FERC on Thursday approved an uncontested settlement on cost recovery and formula rates for LS Power Grid New York’s share of the $854 million Marcy-New Scotland transmission upgrade project, as well as various return on equity adders (ER20-716-004).
LS Power is developing the 93-mile Marcy-New Scotland project, also known as Segment A of NYISO’s AC Transmission Projects, in partnership with the New York Power Authority. NYISO selected the project in April 2019 in a competitive solicitation process to address a public policy transmission need approved by the state’s Public Service Commission. (See “Yes to Marcy-New Scotland” in NY PSC OKs Utility Storage Deployment, Cost Recovery.)
The commission accepted the revised tariff records filed on April 9, granted a waiver to make the changes effective May 27, 2020, and directed NYISO to make a compliance filing with updated revised tariff records in eTariff format within 61 days.
“We note that the settlement recharacterizes the adder for the RTO-Participation Incentive as a 50 basis-point incentive adder to account for ‘benefits to customers, including congestion relief,” the commission said, adding that approval of the settlement “does not constitute approval of, or precedent regarding, any principle or issue in this proceeding.”
The commission in May 2020 also granted LS Power a 50 basis-point ROE adder to reflect the risks and challenges associated with development of its portion of the transmission project (ROE Risk Adder).
At the time, FERC also granted LS Power’s requests for other incentives, including authorization “to create a regulatory asset to capitalize certain costs that would not otherwise be capitalized” and “to use a hypothetical capital structure, consisting of 47% debt and 53% equity, until the project achieves full commercial operation.”
The settlement provides for a base ROE of 9.65% and — in addition to the two 50 basis-point adders — a 100 basis-point adder to be applied to unforeseeable costs greater than 5% of the cost cap, third-party costs, and project development costs.
Planners expect the Marcy-New Scotland project to be in-service in December 2023.
The settling parties include LS Power, NYPA, NYPSC, Municipal Electric Utilities Association of New York, the City of New York and Multiple Intervenors, an unincorporated association of approximately 60 large industrial, commercial and institutional energy consumers with manufacturing and other facilities located throughout the state.