By Amanda Durish Cook

Transmission owner GridLiance Heartland has gained access to the MISO system through an acquisition of transmission lines in Illinois and Kentucky after an unsuccessful first attempt to join the RTO.

In a trio of orders Jan. 31, FERC conditionally approved GridLiance Heartland’s acquisition of eight transmission assets from Vistra Energy subsidiary Electric Energy Inc. (EEI) (EC20-13), set an annual transmission revenue requirement at about $7.4 million (ER19-2050-002) and OK’d a separate open access transmission tariff (OATT) for the two lines that won’t be under MISO functional control immediately (ER19-2092, et al.).

The third order also established settlement judge proceedings to examine the reasonableness of GridLiance Heartland proposing the MISO base return on equity in the OATT for non-MISO assets. GridLiance proposed a 10.32% ROE for the OATT, the ROE rate in use in MISO at the time of its filing in December 2018. FERC in late November adopted a new 9.88% return on equity for transmission owners. (See FERC Adopts ROE Methodology in MISO Complaints.)

The deal involves two 161-kV substations and six 161-kV transmission lines 8-10 miles in length that cross the Ohio River and connect to the EEI-owned Joppa Power Plant in southern Illinois. Vistra owns an 80% interest in EEI, with Kentucky Utilities controlling the remaining 20%. The assets are currently outside the MISO footprint. GridLiance said it would transfer all assets to MISO control by 2022: Four of the six lines will be turned over immediately to MISO, while two must wait for existing power supply agreements to run their course.

The six lines were originally constructed to power the U.S. Department of Energy’s now-defunct Paducah Gaseous Diffusion Plant uranium facility. EEI reconfigured its transmission system to disconnect from the Paducah plant in 2017. Four of the lines connect with TVA, while the other two connect with the Louisville Gas & Electric/Kentucky Utilities balancing authority area. The lines currently don’t serve any load.

MISO’s Board of Directors approved GridLiance Heartland’s application to join the RTO as a transmission-owning member in September 2018 subject to the outcome of the proposed transaction.

FERC had blocked the transaction in August, deciding GridLiance and EEI failed to prove the acquisition wouldn’t adversely affect MISO rates. (See FERC Blocks GridLiance’s Door into MISO.) The move will increase revenue requirements in the Ameren Illinois transmission pricing zone by about 2.6%.

GridLiance proposed rate mitigation credits to offset the $3.6-million difference between the projected revenue requirements of EEI and itself. The TO said the credits would appear in accounting as a fixed revenue credit and lower its revenue requirement every year for the five years after MISO takes control of the lines.

GridLiance said the credits “balance the risks and rewards for a start-up transco with a small initial rate base.” It also noted that it plans to participate in “proactive” planning studies on how the lines “may be optimized to solve documented transmission constraints.” The company said the lines may prove useful in lessening the strain on the transfer constraint linking MISO’s Midwest and South subregions.

GridLiance also noted that as a MISO member, it could help address “underinvestment” in transmission by MISO’s municipal and cooperative utilities.

Ameren Objects

The commission approved the deal over multiple objections from Ameren.

Ameren faulted GridLiance for using estimated, “snapshot in time” revenue requirements for its rate credits rather than actual amounts. It also said the commission was failing to consider that GridLiance would seek recovery of its $23.6 million regulatory asset that FERC approved last year. Ameren asked that FERC create further protections from the impact of GridLiance’s regulatory asset costs.

The company also said GridLiance’s claims of future benefits to MISO or the Ameren pricing zone were “tenuous.”

But FERC said GridLiance’s rate mitigation proposal addressed its concerns over the rate increase. The commission also said GridLiance Heartland is not to recover any amounts related to its regulatory asset during the first five-year rate mitigation.

“The regulatory asset is related to past development activities by GridLiance Heartland and not to costs that [EEI] would have incurred if it had retained ownership,” FERC warned.

FERC accepted GridLiance’s unorthodox rate mitigation proposal instead of the more commonplace five-year rate freeze based on the company’s assertation that forces out of its control could have increased even EEI’s revenue requirement, such as storm damage, or a new NERC requirement.

Ameren also protested the use of a stand-alone OATT for the non-MISO lines, saying it represented a “step backward in terms of the efficiencies created by having an RTO footprint.”

“We are not persuaded by Ameren’s argument that this proposal is a step backwards because GridLiance Heartland is eschewing the efficiencies of an RTO footprint. RTO participation is not mandatory and Order No. 888 requires that an OATT be on file in order to provide transmission service,” FERC responded.

GridLiance said it also plans to use the OATT to provide transmission service over “any future facilities it acquires in the MISO region but does not transfer to MISO’s functional control.”

FERC granted a one-time waiver of Order 1000’s competition requirements for the OATT. The commission said since GridLiance is proposing to transfer control of the lines and substations to MISO, it afforded no “practicable opportunity” for the TO to adhere to Order 1000. The commission noted the “unique circumstances” present in the transaction and said the waiver would be reassessed if GridLiance decides to build additional facilities under the same OATT.