FERC on May 21 rejected PacifiCorp’s request to include in its Open Access Transmission Tariff the interest it pays when refunding advance payments such as interconnection study deposits (ER24-1595).
In a March 22 filing, PacifiCorp described the interest payments as “prudently incurred costs.”
The company noted that FERC Order 2023 requires interest to be paid on refunds of interconnection study deposits, commercial readiness deposits and payments in lieu of site control. PacifiCorp said its Large Generator Interconnection Procedures also include that requirement.
The deposits are refunded when an interconnection customer reaches commercial operation or withdraws from the interconnection queue, the company said. Interconnection study deposits are refunded after deducting study costs PacifiCorp paid for, while commercial readiness deposits are refunded less any withdrawal penalties owed. Site control deposits are fully refunded.
PacifiCorp asked to include the interest payments for those refunds in its Annual Transmission Revenue Requirement that is part of the OATT. And in response to comments during a previous proceeding, the company said it would deduct from the interest expense the interest it earned while holding the deposits.
“The interest expense is a legitimate and required cost for PacifiCorp to provide interconnection service,” the company said.
The filing drew protests from Bonneville Power Administration and a group of customers comprising Utah Associated Municipal Power Systems, Utah Municipal Power Agency, and Deseret Generation and Transmission Cooperative.
The Utah customers said PacifiCorp’s proposal would inappropriately shift costs from generators seeking interconnections to transmission customers.
BPA said PacifiCorp hadn’t been clear on how it would determine the interest expense, or explained why it should have discretion in calculating its interest income on the deposits.
BPA also argued that under a 2013 settlement that implemented a formula rate for PacifiCorp’s transmission service, single-issue rate filings related to the formula rate are prohibited.
FERC rejected PacifiCorp’s proposed formula rate revision, saying the company had not shown that its plan to recover interest expense on the deposits was just and reasonable.
“PacifiCorp has not demonstrated that its proposal would restrict the use of the deposit funds,” the commission wrote. “Although PacifiCorp represents that it currently puts the deposit funds in short-term, daily rate interest-bearing accounts, the record in this proceeding does not indicate that PacifiCorp is required to do so.”
While not addressing all of the protesters’ objections, the commission said PacifiCorp hadn’t fully explained how it would calculate interest expense.
According to its filing, PacifiCorp’s interest expense in 2023 amounted to $15.1 million, which was offset by $9.4 million in interest earned on the deposits, for a net interest expense of $5.7 million. The rate impact of that expense would be about 1%, according to the company, which noted that the interest expense would vary each year.
PacifiCorp said it had tried to work with BPA and other customers on its interest-expense proposal. The company sent its proposed methodology to them in February and followed up with a conference call in March.