By Tom Kleckner

GridLiance arrived on the RTO scene in March billed as the nation’s first competitive transmission company focused on collaborating with public power entities. It came with a pedigree of experienced transmission executives from ITC Holdings and the deep pockets of private equity giant The Blackstone Group.

Now, the company has made its first two acquisitions — 420 miles of 69-kV and 115-kV lines in Missouri and Oklahoma — and announced plans to bid on SPP’s first competitive transmission project.

Incorporated last year, the company unveiled its business plan in March with the announcement that it and its affiliates had entered into 30-year development agreements with the Missouri Joint Municipal Electric Utility Commission (MJMEUC) and the Oklahoma Municipal Power Authority (OMPA), giving them the exclusive right to jointly plan, construct and operate the agencies’ transmission infrastructure in SPP and MISO.

On Sept. 1, GridLiance announced a pair of acquisitions that will give it ownership of the transmission assets of Nixa, Mo., a member of MJMEUC, and of Tri-County Electric Cooperative in the Oklahoma panhandle. Both acquisitions are expected to be completed by year’s end.

ROE Request

On the same day as the announcement, GridLiance subsidiary South Central MCN filed a request with FERC seeking a return on equity of 11.4%, including a 50 basis points (bps) adder for RTO participation and a 100 bps adder as a standalone transmission company (ER15-2594). The company asked for approval of an initial capital structure of 60% equity and 40% long-term debt.

South Central said FERC should grant the incentives to the company, “given its unique business model, which will provide benefits to current and future customers of the wholesale electric grid, including its public power partners.”

The company said it intends to submit a bid to SPP to build the North Liberal-Walkemeyer 115-kV project and requested commission approval to collect construction work in progress if it wins the solicitation. (See SPP Issues RFP for 115-kV Transmission Project.)

South Central will be the operating company for GridLiance in SPP. In MISO, the company will operate under the Midcontinent MCN.

Investment Opportunities, Reliability Benefits

In announcing the acquisitions, GridLiance president and CEO Ed Rahill said the deals allow Nixa and Tri-County to shift their operations and regulatory risk to GridLiance while gaining access to investment opportunities and funding for previously unaffordable transmission projects, including access to — and delivery of — wind energy.

Participating systems will see reliability benefits, according to Rahill, because public power systems are often excluded from regional planning models, leaving many served by a single radial feed, vulnerable to outages if that connection is lost.

“Operating and maintaining transmission infrastructure is expensive without scale, often taking valuable resources away from other core municipal responsibilities,” Rahill said.

Experienced Team

Rahill is one of several transmission and public power veterans who comprise the leadership team of the company, which has offices in Chicago, Kansas City and Austin, Texas.

Rahill was part of the of the management team that acquired ITC Transmission from DTE Energy in 2003 and managed its initial public offering in 2005. As president of ITC Grid Development, he oversaw ITC Great Plains’ greenfield start-up and the development of $500 million in transmission in SPP.

Noman Williams, GridLiance’s senior vice president of engineering and operations, is former vice president of transmission policy and compliance for Sunflower Electric Power, which runs six rural electric distribution cooperatives in central and western Kansas. He has filled several key leadership roles within SPP, and currently serves as chair of the RTO’s most important member body, the Market and Operations Policy Committee.

Like Rahill, Senior Vice President of Business Development Carl Huslig comes from ITC, where he was president of ITC Great Plains. He has worked extensively with SPP and MISO stakeholder groups during his 20-plus years in the industry, leading an SPP task force that paved the way for independent transmission companies.

General Counsel Beth Emery held the same titles at CAISO and San Antonio’s CPS Energy, the nation’s largest municipal utility. (Emery was joined in the company’s Sept. 1 filing to FERC by former Commissioner William L. Massey, now with Covington and Burling.)

Blackstone

The company is being financed by Blackstone Energy Partners, which has invested more than $8 billion of equity globally across a broad range of energy industry sectors. Blackstone Senior Managing Director Sean Klimczak, who oversees the firm’s investments in the transmission and power sectors, said the company saw an opportunity to fill an underserved market for 40 million public power customers.

Public power has “been largely excluded from participating in the planning of and investment in new transmission infrastructure as well as the financial and service reliability benefits they provide to customers,” Rahill said at the announcement of GridLiance’s incorporation in March 2014.

GridLiance’s partnerships with public power allow it to compete with investor-owned utilities that are building most transmission in MISO and SPP, the company says. About 90% of transmission projects in MISO have been awarded to ITC, Xcel, MidAmerican Energy, Ameren and American Transmission Co., the company says. In SPP, IOUs have been responsible for all but a few projects.

Meanwhile, public power rates have been increasing, with MJMEUC’s rates doubling under SPP’s highway-byway cost allocation. And 70% of public power transmission lines and transformers are at least 25 years old.

“Working together, we will have the necessary scale and resources to more effectively invest in, develop and construct new transmission infrastructure,” Rahill said.

Outsourcing

The deals announced Sept. 1 will give GridLiance operational responsibility for Tri-County’s 410 miles of transmission and Nixa’s 10-mile, 69-kV transmission line between Springfield and the Southwest Power Administration.

Jack Perkins, CEO of Tri-County, which has about 23,000 customer meters in the Oklahoma Panhandle, said the deal will allow the co-op to complete transmission reliability projects that it could not have otherwise afforded while outsourcing transmission operations. “Additionally, we will be able to reallocate funding and resources to upgrade our distribution system,” he said.

Doug Colvin, public works director for Nixa, said it no longer makes sense for the city of 21,000 to own its transmission infrastructure. “As regulatory requirements became increasingly complex, the city evaluated a number of options to protect our residents against rising costs and, at the same time, maintain our high reliability standards,” he said. “The GridLiance transaction ensures that we can meet these important requirements, as well as opens the door for our involvement in new transmission projects that can offset rate increases and provides us a much needed seat at the planning table.”