FERC on Thursday approved incentive rates for a project to upgrade an 18-mile wooden-pole transmission line to steel towers (EL21-15).
The Citizens-S Line in far Southern California is owned by Citizens Energy, a nonprofit Massachusetts firm founded by former U.S. Rep. Joseph P. Kennedy II. It connects the Imperial Irrigation District’s (IID) El Centro substation to the Imperial Valley substation, jointly owned by IID and San Diego Gas & Electric.
CAISO identified upgrades to the S-Line as an “economic-driven project” in its 2017-2018 transmission plan.
“The upgrades were recognized as providing economic benefits to the ISO by alleviating limitations on the use of the ISO system caused by parallel flows (loop flows) identified in previous planning study results, reducing local capacity needs materially in the combined San Diego-Imperial Valley areas as well as reducing market congestion on the ISO system — which totaled $6 million in 2015 and 2016,” CAISO said in the transmission plan.
CAISO estimated the upgrade would reduce local capacity needs in the San Diego-Imperial Valley areas by 213 MW, producing annual benefits of $8 million to $16 million, and reduce congestion, benefitting ratepayers by $2.82 million per year.
Citizens Energy agreed to finance the capital costs of the project up to $40 million through a combination of debt and equity. It did so in exchange for a 40-year lease on transfer capability and promised to turn over 50% of its after-tax profits to assist low-income ratepayers in the Imperial Valley, an agricultural area with thousands of farmworkers.
Citizens and CAISO agreed to a 50-basis-point adder for participation in the ISO, a 30-year levelized rate of recovery for capital requirements and a formula rate to recover its actual operating costs. Citizens also requested recovery of 100% of prudently incurred development and construction costs if the project was abandoned for reasons outside the company’s control.
“Citizens S-Line asserts that its proposed rate methodology will result in just and reasonable rates,” that the plan is necessary to obtain financing, and that it will provide consumers with rate stability over time, FERC wrote.
Under Federal Power Act Section 219, an applicant for incentive rates must show the “facilities for which it seeks incentives either ensure reliability or reduce the cost of delivered power by reducing transmission congestion.” FERC agreed with Citizens and CAISO that the project could meet both goals and approved the transmission owner’s incentive rate request.
“We find that the Citizens-S Line is entitled to the rebuttable presumption that the project will either ensure reliability or reduce the cost of delivering power by reducing transmission congestion,” the commission wrote. It said the risks Citizens was taking entitled it to the incentives it sought from CAISO, including the abandoned plant incentive.