. So the Energy and Policy Institute, or EPI, is a utility watchdog organization. So we do a mixture of investigative work and analysis and communications. What we're investigating and trying to document is the harms posed by monopoly utility companies to ratepayers and to the transition from fossil fuels to clean energy. So most of the people, my colleagues who I work with, are kind of climate people. We are motivated by trying to hasten the transition away from fossil fuels. With that said, as we've been doing this work, or at least I've been doing it for the last decade, and getting more and more exposure to how utilities are set up and organized and what incentives they have and how they behave, I think our purview has gotten a bit broader than that. And nowadays, we're sort of — as much as we are interested in utility reform in so much as it affects the transition to clean energy, we're also just generally interested in how utilities act toward their customers and what can be done about that.
Robinson Meyer:
I feel like this is not an atypical pattern, where people get into a policy area because they care about decarbonization and climate change. And then once they get into it, they're like, oh, my gosh, this thing is really screwed up. I feel like this has happened to me to some degree with manufacturing and industrial policy in the U.S. I'm like, oh, my gosh, we've got to get a handle on this kind of for decarbonization reasons. But also just generally, often when you look closer at something that you care about for some other reason, you discover that actually there's a ton of work to be done there, regardless of the importance of decarbonization.
David Pomerantz:
That's definitely been my experience and journey about utilities. I mean, I got into this stuff a little over a decade ago. And even then, I think in the climate community, this sort of two-part equation that people are so familiar with now, which is moving the electric sector to clean sources of energy that don't emit carbon, and then electrifying everything else that we can. That was well in place when I started working on utilities and so, if that's the equation you're thinking about, electric utilities kind of are right at the center of all that. So it made a lot of sense for me from a climate perspective as I've gone — and coming from a place of humility, like really not being a technical expert in electricity and learning a lot as I've gone along the way, you realize from all these other perspectives sort of a general good government and campaign finance and concentration of power in the economy and just generally —I mean, the cost of electricity is kind of the base input for so many parts of the economy. If it's even a little bit higher than it needs to be, the spillover effects of that on everything are really big. So, yeah, that's certainly been my experience as I've gone along, is like, utilities are so important for climate and also so important for just about everything else.
Robinson Meyer:
You described this two-step plan to decarbonize the economy. The first is you clean up the electricity system. You shift as much demand as possible to zero carbon and clean fuels. And then you expand the electricity system. You try to electrify everything you can. And the way that the technologies that we want to electrify work is that you can do this a little bit out of order. If you're also gradually decarbonizing the electricity system, it's better to have more EVs, even if you power them with natural gas in the short term, because then you lock in the EV infrastructure and then you can gradually clean up the grid. It's like a two-part race and you can kind of run both at the same time.
David Pomerantz:
Totally in parallel.
Robinson Meyer:
OK. But when people hear this game plan, I think there's a sense that the utilities will be on board with it or certainly that the utilities will not oppose it. What has your experience been of how utilities feel about this plan? I mean, are they a fan of expansion and not as much a fan of decarbonization? Or are their incentives so misaligned, let's say, that they don't even necessarily care about the kind of expansion in terms of kilowatt hours that we all care about? And what they're really focused on is just building a lot of infrastructure of any kind that then they can make their customers pay for.
David Pomerantz:
I'd say a few things. So one thing — this is such a boring disclaimer that everybody gives when they talk about utilities, but it's true and worth making the caveat up front: they're not all the same. Putting aside the big differences within the sector, right? So you have about two-thirds of America served by investor-owned electric utilities. So these are corporations owned by investors on Wall Street. And then the other third is split between, you know, different versions of public power entities, either cooperative utilities, mostly in rural parts of America, or municipal utilities. Those are all very different.
But even if you just look within the investor-owned utilities, which I think is mostly what we're going to talk about, they're not all the same. So for instance, one important distinction for this question about their posture toward decarbonization and electrification, there are some utilities that all they do is electricity, right? Like they sell electricity, they distribute electricity. There are others who also own gas utilities. This has become more common as the industry has concentrated and as a function of mergers and acquisitions over the last couple of decades, really conglomerated a lot. And so if you're a utility holding company that owns multiple utilities.
Robinson Meyer:
Like Berkshire Hathaway Energy.
David Pomerantz:
Sure, that's a good example, right? So taking Berkshire Hathaway Energy, they own electric utilities. Berkshire Hathaway, their pipeline group, runs about 20,000 miles of pipe and moves about 15% of the gas consumed in the U.S. in 2024. So they have a different set of incentives. The people who run their electric utilities might be relatively positively inclined toward electrification, but the people who run their gas pipeline certainly aren't. They own a majority stake of a LNG terminal, Cove Point. So even within a single corporate utility, you might have pretty mixed incentives towards something like electrification. I think one very broad way to answer this is I think most electric utilities, just looking at the electric part of the sector, they're going to be relatively positively inclined toward electrification, mixed on decarbonization.
But actually, I think this is one of those cases where everybody who is really interested in climate change, and I certainly put myself in that category, even people who are really opposed to climate action, say from the political right, are way overindexed on how and whether that is a defining principle of how utilities make decisions. The way utilities make decisions, the most important thing to them, the most valuable commodity to them by far has nothing to do with, like, is it solar or gas or wind or coal? It's their monopolies. That is the crown jewel of how a utility makes money. And that leads to some situations where, like, you've had utilities in blue states who will accept government policy to speed up transition to renewable energy, but they'll try to get their pound of flesh as part of that acceptance. And usually that pound of flesh is a retrenchment or reification of their monopoly. So they'll say, like, “Yeah, we can dance with decarbonization a little bit, but we want to increase our ownership share of that new clean energy system of assets that we're going to build.” And you've actually seen that literal tradeoff happen in states where you've had really politically powerful utilities and democratic policymakers who don't want to fight with them, but want to get climate policy to happen. So it's like, everything in service to the monopoly.
