The Jetstream Initiative: Franchise Participation Model
The white paper “Alternative Business Models for Transmission Ownership and Operation,” produced by the Department of Energy, identifies the strengths and weaknesses of various public and private ownership and operating models to meet the tactical and strategic needs of the power grid.
The white paper concludes that all existing business models ranging from public, not-for-profit to private for-profit tend to favor local tactical solutions over regional strategic solutions. It further identifies favoritism and distortions of the market caused by consortiums as pernicious problems that are not satisfactorily addressed by any one ownership model.
From the standpoint of local demand, increased power production is interchangeable with increased transmission capacity. From the standpoint of rapid return on investment, power plants are favored over transmission lines. The inherited balkanization of regulation and ownership has lead to an environment of regulatory uncertainty that further discourages strategic transmission solutions. [1]
The Jetstream Initiative is strategic in scope but local in development and operation. Each leg of the proposed power grid will include mandated power transmission and power production capacity bundled into the franchise package. The franchise package for each leg further guarantees a wholesale market that will grow in proportion to the rate of completion of the entire grid.
Performance based compensation regulated by electronic monitoring and a standard compensation formula will encourage efficient operation on the part of the franchise holder. It will completely remove the favoritism and consortium problems identified in the white paper.
Since the path of a particular leg is established to meet national strategic rather than local concerns, known bottlenecks in the current grid can be addressed first. Since each leg will have a mandated power transmission capacity and wind turbine capacity, the system will grow in a predictable and balanced way.
We propose that the franchise terms be set and enforced by the Federal Electric Regulatory Commission. This will include rights of audit. All strategic objectives will be addressed by the terms of the franchise. The cost of administration will be drawn from franchise fees collectible periodically after a franchise is generating revenue with no net long term cost to the taxpayer.
Each project will include construction, operation and maintenance. It is possible that these phases can be bid out separately. We recommend that maintenance responsibilities be separated from operation and consolidated regionally so that maintenance is not deferred in favor of short term profit. Since the system will include computerized smart monitoring, the maintenance phase can be implemented programmatically.
Any entity, public, private or consortium that can meet the terms of the franchise is invited to participate. The franchise terms will take into account the likelihood that the franchise candidate can complete the entire development on schedule. Financing will include a mix of public and private investment and bonding sources. An explicit federal loan guarantee can be used to expedite the process, particularly in the early phases.
The public will be invited to purchase and hold National Alternative Energy Bonds which will be collateralized by the assets and earning capacity of the grid, federally insured, and should carry the AAA rating. This will encourage widespread savings and sound investment as opposed to the environment of speculation that lead to the current economic crisis.
We recommend that these bonds be federal tax free as a way of rapidly funding the initiative and growing the economy thus increasing revenue to the government in the form of tax on the resulting income.
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