Independent transmission development contentious in California

The succession of Steve Berberich as President and CEO of the California ISO opens up the potential for independent transmission development to be competitive in the state for the first time in years, claimed several industry sources in interviews with TransmissionHub.

There is still much uncertainty as to how quickly this potential might be realized, however.

Berberich in June replaced Yakout Monsour, who had been President and CEO since 2005.

“There was a distinct bias against independent transmission at the Cal-ISO up till the time that the last CEO left,” Gary Ackerman, executive director for the Western Independent Transmission Group (WITG), claimed. “His attitude was that independent transmission, despite that there were two major projects in operation, was nothing but a bunch of people who want to do what the utilities did.”

Independent projects TransBay Cable and PATH 15 have been operational since 2010 and 2003, respectively. TransBay Cable, which was entirely privately financed, began its efforts in 2004 and began construction in 2007. 

The WITG’s member companies include Desert Southwest Transmission Project, Energy Capital Partners, LS Power, Pattern Energy Partners, StarTrans IO, Brookfield Transmission, Clean Line Energy Partners, SouthWestern Power Group, The Nevada Hydro Corporation and Tres Amigas.

Over 30 independent transmission projects were submitted to CAISO for consideration in its transmission planning process during the 2008-2010 open window period, but none was approved, Ackerman said.

California Transmission Lines

Monsour’s preference in determining which projects to include was for utilities, which have a tariff obligation to interconnect new generation projects to the grid, Ackerman claimed. He added, though, that “a very literal interpretation of the existing tariff suggests that there is really no space for independent transmission unless it wants to be merchant,” Ackerman said.

Ackerman and David Kates, project manager for Nevada Hydro, claimed that independent transmission developers have also seen CAISO approve near replicas of their projects proposed by utilities.

Energy Capital Partners proposed a line, which would have entailed upgrades to the Eagle Mountain substation owned by Edison International (NYSE:EIX), Ackerman said, speaking on the private equity firm’s behalf. That project was not approved, but a project similar to it was proposed by Edison International subsidiary Southern California Edison, though it involved the construction of a new substation, Red Bluff.

“[SoCalEd] had an obligation to build the Red Bluff Substation to interconnect renewable power generators, which had requested interconnection to the CAISO system, in accordance with applicable FERC rules and the Cal-ISO tariffs,” Kevin Payne, SoCalEd’s vice president of engineering and technical services, said in an email to TransmissionHub.

The California ISO denied any claim that it has discriminated against independent transmission.

“The ISO has developed amendments to its tariff in the last few years that provide opportunities for independent developers to compete on a level playing field with the incumbent participating transmission owners to build and own ratepayer-funded projects,” CAISO said. 

“The process for changing the rules, obtaining FERC approvals, and then implementing the new rules has not been fast enough for some companies that want to build ratepayer-funded transmission projects,” CAISO said. “As a result, some of them continue to assert – without foundation – that the ISO has unfairly excluded them from such opportunities. The truth, however, is that tariff changes of this magnitude are controversial and take time to design and implement.”

TransBay Cable’s experience with CAISO was not onerous or contentious, a spokesman for the company said.

“Cal-ISO can certainly be tough,” he said. He added that given the importance that energy plays in California, that toughness was not necessarily inappropriate.

CAISO CEO Berberich, in a recent meeting with some of WITG’s members, expressed openness to independent transmission, said Ackerman and Bob Mooney, project manager for Desert Southwest Transmission Project.

Mooney cautioned, however, that the number of players involved in the California planning process might stymie progress.

“There are many stakeholders influencing the CAISO and CPUC,” he said, including investor owned utilities, many publicly owned utilities and others. 

FERC Order 1000, which requires regional and inter-regional transmission planning efforts, may also slow things down.

“FERC’s recent Order 1000 has brought the debate about competition in transmission and transmission cost allocation into the open, but the impact of the order is still uncertain,” SCE’s Payne said.

Current independent transmission development

Two independent developers are in advanced stages of seeking approval for their projects: Nevada Hydro and Desert Southwest Transmission Project.

Nevada Hydro has proposed the Talega-Escondido/Valley-Serrano project, a 30-mile, 500kV transmission line to run north to south between San Diego Gas & Electric’s and Southern California Edison transmission lines. The project is estimated to cost $650m, according to project manager David Kates.

Nevada Hydro has tried to bypass CAISO by seeking approval from the California Public Utilities Commission, however. The CPUC would issue to Nevada Hydro a certificate of public convenience and necessity, which Kates said could be sufficient to begin construction.

Desert Southwest applied as an economic project under the CAISO tariff in 2009. Afterwards, it submitted to and received from the Federal Energy Regulatory Commission an order delineating the rates to be applied for how the company would be compensated, project manager Bob Mooney said.

“We simply, at this point, never got a response from CAISO about our filing,” Mooney said. “They proposed a tariff, and FERC allowed them to change the tariff. So we’re still kind of in never-neverland. We might be found to be needed at some point, but there’s not a well-defined process to that end.”

Mooney said Desert Southwest can still go forward with its FERC order, modify the project as a merchant and seek subscriptions. The company has received all the necessary environmental permits and has to secure rights to a few miles of private land, on which there is only one physical residence, Mooney said. The remaining 110 miles of land are managed by the Bureau of Land Management, which in 2007 granted the project the necessary rights of way.

FERC Order 1000 creates another element of uncertainty, and may require a developer to spend “multiple million dollars” to have a fully permitted transmission project, Mooney said. “There’s not a clear path to approval by anyone.”

Desert Southwest began work in 1999 on its 120-mile, 500-kV line, which would deliver energy to the Blythe, Calif., area. The project is estimated to cost $400m, and if approved, could be in service in three years, Mooney said.

About Rosy Lum 525 Articles
Rosy Lum, Analyst for TransmissionHub, has been covering the U.S. energy industry since 2007. She began her career in energy journalism at SNL Financial, for which she established a New York news desk. She covered topics ranging from energy finance and renewable policies and incentives, to master limited partnerships and ETFs. Thereafter, she honed her energy and utility focus at the Financial Times' dealReporter, where she covered and broke oil and gas and utility mergers and acquisitions.