Robinson Meyer:
And the monopoly here, this is a type of corporate — I'm not even sure what to call it, that exists in very rare places in American law. Or doesn't exist that often in American law, right? It emerges from this correct observation, especially correct in the early 20th century, but I would argue still holds in many respects to this day, that the electricity grid is a natural monopoly. We would rather have one provider of the electricity grid to everyone's homes because we don't want lots of duplicative infrastructure. You don't want, like, your neighbor in your apartment building or your neighbor in your street to have a different set of wires going to their house than go to yours. So we need a ton more extra wires then.
So it all dates from when electricity and distributed electricity was a new technology form in the early 20th century. And different entrepreneurs were racing to get electric light and different wires strung up. And there are some early stories from that period where, like, as new companies were competing to distribute electricity, there would be parts of New York City, for instance, where there's enough wire getting strung up where, you know, you can’t see the sky — that kind of thing. I don't know how apocryphal that might have been. But at that time, certainly, it made sense to have a monopoly on electric distribution.
Robinson Meyer:
And the monopoly here is like a true jurisdiction, right? It's basically saying, “In this geographic area, only one company can provide electricity service. No other company can do it.” And that kind of corporate right exists only for this small set of regulated monopolies in the country. I mean, we have it for water and electricity and natural gas distribution. And that's kind of it, I think.
David Pomerantz:
It's very, very rare in our economy. And I think there's an interesting conversation happening right now, sort of on the sidelines of all this stuff among a small handful of antitrust lawyers of like, how much should that still be the case? Like, maybe in the early 20th century, utilities did have a sort of, quote unquote, “natural monopoly,” where increasing scale and reserving it to one company would make all this cheaper. Now it's certainly true that to the extent there are natural monopolies in this industry, they cover a much smaller part of the electricity value chain than they once did, so like, maybe electric utilities should still be entitled to monopolies over the distribution wires, is that true for electric generation or transmission or even, billing and the customer relationship? All those are areas where in different parts of the country, to varying degrees, competition's been introduced and often to really good effect.
Robinson Meyer:
Well, let's talk about the bill. I want to get back to these questions, but let's start by talking about the bill. So I think the bill's biggest effect on the power grid are these transmission provisions. And I've been covering a lot over the past several years about how important transmission is for decarbonization. What does the bill do on transmission? How do you think about this bill overall and its effect that it would have on the energy system?
David Pomerantz:
Yeah, so the bill I'd say is pretty ambitious when it comes to reforming how transmission is planned and permitted and paid for, and also who gets to control it. So maybe just in terms of the status quo, the short version is, for the kinds of transmission that we're going to be talking about here, this distinction is pretty crucial — like, longer lines, higher voltage lines, the ones that connect different regions of the country to each other that are critical for the energy transition, and also, candidly, would be quite critical even without it, right? Like, just for cost and reliability. Those lines we are not building. We're just building very few of them. Some parts of the country are doing a little bit better, but that's clearing the very low bar of doing almost nothing. Building regional or interregional transmission has basically ground to a halt in America.
So the bill, I think, seeks to address that problem. And it does a few things. So starting with the big stuff, probably the centerpiece of transmission, the first reform listed in the transmission section of the bill is around permitting. So currently, if a transmission line — one of these long lines that I'm talking about, that has to cross multiple states — it has to be permitted by each state it crosses. The bill says that if a single state says no on one of these high voltage lines or is just taking too long to decide, federal regulators can step in and approve the line if they find that it benefits the public. They can't do it capriciously, but if they find that it benefits the public, they can step in and approve that line. And if they're even higher voltage lines — so lines of 345 KV or more — those lines can actually file at FERC in parallel at the same time as they're filing for permissions at the state. And so it should make getting those lines permitted much easier.
So that's one change.
Another really big one is around planning. So right now there are different transmission organizations in different parts of the country. So I think most of your listeners will be familiar with some of these even though most Americans probably are not, but some of these are called RTOs or regional transmission organizations. Those are formal organizations, there's one called PJM that covers kind of the mid-Atlantic states, in the eastern part of the Midwest there's MISO, in the sort of more Great Plainsy part of the midwest extending kind of in a big vertical strip down the middle of the country, They all plan transmission differently, right?
And if that sounds a little bit nutty, I think everybody would probably agree that if you were building this system from scratch, we wouldn't have it that way. And this is really important. The system wasn't built from scratch. So we didn't have regional transmission organizations up until reforms that started in the late 1990s. So for the entirety of the 20th century, utilities basically did this on their own. Like, they decided if they needed a transmission line and that was kind of it. So one way to look at this is, like, we've been on this long journey toward trying to take control of the transmission system away from individual utility companies and sort of put it more in the public sphere. Developing regional transmission organizations was a part of that, but it's been an incomplete journey, I would say. And so one of the things that BAAJA does is this kind of consolidated planning. It gets the country's various grid regions to plan in congruent ways. And I said we're not building much regional transmission earlier. In terms of inter-regional transmission, so transmission that actually crosses between regions, like crosses from PJM to MISO, we're building basically none of that. So that kind of consolidated planning should help with that.
Robinson Meyer:
So there's one set of changes in the bill, as you were saying — I mean, we talk about this, we've talked about this before, written about it, which is basically like: if you wanna build a natural gas pipeline, you go to the government and if the federal government says, yes, you can build it. Like, they have a checklist of things that they have to do to see if your pipeline's in the national interest and they check, check. “Okay, it's in the national interest. Here's your permit, you can go build.” This, I believe, would not quite do that for transmission lines, but it basically creates a federal backstop authority where FERC can do it. And I believe it even says, like, with pipelines, FERC basically is told, “Look, if this transmission line meets this criteria and that criteria, you will find it in the national interest.” This isn't just a “you may.” This is like, “You must actually go and find this thing in the national interest if it meets certain certain guidelines.”
