The California ISO‘s proposal to address right of first refusal (ROFR) concerns provides a framework for more construction opportunities for independent transmission than would be available just by meeting FERC Order 1000’s related requirements, the ISO said in its Order 1000 compliance filing Oct. 11.
First, to comply with the order, which mandates that ROFR language be removed from transmission tariffs, Cal-ISO tweaked its definition of high- and low-voltage facilities based on voltage and location, and renamed them “regional” and “local” facilities, respectively.
Local facilities are defined as those below 200-kV that are not proposed as part of a regional transmission plan (and therefore are not subject to regional cost allocation) and fall within a local transmission owner’s footprint.
All facilities that do not qualify as “local” are considered regional, and are therefore subject to competitive solicitation and cost allocation.
To enforce this revision, Cal-ISO added language to its tariff further clarifying that it has the discretion to determine whether a regional solution is more efficient and cost-effective than any local solution or solutions.
“In doing so, the ISO will also assess whether it can replace any individual local project or multiple local projects with more efficient, cost-effective regional projects, which could be open to competition,” Cal-ISO said.
If a needed transmission element can be classified as both a local and a regional facility, Cal-ISO will conduct a competitive solicitation for the entire facility, unless it can “reasonably separate construction responsibility for the local and regional portions,” Cal-ISO said.
“The ISO assumes that the commission’s preference under Order No. 1000 would be to treat the transmission element as a regional transmission facility for construction responsibility purposes. That will increase the opportunities for independent transmission providers to compete to build transmission,” the ISO said.
Cal-ISO noted that Order 1000 would allow existing transmission owners to build 230-kV, 500-kV and above transmission facilities, so long as the facilities were located entirely within their existing retail service territory or footprint and the transmission owners do not seek regional cost allocation.
Further, Order 1000 would not require that local transmission facilities be subject to approval at the regional level unless the incumbent transmission provider sought regional cost allocation for them, the ISO said.
Cal-ISO’s proposal, meanwhile, limits the definition of local transmission facilities to those that would be built by participating transmission owners and have voltage levels below 200-kV.
The ISO also proposes that the right to build a facility should not depend on whether the participating transmission owner decides to seek regional cost allocation.
“Rather, the ISO’s process eliminates any discretion on the part of the individual transmission owner and sets forth ex ante which transmission facilities are eligible for regional cost allocation and which are not,” Cal-ISO said. “The ISO’s framework will provide more construction opportunities for independent transmission providers than under the framework enunciated in Order No. 1000.”
The ISO also has proposed eliminating current tariff language that allows incumbents to have the exclusive right to build on their own rights of way (ROWs) and clarifies their ROFR with respect to upgrades on existing facilities.
If two or more qualified sponsors want to build and own the same project, Cal-ISO will facilitate collaboration between them to propose a single joint project. If they are unable to collaborate and the project sponsors will seek siting approval from the same siting authority, such as the California Public Utilities Commission (CPUC), the ISO will defer to that authority.
If the project sponsors will seek siting approval from different authorities, the ISO itself will determine which sponsor should build and own the project and recover its costs in the ISO’s transmission access charge (TAC).
“The ISO makes its determination based a comparative analysis of the degree to [which] each project sponsor meets the non- discriminatory criteria specified in the tariff,” Cal-ISO said.
According to the filing, criteria include the demonstrated cost containment capabilities of the project sponsor, including any binding agreement to a cost capital; specific advantages or strengths that a project sponsor has to build and own the project; a comparative assessment of the initial qualification criteria; a project sponsor’s financial resources and capabilities; the project sponsor’s technical and engineering qualifications; the project sponsor’s current and expected capabilities to finance, license and construct the facility and then to own and maintain it; and the project sponsor’s prior record regarding the construction and maintenance of any transmission facilities.
Cal-ISO tariff would already have yielded more competition
In support of its claim that its proposal will provide more opportunities for non-incumbent transmission developers than would be available by merely meeting Order 1000 requirements, the ISO pointed to portions of its recent transmission plans.
Had the ISO’s proposed compliance tariff been in effect during its 2011-2012 planning cycle, four projects would have been treated as regional, subject to competition; one would have been defined as having individual elements that could be extrapolated as a regional transmission facility, subject to competition; whereas four projects would have been considered local, subject to ROFR claims; and other elements would have been considered upgrades to existing facilities, which incumbents are entitled to build under Order 1000 and the ISO’s current tariff.
For the 2010-2011 planning cycle, eight projects would have been defined as local transmission facilities, subject to ROFR claims; two projects would have been regional transmission facilities, subject to competition; three projects had some local transmission elements to which a ROFR would apply; and some regional transmission elements would have been subject to competitive solicitation.
“Under Order No. 1000’s principle, because all of these facilities are located entirely within the retail service territory or footprint of an incumbent transmission provider, the incumbent transmission provider would have a right to build them,” Cal-ISO said. “The ISO’s framework thus creates significant opportunities for independent transmission developers beyond those provided by Order No. 1000.”
According to Cal-ISO, a local transmission facility is (1) under the Cal-ISO’s operational control, (2) is owned by a participating transmission owner (PTO) or to which a PTO has an entitlement that is represented by a converted right, (3) operates at a voltage below 200-kV, and (4) only in the case of a transmission facility approved in the final 2013/2014 comprehensive transmission plan and thereafter, is located entirely within a participating transmission owner’s footprint or PTO service territory. The fourth requirement is a modification of the current definition that the ISO uses for cost allocation purposes, but is consistent with the description of local transmission facilities in Order No. 1000-A.