By Rich Heidorn Jr.

FERC will hold a two-day technical conference to review its transmission policies, an initiative that may result in refinements to its Order 1000 rules on competition and its 2006 order offering incentives to developers.

Chairman Norman Bay announced Thursday that the commissioners will lead a technical conference on competitive transmission development processes June 27-28. Bay said the conference will look at issues including the use of cost containment provisions and the relationship of FERC incentives to competitive development (AD16-18).

Bay made the announcement after a staff presentation on the results of a data-gathering initiative to measure the effectiveness of Order 1000 and other transmission initiatives. (See related story, FERC Transmission Metrics Report IDs Potential Underinvestment.)

The technical conference also makes good on a promise the commission made in an order Thursday rejecting ITC Grid Development’s request that FERC bar transmission rate reductions in Order 1000 solicitations (EL15-86).

ITC’s petition for a declaratory order asked that the commission rule that winning bids subject to binding revenue requirements be deemed just and reasonable and treated similar to a “black box settlement.” It also sought a FERC ruling that such bids are entitled to Mobile-Sierra protection, meaning they cannot be changed as a result of a complaint unless it harms the public interest.

ITC said it plans to compete for transmission projects in SPP, MISO and potentially other areas with bids that include a projected annual transmission revenue requirement. It said the protection it sought would function similar to an abandoned plant incentive, which ensures developers recover their costs when projects are canceled due to events beyond their control.

‘Asymmetrical Risk’

Absent such protection, ITC said, developers will face an “asymmetrical risk.” The company said both MISO and SPP are requiring binding cost caps that leave developers liable for cost overruns. But if the developer is able to reduce costs, its savings could be negated as a result of a Federal Power Act Section 206 complaint.

The company’s petition attracted dozens of interventions from incumbent transmission owners, regulators, trade groups and industrial electric customers.

FERC sided with commenters who said ITC’s request should be considered as part of a broader rulemaking.

“ITC’s petition highlights important policy issues related to the potential benefits of cost containment proposals in the context of competitive transmission development. However, a petition for declaratory order is not the appropriate means for addressing these issues,” the commission ruled.

NextEra Request

The commission said the technical conference will be the forum for discussing the issues raised by ITC and by NextEra Energy Transmission West in a request it filed last year seeking transmission rate incentives for projects in CAISO. The commission responded to NextEra’s request in a January order that granted its request in part and set the company’s base return on equity request for settlement judge procedures (ER15-2239).

That order also promised a technical conference, which it said would consider how risks associated with cost containment proposals relate to the “first expectation” set forth in its 2012 policy statement, Promoting Transmission Investment Through Pricing Reform (RM11-26).

“The commission explained in the policy statement that an applicant seeking an incentive ROE would need to demonstrate that the proposed project faces risks and challenges that are not either already accounted for in the applicant’s base ROE or addressed through risk-reducing incentives.”

The order also said the conference would look at how risks assumed by developers submitting cost-capped bids relate to in the policy statement’s expectation that an applicant seeking an ROE incentive based on a project’s risks and challenges “demonstrate that it is taking appropriate steps and using appropriate mechanisms to minimize its risks during project development.”

Anecdotal Evidence, Rising Rates

Commissioner Tony Clark said stakeholders have told him “‘In this particular region we’re seeing this and we think it works well and we’re seeing this in other regions and we don’t think it works quite as well.’ So it’s just time to do an analysis of that in less an anecdotal way and more of a systematic way to see if there’s lessons that have been learned.”

Commissioner Colette Honorable said she also has been hearing from stakeholders about ways to improve transmission planning and cost allocation processes. “Goodness knows we have work to do there,” she said, citing interregional planning as “the tougher [nut] to crack.”

The failure of grid operators to agree on any interregional transmission projects has been a disappointment to developers and wind power advocates.

Honorable also called for the commission to balance the need for additional transmission against costs. “When I first began as [an Arkansas Public Service] commissioner in ’07, I think transmission costs were on average no more than 10% of a consumer’s bill,” she said. “I’m hearing now it’s as much as 20% in some areas.”