David Pomerantz:
That's right. The way I would describe this is the reforms in the bill for transmission permitting probably don't make it quite as easy to permit a transmission line, interstate transmission line, as it currently is to get permitted an interstate gas pipeline. But it's a lot closer to that, whereas under the status quo, this is all fragmented. It's really hard. And in the best case, it's taking you years and years.
Robinson Meyer:
We can get into why it is so easy to build a natural gas pipeline while it's still not easy to build a transmission line. And my sense is, yes, it's that the whole system is built to service the needs of fossil fuel companies and not as much electricity. But it's also just — number one, it is an open question to me of whether even if you were the most powerful set of organizations in the world you could get Congress to pass a law that gives any kind of linear infrastructure private developer the kind of authority that natural gas developers have under the law right now. And that's because the law that gives them all that authority was written in the 1930s. It's very old. It's just like an old New Deal-era law.
David Pomerantz:
I'd agree with that. I mean, you're not going to get me to disagree with the fact that much of the federal government's decision-making is sort of — there are a lot of incumbency biases that fossil fuels have. I think the fundamental thing happening there is that the Natural Gas Act was passed a long time ago and it would be probably harder to pass it that way now, so what's good about the the current transmission permitting legislation on the table is it certainly gets closer to that point, where it would be easier to permit transmission now.
Look, not everybody's going to be in favor of that, it's probably worth noting. Building long transmission lines does often generate a lot of discontent from landowners. So there's no point dismissing that. That becomes a value judgment for people who are landowners who oppose a transmission line. I don't think there's anything in the bill that takes away their ability to file comment, to say they want the line moved. I don't believe the permitting reforms in here are like railroading people in that way. But there's going to be people who are unhappy with anything that gets transmission lines built faster.
I am of the opinion personally that as a country, both for energy transition reasons and also to have a better functioning electric system and ultimately lower rates, that the balance is off right now. And we have to be able to build more of this. And I think, like, this maybe gets into some of the broader questions in the bill about permitting and how hard it should be to build energy infrastructure, I think, is a question that's sort of laced through the entire legislation.
Without getting into all that, I'll just say it's worth keeping in perspective, like, a transmission line versus other things. So one of the arguments I've tried to make to people, at least privately, who are understandably sympathetic to, like, landowners or conservation interests or tribes who are opposed to a transmission line is, for the most part, their opposition is around the viewshed. Basically, they don't want to look at it. And I'm not saying that in a pejorative way. I think there are a lot of cases where those concerns are very real and deeply felt. I do compare that to, however, like if building more transmission lines, more regional transmission lines allows coal plants to shut down, which it would in the long run, because it would undercut their value, when we're talking about the effects of those plants, we're not talking about somebody's view, right? We're talking about people's lungs. And so the bill will make it easier to build transmission lines and there will be people who don't like that. But I think that comparison's pretty important to keep in mind when we're talking about that.
This is all sort of in the “making it easier to build transmission” category. The next one is like, Who gets to control it and are we building the right type, and is it a good value for customers? So we can talk about that next, but in the “making it easier to build” category, a couple of other things. These are more discreet, but important. So one section of the bill basically says that if a transmission owner wants to reconduct to their line — so I'm probably going to sort of do violence to the technological nuance here, but for normal people, you could think of it as, like, basically string-up better wires, wires made out of better materials that can carry more electricity. It exempts the transmission owner from having to go through NEPA review for that if it's in an existing right of way. So I think that makes a lot of sense. Like, they've already presumably gotten that line permitted. They don't need a new review for stringing up new wires.
And then the other thing that it does that's in this sort of encouraging-new-technology vein is that it requires that investors and utilities use what the bill calls advanced transmission technologies on all new lines, including the best available conductor technology. And actually to look at existing lines and say, if the benefits of upgrading the line outweigh the costs, they need to do that too. And it assumes that it's prudent, which means that that actually is a thing that will help the utilities do that. It's really good for customers. There's a lot to be gained from just upgrading the lines that we have. There's been lots of studies on this. We can really increase the capacity of the system that way. It's probably being underused right now because, from a utilities perspective, the cheaper solution isn't always the best one.
Robinson Meyer:
I mean, we've talked about this in previous shows, but this is because utilities turn a profit and in fact, make all their profit off of building big permanent infrastructure that they can quote unquote “rate base,” which means that they then take that infrastructure, break it up into 30 year payments, add a guaranteed profit on top of it. Often now in the 8 to 12% range, I mean, it's much higher than you could get from say, putting your money in treasury bonds and then just charging it to electricity to their captive customers on top of whatever their operational expenses from generating the electricity that they need to generate are that month, right? Is that a fair description?
David Pomerantz:
That's exactly right. That's exactly right. Utilities make money from the equity share of their capital investments at a rate of return that is administratively set by regulators. So most businesses who sell stuff, they want to have the lowest costs and the highest revenues. For utilities, actually for their capital expenses, the building stuff, they want higher costs, at least insofar as they're funding it with their investors' money because that's what they earn a profit off of.
Robinson Meyer:
The transmission section is the, I don't know that this is the right framing, but it's often framed as climate advocates as like the good part of the bill. This is like all the things that people want to see happen in the electricity system, or certain environmental groups have framed it as the good part of the bill, and they've contrasted it with other changes that the bill makes to say longstanding environmental review laws. They say, “Oh, we love the transmission section. We love the transmission planning section. This is the good part of the bill.” But it does sound ultimately like a planning process, and not that we're mandating everyone build more transmission lines. And so why do we think that this planning process will ultimately produce more transmission or that the bill as a whole will ultimately produce more transmission lines across the country?
