Rate incentives for reliability projects should continue, MISO transmission group says

FERC should continue to reward rate incentives to transmission projects designated for reliability purposes, and should not limit those incentives to initial cost estimates, the Midwest ISO Transmission Owners said.

The Midwest ISO Transmission Owners on Oct. 7 filed their reply comments to FERC’s notice of inquiry on Order 679. The order, issued in 2006, provides regulations to promote transmission investment through pricing reform. The Midwest ISO Transmission Owners comprise a group of investor-owned transmission owners, cooperatives and municipals.

“[T]he Commission’s current incentive policies promulgated in Order No. 679 have fostered significant new investment in needed transmission expansion, and with limited exceptions, should be retained,” they said.

Allowing rate incentives for projects being built to meet reliability requirements is consistent with section 219 of the Federal Power Act, they argued.

Those who oppose the idea that a project should receive incentives for reliability if the project meets other requirements of FERC Order 679 ignore that incentives ameliorate project risk, the group said. Furthermore, rate incentives focus on whether a project facilitates reliability or reduces the costs of power, and not on whether the project is being built as an economic project or in response to a reliability or contractual requirement.

That a reliability project can also be “non-routine” further reinforces the need for these types of projects to receive rate incentives, as non-routine projects face the same risks as do economic or public policy projects, such as siting delays, geographical challenges and, if a large-scale project, long lead times, the group said.

“Granting incentives may be necessary to allow the applicant to maintain cash flow, avoid degradation to its credit metrics and ratings, and obtain reasonably priced capital,” they said, noting that FERC has denied rate incentive requests when applicants have failed to show that the project is non-routine in scope.

Detractors also ignore that a line may be constructed to meet multiple needs, such as a multi-value project, the MISO transmission owners claimed, adding that MVP lines should not lose their status if they meet a reliability need in addition to an economic or public policy need. 

“Order No. 1000 requires transmission providers to ‘provide for the consideration of transmission needs driven by public policy requirements in the local and regional transmission planning processes’ along with transmission needs related to reliability issues and economic considerations,” they argued. “This also means a project should not be ineligible for transmission rate incentives because it meets both public policy and reliability needs.”

The MISO Transmission Owners also argued that rate incentives should not be limited to cost estimates provided during the regional planning process, as cost estimates change as projects progress.

“Transmission developers face potential cost increases due to changes in siting required by state siting authorities, delays in obtaining often numerous regulatory approvals, and other factors that are unanticipated or beyond the developer’s control,” they 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.