FERC trial staff support settlement for DATC’s $4bn Midwest project portfolio

FERC trial staff on Nov. 29 asked that the commission approve a settlement proposed by DATC Midwest Holdings for the seven transmission projects in MISO that comprise the $4bn Midwest Portfolio.

DATC on April 20 applied for FERC approval of its transmission rate formula and incentives (Docket ER12-1593). The company, a joint venture between Duke Energy (NYSE:DUK) and American Transmission Co., requested approval of several Order 679 transmission rate incentives. The company also proposed adopting a 12.38% return on equity.

“The settlement provides a fair and reasonable resolution that serves the public interest, is uncontested, represents meaningful negotiation among the participants, and resolves all issues set for hearing and settlement judge procedures” the trial staff said in the filing.

The essential terms of the settlement offer include revisions to the proposed formula rate filed as Attachment O to the MISO tariff, including a more detailed calculation of post-retirement benefits other than pensions (PBOPs); a new note on the interest calculation of the formula rate; confirmation that the revised formula rate recovers only those regulatory assets authorized by FERC in the hearing order and that recovery of any other regulatory asset requires separate authorization; and the addition of work papers to the depreciation rates and the interest rate calculation.

FERC on June 19 approved DATC’s requested transmission incentives on the condition that the projects are included in MISO’s transmission expansion plan (MTEP). The commission, however, said DATC had not shown its formula rate to be unjust and unreasonable, and said hearings should be held on the matter. The settlement offer arose out of several settlement hearings held between July and November.

The conditionally approved incentives include 100% of construction work in progress (CWIP) in rate base; approval to use a hypothetical capital structure; authorization to seek recovery of abandonment costs; authority to create regulatory assets for costs not included in CWIP.

The seven transmission projects comprise the Midwest Portfolio, a proposed $4bn project consisting of more than 1,800 circuit miles, including 1,200 circuit miles of 345-kV lines, 550 miles of 500-kV HVDC lines, seven new substations and three new HVDC terminals that will stretch across Iowa, Indiana, Wisconsin, Illinois and Ohio.

“DATC designed the Midwest Portfolio to complement MISO’s multi-value projects (MVPs) approved in December 2011, and like the MVPs, the Midwest Portfolio will bring congestion relief and reliability and public policy benefits,” DATC said in its application. “It will relieve congestion and reduce congestion related costs in the MISO footprint by an estimated $768.2m in 2021 (in 2021 dollars).”

The seven projects are: 

  • Project 1, which comprises 91 miles of 345-kV lines and 15 miles of 230-kV lines located entirely within Indiana. The estimated cost is $222m.

  • Project 2, which comprises 117 miles of 500-kV HVDC lines, 42 miles of 345-kV double circuit lines, and two HVDC terminals. Project 2 will connect to Project 1 in Indiana and end in central Illinois. The estimated cost is $831m.

  • Project 3, which comprises 61 miles of 345-kV lines, nine miles of 345-kV double circuit lines, and two new substations, and will extend from northeastern Illinois to northern Indiana. The estimated cost is $120m.

  • Project 4, which comprises 15 miles of 161-kV lines, 145 miles of 345-kV lines, 101 miles of 345-kV double circuit lines, 435 miles of 500-kV HVDC lines, and five new substations. It will connect to Project 2 in central Illinois and extend to a new HVDC terminal in western Iowa. The estimated cost is $2bn.

  • Project 5, which comprises 145 miles of 345-kV double circuit lines, 36 miles of 345-kV lines, and a 765/345-kV transformer. It extends from east of Indianapolis to central Ohio. The estimated cost is $472m.

  • Project 6, which comprises 124 miles of 345-kV double circuit lines and extends from a generating station in Wisconsin to the HVDC terminal of Project 2 in central Illinois. The estimated cost is $266m.

  • Project 7, which comprises 60 miles of 345-kV lines and includes some buswork to reconfigure the nearby Silver Lake substation. It is located at the Wisconsin/Illinois border. The estimated cost is $132m.

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.