David Pomerantz:
Well, those are fair questions. I think a couple of things. One is in the cases where regional transmission organizations have basically gotten their act together and come up with a plan to sort of value and figure out the cost allocation and who's going to pay for what and plan out a lot of transmission. They actually have done that. The examples are just far too few and far between. But MISO is probably the best case study of this. Starting, I think, in 2011, they had their MVP process to plan regional transmission, and it's all happening too slowly, but it is happening. Like, they sort of got on the same page as an RTO about how to do planning, and you're starting to see lines being developed. Now, they're not building lines yet in the southern part of their region, which I think you can draw a line directly tracing that failure to the resistance of an investor-owned utility, Entergy. And they're not building lines yet between MISO North. So this is like Minnesota and the Dakotas and those areas, and MISO South, like Arkansas and Louisiana. There's a big physical bottleneck there.
And everybody recognizes they need to build more north-south transmission in the middle of the country to bring cheap wind from the Dakotas and Minnesota down to the Arkansas, Louisiana regions and Mississippi. And the company that has been sort of at the center of blocking that has been Entergy. So, like, I think what we know from just observing the way the RTOs are working now is if they're prodded and pushed and given standards and sort of clearing out a lot of the bureaucratic process and fighting, they can plan regional transmission.
A lot of the components of the bill, some of which we haven't talked about yet but should, I think are designed to subdue some of that utility opposition to building more regional and inter-regional transmission as well. But it's a totally fair question. I mean, like what the planning and permitting reforms in the bill do is, they do this very carefully, but they take some power away from local interests like utilities and RTOs and they give it to FERC. They do that, I think, thoughtfully, which you would expect with Republican co-sponsors who care about federalism. So it's not like just totally throwing those interests by the wayside and giving the federal government all planning authority as much as some people would probably really like that. You know, seeking to create a more robust, empowered FERC when it comes to transmission planning.
David Pomerantz:
A fully reasonable question is, will FERC use those new powers effectively and responsibly? And that is probably a threat to the bill's efficacy looking forward. At the same time, the status quo is not working. And actually, I think this is an issue where FERC has shown an appetite for action and even some bipartisan action in recent years. So there's some reason for optimism that FERC will step up and use its new powers in an effective way.
Robinson Meyer:
My understanding is also that part of what happens as part of these planning processes and part of what happened in a grid-planning process is that if a need for a line is shown, then a third-party kind of outside transmission developers can step in and build that line and they get faster permitting and they get all these authorities involved. That right now they would never have. And so to some degree, there's a bit of a backstop here, which is like if an RTO through this process under FERC's oversight determines it needs a line and then the line like the utility doesn't build the line or the opposition to the line, like someone else can step in and build this line. And it's like you get all your papers stamped really quickly if the line is found to be beneficial.
David Pomerantz:
That's true. I mean, I would broadly characterize the transmission reforms in this legislation as being very pro-competition right now. And I think one of the sort of sticks in the bill is saying that if an RTO and the incumbent utilities don't step up to build these lines and competitive developers can, then there's a pathway for that to happen. There are a bunch of other ways that the bill encourages competition that I think are really important. And really, I think why they're so important is because, maybe to zoom out and say, because I'm not sure we've answered this question yet: Why haven't we built transmission? If it's so needed and it would lower rates and it's good for the energy transition, all these things, why have we not done this? And a lot of the debate around permitting has actually focused on the wrong factors here because it fits into other bigger political conversations around permitting reform. There's been a lot of talk around, landowner or conservation or tribal resistance. Those things are real. And as we discussed, there's titles in the bill to address some of that. But I would argue that the big reason we haven't built regional and inter-regional transmission in the last couple of decades has actually been utility resistance. And so maybe to come back to a question you asked earlier, like why would they resist? Like they build the transmission, right? I think the key thing here for people to understand is the reason transmission has so much value, like the reason it's good that it would lower rates to build interregional transmission lines, is because you're importing electricity from a place where it's cheaper to a place where it's more expensive. Well, that's great for ratepayers. But what about the company that owns that expensive electric generation? They stand to lose. Like that's undermining their assets.
Robinson Meyer:
And their monopoly, really, too, right?
David Pomerantz:
Yes, it's 100% undermining their monopoly. So, like, if I can, let me just give one or two examples of how utilities have responded to this threat because I think it speaks to what the bill is trying to solve. Next Era, ironically, a company that builds plenty of transmission, but I think that's kind of part of the point; they show how even utilities who build transmission can oppose lines if it threatens their own assets. So Next Era contributed over $20 million to a group called Mainers for Local Power. That was most of the money that group spent in support of a ballot referendum in 2021 to ban a transmission line to carry hydropower from Canada to New England. That initiative won. Courts later overruled it and the line went forward. But Next Era did more than that. That spending was public. Previously to that, they privately spent covert money on groups to route money to the Democratic Party in Maine and others to try to stop the line. Why'd they do that? Well, they own nuclear- and gas-generating assets in New England that would be undercut by that cheaper power. And then I mentioned Entergy before. Entergy is probably the poster child for this. So Entergy serves customers in Louisiana, Arkansas, and parts of Texas. And other utilities in the Southeast are actually not part of an RTO. They're probably the fiercest opponents to regional transmission.
Robinson Meyer:
The Southern Company and Georgia Powers of the world?
