FERC approved LS Power’s request for rate incentives for the first competitive project surfacing from MISO’s long-range transmission plan (LRTP).
On Tuesday, FERC allowed LS Power’s Republic Transmission an abandoned plant incentive if the $77 million Hiple 345-kV line at the Indiana-Michigan border is canceled or abandoned for reasons beyond Republic’s control (ER23-1924). The commission’s approval elicited a rebuke of transmission rate incentives in general from Commissioner Mark Christie.
The Hiple line is the first competitively bid line segment to emerge from MISO’s LRTP and could be taken from Republic through Indiana’s new right of first refusal law, which gives incumbent developers the right to build projects recommended by RTOs. MISO awarded Republic the right to construction in June. (See MISO Picks Republic Transmission for 1st LRTP Competitive Project.)
Republic acknowledged that its status as selected developer could be in jeopardy in its request for the abandoned plant incentive. It said it “faces risks from incumbent utility opposition to competitive transmission” and that “even though the law did not take effect until July 1, 2023, the incumbent transmission owner may litigate and oppose Republic’s construction and ownership of the project in other ways.”
Competitive developer NextEra Energy lost its bid to construct what would have been the first competitive transmission project in MISO South because of Texas’ ROFR law. FERC recently denied NextEra’s request for a stay on MISO’s termination of the project. (See FERC Briefs: Orders Addressing Arguments Raised on Rehearing.) Next Era this week filed a petition for review with the D.C. Circuit Court of Appeals.
Republic also said it faces uncertainty over “significant regulatory and permitting, financial and construction risks,” including the unpredictability of the future fleet transition, which is the onus behind the line. The point of interconnection with Michigan transmission developer METC at the Indiana-Michigan border also is uncertain and will be determined by the route approved by the Michigan Public Service Commission.
FERC said Republic “demonstrated a nexus between its requested incentive and its planned investment.”
“We find that Republic has demonstrated that the Hiple project faces certain regulatory, environmental and siting risks that are beyond Republic’s control and could lead to the Hiple project’s abandonment,” FERC said.
Commissioner Christie said that while he agreed with FERC’s decision, it is time to “revisit the array of incentives offered to transmission developers, including the abandoned plant incentive … as well as the [construction work in progress] incentive and the RTO participation adder.”
Christie said FERC granting rate incentives of late “has become nothing more than a check-the-box exercise,” with no real examination as to whether developers are shouldering substantial challenges and risks.
He said while the construction work in progress incentive “effectively makes consumers the bank” for transmission projects, the abandoned plant incentive forces them to be insurers as well.
“This incentive allows transmission developers to recover from consumers the costs of investments in projects that fail to materialize and thus do not benefit consumers,” Christie wrote. He asked that FERC reevaluate the incentives to “ensure that all the costs and risks associated with transmission construction are not unfairly inflicted on consumers while transmission developers and owners stand to gain all the financial reward.”
Finally, Christie said he supported limiting the RTO participation adder to the “three years following a transmitting utility’s initial membership in an RTO.”
