FERC rules on additional investment option for West of Devers project

FERC on April 21 approved a request by Morongo Transmission LLC regarding the possible investment of more than $400m in Southern California Edison’s (SCE) West of Devers project, a proposed 48-mile upgrade of facilities in Riverside and San Bernardino counties in Southern California.

The Morongo Band of Mission Indians is the majority owner of Morongo Transmission, FERC noted in the order, which explained that in an Aug. 25, 2014, decision, FERC approved the rate methodology for Morongo Transmission under a development and coordination agreement between the company and SCE. That 2014 order, which approved the use of a hypothetical capital structure of 50% debt and 50% equity and the use of a 30-year levelized fixed rate for recovery of Morongo Transmission’s capital requirements, also addressed an investment cap in the agreement between Morongo Transmission and SCE that limited Morongo Transmission’s investment level to $400m, FERC said.

SCE is looking to build the West of Devers project, which involves replacing or upgrading the existing 220-kV transmission lines and associated facilities between the Devers, El Casco, Vista and San Bernardino substations in Riverside and San Bernardino counties.

After an earlier version of the project failed to gain approval to cross Morongo reservation land, Morongo Transmission and SCE negotiated a right of way (ROW) lease agreement that permits SCE existing facilities and the West of Devers upgrade project to cross the reservation in exchange for Morongo Transmission having an option to invest up to $400m at the time of commercial operation of the project.

The project would increase the transmission capacity of the existing West of Devers corridor from the current 1,600 MW to about 4,800 MW, and allow SCE to meet the generator interconnection requests of multiple renewable power projects in the region, according to the SCE, a subsidiary of Edison International (NYSE:EIX).

In an April 12 proposed decision, an administrative law judge at the California Public Utilities Commission (CPUC) recommended approving a certificate of public convenience and necessity for the project, including a transaction between SCE and Morongo Transmission that would provide SCE with access to an ROW across the tribal land for construction of a portion of the project.

Parties in the CPUC case may file comments on the ALJ decision, which will be taken up at a future CPUC meeting.

Based on SCE estimates, the cost of the project, as configured based on the ALJ ruling, is $878m, plus a contingency of $132m, the ALJ said. The ALJ decision adopted a maximum cost cap of $1.01bn for the project.

In a Feb. 19 petition for declaratory order at FERC, Morongo Transmission asked FERC to confirm that the rate methodology authorized in the 2014 decision would apply to an additional investment in the project beyond the $400m cap, FERC related.

Morongo Transmission explained that on Sept. 25, 2015, SCE and the company modified their agreement to provide Morongo Transmission with the option to invest up to 50% of the final cost of the West of Devers project, which could exceed the $400m investment authorized in the 2014 FERC order.

Morongo Transmission sought the ruling to provide it with the certainty it needs in order to arrange financing for an investment in the project, FERC said.

The California Department of Water Resources State Water Project filed comments on the petition, asking FERC to confirm that Morongo Transmission has not requested a rate of return for any investment in the project, and that any rate of return would be subject to a future filing at FERC under Federal Power Act (FPA) Section 205, FERC noted in the order.

The commission granted the declaratory order and confirmed that the rate treatment authorized in its 2014 order for Morongo Transmission would also apply to any additional investment beyond $400m under the terms of the modified agreement between SCE and Morongo Transmission.

In response to the comments filed, FERC confirmed that Morongo Transmission’s rate of return would be subject to a future FPA Section 205 filing.