David Pomerantz:
Yes. Yes, that's right. Southern Company, Duke Energy, those companies. So Entergy was very happy not being in an RTO like at Southern Piers, they actually committed to join an RTO at the point of a gun. So they were facing a DOJ antitrust investigation into alleged anti-competitive transmission practices. This kind of gets back to your question, Rob, about whether they're natural monopolies or what. Well, the DOJ at this time felt that energy was surpassing its monopoly privileges, at least in the realm of transmission. So it made an interesting choice to join MISO, the mid-continent RTO team. And they joined Entergy to join MISO in 2013. There's actually really good data on what happened next. So MISO tracks its planning hours, like the hours it spends to plan transmission. And they went at the time of MISO joining in 2014 from 1,000 hours to, by 2018, almost 6,000 hours. So basically Entergy's role in MISO is to gum up the works. I mentioned earlier, MISO approved over $20 billion in regional lines in 2024. All of those lines went into the Midwest. None of them went into the South, where they might out-compete Entergy's plants.
There's a really good paper on this from an economist named Catherine Hausman that asked the question of, like, how much would transmission lines cost Entergy if they were built? And she found, I believe it was $850 million in net revenues that the company would lose out on if cheaper electricity were imported into its region. So that's what they stood to lose. And they did all kinds of kooky things to protect that monopoly. So Entergy actually had kind of like an undercover former executive attend MISO meetings without disclosing that they were working on behalf of Entergy, they co-opted their state regulators. So my colleagues at EPI did some great reporting on this, showing that Entergy coordinated with the Mississippi PSC staff and the PSC's outside consultants to push back on MISO's long-range planning. When NextEra was actually trying to build a line in East Texas that would have connected ERCOT to the rest of the grid, Entergy backed a law in the legislature that would block anybody but Entergy from building a line like that. And MISO later canceled the line. So companies like Entergy, NextEra, Southern Company has been probably the worst offender on this. They've all sought to undermine transmission development and kind of like an endless parade of chicanery. And even when it's not like undercover, hiring undercover consultants, Southern Company has like a decade-long record of just advocating to FERC that there's no new value from electric transmission, regional transmission to the Southeast. They've got it covered and there's no reason for reform at all.
Robinson Meyer:
I want to hit a few more things quickly. You mentioned basically Southern Company has opposed transmission lines repeatedly. And Southern Company, the Southeast, unlike other parts of the country, where, you know, in the Mid-Atlantic, we have PJM and New York and New England and the Midwest and Texas and California. There are electricity markets in Colorado. There's electricity markets and the electricity markets function and there's independent power producers. And there's still local utilities and the local utilities have a lot of monopoly power. But there's been successive efforts over time to reform the electricity provisioning structure that exists in those regions of the country. That is not true in the southeast. In the southeast, there are still monopoly utilities. And those monopoly utilities are Southern Company. There's George Power. There's a handful of others. They own all the power plants that produce electricity. They own the transmission lines that get the electricity to customers, and then they own the line that runs from the local substation into the customers' homes. There are exceptions to all of this, but in general, these are still old-fashioned, vertically integrated monopoly utilities. What does the bill do to make sure that organizations like Southern Company or the Southeast generally have additional transmission capacity?
David Pomerantz:
Yeah. So the most important thing the bill does is it covers them, which is something that in the flurry of lobbying over the next few weeks, Southern Company and Duke Energy, I expect, will try to get themselves exempted. So even though there's no RTO in the Southeast, they are covered by the various laws and orders from FERC that says they have to do transmission planning of some kind. And they would be covered by this bill as it currently stands based on the public draft. The problem is they're not doing any of that. Southern Company, as a good example, Southern Company is one of the biggest utility companies in the country. They own the monopoly utilities, the only monopoly investor-owned utility that serve Alabama, Mississippi, and Georgia. Georgia Power, Alabama Power, and Mississippi Power for electricity, at least. They're co-ops too, but they're the only game in town when it comes to large corporate utility companies. To date, it's not that Southern Company — and this is actually true for other utilities around the country too, but the problem is most pronounced in the Southeast— it's not that they don't build transmission. They build local transmission, right, that enjoys really high profits but is of questionable need and is much easier to permit because it often doesn't cross state lines. So the bill would cover Southern Company and Duke and the other Southeastern utilities for its planning components. It doesn't draw a distinction from the RTO regions. It says they have to do consolidated planning and then they have to sync up with their neighbors to match planning with them as well.
The Southeastern utilities will fight all that. Aggressively. Southern companies probably spend more money lobbying FERC than any other utility. NextEra, which is in Florida, owns the Florida Power and Light utility. Florida Power and Light and NextEra spend more money lobbying than any other utilities. Actually, for what it's worth on this point, we looked at Q3 lobbying disclosures in the Senate. And while the companies don't have to list, like, details, they don't have to say the position they took on legislation, you do see what they lobbied on. Almost all these companies lobbied on BAAJA. And while you don't see how much they spent on any one bill, just for a sense of scale, Southern Company only on its in-house lobbying team spent over $3 million dollars in the third quarter this year on federal lobbying. That's just in three months. They spent a million dollars a month lobbying Congress, and they do list transmission planning, interconnection, permitting, EEI — the Trade Association for Electric Utilities — they spent 1.6 million. Entrygy spent a little over half a million. This is a lot of money that is pouring into the coffers of utility lobbyists in the last few months to influence the bill. So far, they've been unsuccessful, which speaks to how down on their political luck utilities are right now.
