By Rory D. Sweeney

FERC last week decided a seven-year-old dispute over the cost allocation for three Virginia Electric Power Co. transmission undergrounding projects, ruling the costs should be shared by all VEPCO network integration transmission service customers with loads in the state.

The commission reversed some findings from an administrative law judge’s 2016 initial decision while upholding the remainder (EL10-49-005). The commission also denied requests for rehearing of its March 2014 order that said VEPCO loads outside Virginia could not be allocated the incremental costs of the undergrounding, which was ordered by the state (EL10-49-004).

At issue was whether Old Dominion Electric Cooperative and North Carolina Electric Membership Corp. should be required to pay the additional costs of undergrounding VEPCO’s Pleasant View, DuPont Fabros and Garrisonville projects.

“The cost impact of the state’s actions is stark: Approximately 64% of the collective total costs of the projects — almost $150 million — was incurred to place the lines underground,” the commission said. “Considering the three projects together, placing the lines underground nearly tripled construction costs.”

The commission reversed Administrative Law Judge Michael Haubner’s determination on calculating the costs to be allocated to the two utilities for the projects, ruling that it should only include depreciation, return on capital investment, income taxes, accumulated deferred income taxes and property taxes.

It also reversed the judge’s determination that the methodology used to allocate the underground component of project costs should be used for future capital expenditures that don’t increase the projects’ capacity. FERC affirmed, however, its 2014 ruling on cost allocation, the ALJ’s determination that future capital expenditures that increase the projects’ capacity are beyond the scope of the proceeding and its determination of refunds, which are dated to March 17, 2010.

VEPCO must submit tariff revisions and rebill customers within 30 days, and file a refund report within 60 days.

The commission rejected challenges to its March 2014 order, which concluded that the undergrounding costs could not be collected from out-of-state loads because the additional cost was necessitated by state requirements, not reliability needs. The projects created “systemwide benefits,” so the costs should be allocated among wholesale customers rather than just retail, the commission said.

“The commission is not limited to adopting only a remedy put forward in the complaint or in briefing, as the rehearing applicants allege,” FERC said. “The commission has considerable discretion in fashioning remedies and can base that remedy on the record developed.”