By Rory D. Sweeney
FERC on Thursday approved a rate settlement for a transmission project that may never happen.
The agreement settled a dispute over how much profit LS Power’s Northeast Transmission Development should receive for building transmission infrastructure across the Delaware River to address stability issues at New Jersey’s Artificial Island (ER16-453).
It was brokered between Northeast Transmission and several objectors in the case: Delaware Public Service Commission, American Municipal Power, Old Dominion Electric Cooperative and Delaware Municipal Electric Corporation.
However, the decision may be moot. Following complaints over cost allocation and a near doubling of the estimated cost, PJM suspended the project — PJM’s first Order 1000 competitive solicitation — pending a “comprehensive” staff analysis to be completed by February. (See PJM Board Halts Artificial Island Project, Orders Staff Analysis.)
The settlement includes a base return on equity, an equity cap and a three-year moratorium on any involved party petitioning for modifications to the deal:
- Northeast Transmission’s base ROE will be 9.85%, retroactive to February 1.
- A hypothetical capital structure of 50% equity/50% debt approved in an order issued by FERC in April will remain effective until PJM assumes control of the project.
- The equity component used by Northeast Transmission to calculate its weighted average cost of capital will be the lesser of 54.75% and the actual ratio of equity as a percentage of total capital.
- The moratorium is in effect until three years after PJM takes control of the project. It includes prohibitions on making Federal Power Act Section 205 or 206 filings or supporting others’ filings. Northeast Transmission also is barred from petitioning to include construction work in progress in its rate base.
Artificial Island is the site of three nuclear power plants owned by Public Service Enterprise Group. The proposed project would address stability issues that prevent PSEG’s Hope Creek and Salem 1 and 2 units from maximum generation. It would include a 230-kV line from the existing Salem substation in Lower Alloways Creek on the New Jersey side to a newly constructed Silver Run 230-kV substation in Delaware. The Delaware substation would connect the project with the existing Red Lion – Cartanza and Red Lion – Cedar Creek 230-kV transmission lines.