But coming back to that local transmission, just quickly, this is where I think the bill seeks to do maybe the most unexpected and important thing that I would draw attention to. I think it's probably utilities' top priority to kill, which is that, like I said, currently utilities, it's not that they're building no transmission, they're building plenty of this local low-voltage transmission. The bill would allow, and this is totally new, would allow states to refer to FERC, a utility's local transmission planning. If they find that the utility is not picking efficient or cost-effective local projects, or that it's getting in the way of regional planning in the exact way I mentioned Entergy is doing, then the state, like a state like Georgia or Louisiana, could say, hey, FERC, can you help us out here? Because the reason we're not building the regional transmission we need is because the utility is blocking that and wasting all the customers' money on local transmission. And then a joint team between FERC investigators and the STEEC would be able to investigate that utility obstruction. And if they found findings that the utility was in fact doing that, they could take action. They could cut the profit rate the utility earns on those local lines. They could issue fines. I think the utilities will come gunning for that really hard. I actually think that's a really important part of this bill because it recognizes that the problem isn't that the utilities aren't spending money on transmission. It's that they're only spending on the kind that they like that doesn't threaten them. So if all the bill did was around permitting and aligning planning, I think that would be really important and worth doing. But this extra component, I think, will give the whole thing a lot more teeth.
Robinson Meyer:
Why can this kind of provision or just all the reforms that the bill would make to the transmission system, why can all of this happen now? Like, why is it happening now? Because I think, much like, say, the local and community banks, which have a lot of power in Congress, even more power in some respects than the investment banks, the utilities are supposed to have a lot of power in Congress, too. Almost every member of Congress, there's a local utility in their district, right? And so why is this happening now?
David Pomerantz:
Well, I think utilities are in their weakest political moment they have been in for a long time. It's bipartisan. And the simplest answer is we're going through a ratepayer revolt nationally where utilities have raised rates and bills on their customers repeatedly. I mean, investor-owned utilities rates have gone up faster than inflation. And by the way, one thing that's really important here is that it's not just like, oh, it's because transformers are more expensive and everything's more expensive and it's sort of a part of the economy. Public utilities like co-ops and municipally-owned utilities, have not raised rates faster than inflation. Their rates have actually gone up slower than inflation.
I'm going to parody myself here, but really a lot of this is about corporate greed. I mean, utilities at this moment where data centers are creating all this incredible new demand and even absent that, there'd be new demand from electrification. The pie for investor-owned utilities to make a lot of money should be growing bigger. Unfortunately, they kind of insist on having every slice of the pie. It's really turned the public against them dramatically. And you're seeing that public sentiment change, I think, reflected in politicians. And it's interestingly bipartisan, right? So maybe not surprising that Democrats who for some years have been conditioned to think that electric utilities are not always on the right side of climate. There are large corporations who are raising people's rates. Like you could kind of see where that would maybe be coming from. But it's just as much with Republicans. And that's probably the much more dramatic change, actually, is that from the reporting I've read, the Republican negotiators on the bill were very happy to sort of introduce utility accountability type provisions in there. And that just would have been unheard of five years ago.
Robinson Meyer:
There's a meme from SpongeBob SquarePants where Mr. Krabs, the cartoon crab character for those listeners who are Older Gen X and above, says, “Wait, I hate golf” in the middle of him golfing. He realizes he hates golf while he's golfing and people sub other things. And I think there's a story of this bill, which is basically Democrats going, “Wait, I hate permitting laws.” And Republicans going, “Wait, I hate utilities.” And yes, this bill basically being the product of those two realizations.
David Pomerantz:
I totally agree with that. I mean, some of this is just about people's bills going up and being mad at utilities and the political moment reflecting that. I do think there are some other things happening below the water level. One of the first things that made my eyebrows go up in the second Trump administration was in early 2025. The Trump administration's Department of Justice formed this anti-competitive regulations task force. It was in response to a Trump executive order. And it had paragraphs for different sectors of the economy. And on energy, it said it was seeking comment on, and I'm quoting this part, “laws and regulations can undermine reliability and affordability by protecting incumbent electricity providers from competition or disruptive innovation.” I mean, that could have been written by any environmental group in the country who's been battling incumbent utilities for the last several decades. And it was coming from the White House.
And so, like, traditionally, utilities have probably at the federal level been closer with Republicans than Democrats. They give more money to Republicans by about a two to one margin in most election cycles. But I think that has changed in the last couple of years. I mean, if you just look at Trump one versus Trump two, Trump's first Department of Energy was rife with staffers who came from electric industry, came from industry. That is not the case now. Like, there is a strong sort of anti-monopoly sentiment in parts of the Republican Party, whether it's always expressed is a different question. But I think you're seeing a lot of that bubbling up. And then with everything happening on energy prices and data centers, it sort of became a perfect storm for utilities to very quickly lose a lot of institutional power that they had previously held with Congress.
Robinson Meyer:
Do you think that this will continue just from what you're getting a sense of? Will this decline in utility political clout continue or is this limited to this moment? And if this bill doesn't pass, then utilities are going to close ranks. And there won't be another chance to take on utility power again.
David Pomerantz:
That's kind of the million-dollar political question from where I sit. On the one hand, unfortunately for ratepayers and customers, I don't see investors and utilities having like a sudden change of heart, and doing the things that they could and should do to arrest inflation and lower people's bills. I do want to make it clear, like, they could do that. There are a lot of things that utilities could do if they weren't looking at their next quarterly returns and just sort of maxing cap-ex, that they could do to bring people's bills down. Like, you could see that on the public side of the sector. I don't think they will. I think their incentives are too perverse. And because of that, I think they're going to keep getting themselves into trouble politically by going for rate increases and bill increases. And so I see that at least for the next couple of years as being somewhat secular. Some of it, by the way, is actually not wrong, right? Like the grid is aging and they do need to spend money. That's why it's unfortunate that they're not saving money where they can because they are kind of in a pickle there. So like, that part I see as sticking around at the same time on the other side of that argument.
