Kentucky regulators approve utilities’ request for preapproval to transfer spare transformers

The Kentucky Public Service Commission on Feb. 22 said that it has approved an agreement that will allow participating electric utilities to respond more rapidly to power outages and other emergencies by giving them greater flexibility to transfer equipment to each other.

The commission said that in its order, which was issued on Feb. 22, it has agreed to preapprove emergency transfers of large electric transmission system transformers with a value of more than $1m; state law requires commission approval of equipment sales or purchases in excess of $1m.

The preapproval, which extends to four Kentucky utilities under commission jurisdiction, will expedite the transfer of utility owned transformers in connection with the Regional Equipment Sharing for Transmission Outage Restoration, or RESTORE, agreement, the commission said. The agreement also extends to such other less expensive equipment as circuit breakers, the commission said.

The RESTORE agreement was initiated in 2016 by Kentucky Utilities (KU), Louisville Gas and Electric (LG&E), PPL Electric Utilities, Southern Company (NYSE:SO), and the Tennessee Valley Authority (TVA), the commission said, adding that KU, LG&E, and PPL Electric Utilities are sister companies within PPL (NYSE:PPL).

A total of 28 utilities in the South and Midwest now participate in the RESTORE agreement, the commission said, noting that other Kentucky companies include Duke Energy’s (NYSE:DUK) Duke Energy Kentucky and East Kentucky Power Cooperative (EKPC), a Touchstone Energy Cooperative.

As noted in the commission’s order, Duke Energy Kentucky, EKPC, KU, and LG&E – collectively referred to as the joint applicants – last October submitted a joint application requesting commission preapproval of the sale or purchase of utility owned transformers with original book values in excess of $1m, which the joint applicants may undertake under the RESTORE Agreement.

Under the RESTORE Agreement, the joint applicants, along with other participants, agree to identify and designate spare transformers, along with such less costly components as circuit breakers, with each utility participating in any or all designated voltage or equipment classes as it deems appropriate.

The commission added that if a “triggering event” occurs, an affected member of any particular class has the ability to purchase previously designated spare transformers and other components from other members of that class.

Under the RESTORE Agreement, a “triggering event” is defined as a “catastrophic event creating an urgent grid need in which, for an extended period of time, a participant loses its ability to serve significant load, is at imminent risk for losing significant load, or cannot maintain grid stability.”

Thus, the commission added, the joint applicants state that the RESTORE Agreement is intended to ensure that utilities “have access to spare infrastructure necessary to restore the transmission grid in a timely manner following disruption caused by a catastrophic event.”

Under the RESTORE Agreement, the purchase price of a transferred asset is replacement cost, including transportation and other acquisition costs, plus any reasonable costs and expenses of the seller, and tax liability attributable to the sale. Thus, the commission added, the joint applicants state that any seller will be “made whole” for any asset sold under the RESTORE Agreement.

The joint applicants also state that the ability to quickly purchase a transformer under the RESTORE Agreement will be beneficial to the joint applicants should there be a triggering event because transformer purchases in particular are subject to long lead times.

The commission also noted that the joint applicants state that preapproval of such transfers, which occur on reasonable terms upon a defined catastrophic event, is preferable to the joint applicants being left to market forces and potential delay during such events.

The joint applicants state that they anticipate replacing any transformer sold under the RESTORE Agreement within a reasonable time and thus do not expect their service to be compromised by participating in the agreement.

The commission also said that while the joint applicants state that the RESTORE Agreement does not require them to purchase additional transformers beyond normal inventory, should a transformer committed to be available through the agreement be used or sold, the joint applicants would be required to commit a comparable transformer to the agreement, which could necessitate a purchase. Thus, the joint applicants request that the commission’s approval apply not only to transformers currently committed to the RESTORE Agreement, but also transformers to be committed in the future, the commission said.

Among other things, the commission said that each joint applicant is to provide final transfer or, if applicable, acquisition details, within 30 days of any transaction occurring under the terms of the RESTORE Agreement and is to supplement such initial reporting with subsequent final documents.

About Corina Rivera-Linares 3286 Articles
Corina Rivera-Linares was TransmissionHub’s chief editor until August 2021, as well as part of the team that established TransmissionHub in 2011. Before joining TransmissionHub, Corina covered renewable energy and environmental issues, as well as transmission, generation, regulation, legislation and ISO/RTO matters at SNL Financial from 2005 to 2011. She has also covered such topics as health, politics, and education for weekly newspapers and national magazines.