I think one thing doing this work has taught me is that these companies have been around for over 100 years. If you read some of the history on some of the big political fights that investors and utilities were in the 1930s, they do the exact same things now. They did that. They spent on propaganda. They route their money through trade associations. They recruit other parts of the political economy, like labor, to back them with politicians for whom that constituency is important. Like, they have and this is something EPI has has really tried to investigate and highlight and ultimately address they have at the end of the day like a publicly subsidized pool of money of ratepayer money to spend on politics that almost no other industry has and so I think like they will regroup. Counting them out is probably a mistake. a utility CEO a couple weeks ago, I think for Eversource, got caught sort of saying the quiet part out loud, which is, I think he was trying to appease investors, but he said, “Look, I know you're hearing a lot of pretty nasty things about us from governors around the country, but those people, you know, they text me privately, we talk, and they'll tell me privately we're still friends and this will all blow over after the election.” So I think that is the hope of the sector, that, all this stuff, all this anger about prices, their political misfortunes right now, that only lasts through November and people will find something else to be angry about given enough time. I don't think that's true when so many Americans are being forced to choose between their medicine and groceries and rent and their utility bills. And you can see it in the polling. It's pretty dramatic, but that is what they'll be working toward, and they'll have a lot of political money to try to make people forget.
Robinson Meyer:
You observe basically that municipal utilities, publicly owned utilities, government owned utilities have not risen rates as fast as inflation. Well, investor owned utilities have risen rates much faster than inflation. So this was because of corporate greed. I think what's interesting is like whenever I hear this account, like this was not happening in the 2010s. It is happening now. And I assume greed being one of the seven deadly sins has a somewhat monotonic relationship in the economy. So what changed in the past few years that allowed these companies to exert their greed or their authority much more aggressively than they could, say, in the decades before? Like what has helped trigger this broader inflationary hike?
David Pomerantz:
Yeah, it's a little bit hard to pin down to a particular year because the way so much of utility finance works is like, a lot of their profitability is driven by the return that they're able to secure from regulators. And that return then compounds over years and years. So like, if a utility secures a really high return on equity in one year, like you're still seeing that drive its profit margins up, like 15, 20 years later, which makes it really hard to sort of draw lines between cause and effect, like what period at which they started making a lot more money versus what period the regulatory changes happened. One thing I'll say though is we have been in a period in recent years where, for a couple of reasons, the grid genuinely has needed investment, sort of alluded to this before, but one of those reasons is just like the cycling out of infrastructure. So a lot of the grid is pretty old. The other reason is because of increasing effects of extreme weather. So that's storms in the south and wildfires in the west and utility infrastructure, electric infrastructure is very exposed to all that stuff.
So we are in a period in the last decade of utilities genuinely needing to turn over a lot of that investment. They should be allowed to do that. The problem is they shouldn't be allowed to sort of rake people and laugh all the way to the bank along the way. I think probably if you ask most Americans and even just most politicians, like, should utilities be able to profit at really high levels from the stuff that they need to build or rebuild as a result of a hurricane or wildfire or some other tragedy, I think most people actually, if you ask them, would assume they were doing that at cost. Like, they wouldn't even understand that that can be such a big utility profit center in the first place. So I think it's a combination of really poor regulation at the state level by public utility commissions who are in charge of this stuff, and FERC for that matter, and being in a period of needed cap-ex investment for the grid.
Robinson Meyer:
Do you think the bill is good for data centers? And what's been your observation of how utilities have behaved during the data center boom?
David Pomerantz:
I think the bill is good for keeping data centers on the grid and making them pay more for it. So let me unpack that a little bit. Right now, data centers have this choice they have to make where they can either try to get a grid connection, which is hard because the grid is so broken. I mean, the sort of fundamental reason it's hard is because it's so hard to build transmission. And the bill seeks to address that. Because it's been really hard for data centers to get a grid connection, some of them are instead building these off-grid gas parks. We need a more malevolent sounding word than park, but like these behemoth facilities.
Robinson Meyer:
Totally islanded, basically massive, extremely dirty natural gas power plant fields.
David Pomerantz:
Yes, that's much better. These are cropping up in West Texas or cropping up in Ohio and other places. From my perspective, this is the worst possible outcome. Like, these are climate super emitters. To the extent you believe, and I do, that data center development that was done really well could lower people's rates. It takes away that possible upside, right? And I don't even know that it totally insulates people from rate impacts of data centers, like putting aside the pollution, like nothing is totally disconnected from supply chains, right? So even the off-grid data centers, that's part of the implicit promise there is that they're going to hold rate payers harmless. Well, they're still buying up all the turbines and all the transformers and like everything that the grid needs.
Robinson Meyer:
I think this is a particularly salient concern in Pennsylvania and Ohio because the Trump administration is trying to expedite 9 gigs of gas in Ohio. And like, I know there's a ton of gas in the Marcellus, it's completely conceivable to me that, like, production increases and we just get an extra 9 gigawatts of gas every day out of the Marcellus. But like, it just does seem to me that there's going to be a bottleneck somewhere and that is going to increase natural gas prices for everyone else in the Marcellus and everyone else in that basin. And it's not good for the climate, but that's how energy prices work in equilibrium. But it means we need to be realistic about what adding 9 gigawatts of quite dirty gas consumption would do to the entire region and that you can never prevent new energy demand of that scale from not doing something to everyone else's rates when you're talking about a system that can only grow so fast.
David Pomerantz:
Yes, I totally agree with that. I see that off-grid gas as basically like a failure mode for everybody. It's not really what the data center operators want. It's not really what the utilities want. They'd rather have the load. It's terrible for the climate and I don't think it does anything for ratepayers, so to me, the goal should be: data centers, if they're going to be built, that are on the grid paying their fair share and even like going beyond their fair share, right. There's some interesting fights actually happening between the data centers and the utilities, where in places like Virginia, some people are saying — and some of the hyperscalers, at least in selected cases, are volunteering for this, since utility capital is so expensive and that's where they make their profit, and what the data centers really want is speed, but they're somewhat price insensitive, or at least more price insensitive than they are speed sensitive: Like, why don't you displace all that utility financing with data center financing? Make them pay for the stuff we need on the grid.
That to me is the best case scenario, is that the data centers that are built are built on the grid, and they not only pay for their stuff, but they pay for the grid that we all want and need. What BAAJA does on data centers moves toward that goal. So it makes a policy change that allows utilities to charge data center customers for not only the cost of using specific transmission infrastructure that their data centers cause to be built, but also the cost of the existing power grid. And I think that's a significant change. Now, like, if your whole orientation toward this issue is to stop all data centers at any cost, independent of whether they're on-grid or off-grid, then, like, I guess a reform that makes the on-grid solution a little bit easier for data centers and everybody else — factories, hospitals, everybody, but also sort of makes them pay more — then maybe you don't like that. If your goal, from a climate perspective, is to have data centers that are going to be built on the grid be less polluting and contribute more toward funding the grid, then I think the bill is progress on that goal.
I also don't think those things are totally mutually independent. People can do whatever they want, of course, but people could support data center moratoria and support legislation that makes it more likely that data centers that are built are on the grid and paying their fair share. So anyway, that's what the bill does with regard to data centers.
Robinson Meyer:
One of the many problems that Americans seem to have with data centers is this disproportionate effect they have on electricity rates. And sometimes that's an effect of how the local electricity market works. And increasingly, it will become more and more just a result of the enormous electricity demand from data centers. And Americans have other problems with data centers, too. And people who fight data centers have lots of problems with them and would prefer to see a world with no data centers. And so this bill is not a data center bill, but it's trying to fix some problems around data centers in the energy system because it is an energy bill. And I think to some people, they look at that and they go, well, this is just going to make it easier to build data centers. And data centers are bad for X, Y, and Z reasons, not this reason. And that drives why, to their perspective, this can be a bad thing.
Notably, the politicians who have had the most success talking about data centers are not running on a — Abdul El-Sayed, Gina Hinojosa in Texas, right? They are actually not running on a “no data centers anywhere, anytime ever” platform. They're running on a “data centers if they solve this set of problems” platform. And the bill does in fact solve the energy set of problems around data centers.
David Pomerantz:
I think it at least moves the ball forward. One area where I'm somewhat sympathetic to people who say — I've seen this point made — that there's an asymmetrical time horizon issue in the bill where parts of the bill that will make it easier to build fossil fuel infrastructure could take effect pretty quickly, whereas the parts of the bill designed to encourage transmission development, I think, like we said, the tradeoffs may be a little more complicated than that, but that's the oversimplified version is that the transmission development parts of the bill will take some time. And I actually think that's pretty fair. People can make their own judgments about how they should treat the bill in light of that. The reason the transmission development portions of the bill will take some time to implement is because, like, mechanically the way a lot of this works is it kicks things to FERC to make rulemakings. And in those rulemakings — utilities will spend millions of dollars on lawyers to block the intentions of the bill. So I don't think that means the bill's transmission reforms aren't going to be effective. I do think what it means is if people want to see transmission reform happening, this bill passing would not be the finish line. If it overcomes the utility lobbying, which will be furious in the next two weeks or so or three weeks to either kill it or define it, even in that event, even if it basically passed as written, that will open a whole series of new fights.
And so to the extent this is a moment where Congress is interested and recognizing the detrimental effect that utilities are having on repairs, there's no reason they need to stop. I mean, there are a whole load of other things Congress could do, and certainly that dozens of new state legislatures and governors could do, to crack down on concentrated utility monopoly power that the utilities will use to subvert the transmission reforms in this bill if they pass.
Robinson Meyer:
As someone who's written basically saying we should create a continent-wide macro-grid of some kind, however we do it, it doesn't need to be the government who does it. I think that would make sense. It seems like that would be faster in a lot of ways, but it doesn't need to be. Like, this is the opening gun on that. This bill to me seems like the door opening to that possibility, like you cannot execute that plan without a piece of legislation like this passing but you cannot actually but it will not result it will produce a much better grid than the one we have. And if this, I think, bill were to pass alone, it would be an improvement, at least from the transmission perspective, on what exists right now. But this is like the door opening and then basically legislators, lawmakers, policymakers, potentially Democrats will have to walk through that door in the future. The John the Baptist of saving America's electricity grid — this is not the final salvation.
David Pomerantz:
I agree with that characterization 100%. And if there's an optimistic note to end on for that in terms of like what could happen next, what might happen next, I do think the fact that from all the reporting I've read, the transmission reforms and the bill have been relatively bipartisan, could mean that policymakers, both in Congress and hopefully at the state level, are ready to take the next steps in that, journey and not say, well, we sort of poked the big bad utilities in the eye this one time, but now let's all be friends again, but that they're actually ready to move consistently, which I agree with you, is critical. I think from a transmission and a grid perspective, the reforms in here are very necessary progress and wholly insufficient. So if they pass, there will be a lot of work to build on.
Robinson Meyer:
No matter what happens to this bill, I want to keep talking about it. I think it's such an important conversation. So I'm looking forward to continuing the conversation in the future. And in the meantime, David Pomerantz, thank you for joining us on Shift Key.
Courtesy of Climate Tech VC
Courtesy of Climate Tech VC
An antimony mine in Tajikistan. STRINGER/AFP via Getty Images
